How to Handle Being Mis-sold a Business Energy Contract

In the dynamic and often complex landscape of business energy contracts, the unfortunate reality is that not all transactions unfold with transparency and fairness. Due to a lack of regulations and no clear guidance from Ofgem, businesses, regardless of their size or industry, could find themselves locked into a mis-sold contract. This issue is one that demands our attention and understanding, for its consequences can be financially burdensome and operationally stifling.

Have you been mis-sold a business energy contract?

It’s possible for energy brokers to mis-sell business energy contracts. This leads to businesses paying more for their energy than they should because the energy broker has either:

• Not discussed their fee or not clearly displayed how they (the broker) is compensated for their services.
• Not fully disclosed all elements of the energy cost and therefore showing an artificial price
• Enrolled the business in a long-term contract when it’s not always appropriate for the client

Things go from bad to worse as once a business agrees an energy contract there is no cooling off period, and they are now trapped in a costly deal. Terminating a business energy contract is a complex and difficult process and therefore being mis-sold a contract is a serious issue.

How Energy Brokers pricing works

Before you can determine if you have been mis-sold an energy contract, you have to understand how the business energy broker pricing model works which is summarised below:

• A theoretical cost of an energy contract is 30p/kWh per hour.
• A broker will add on a commission, e.g. 2p/kWh.
• The total price a business would pay is 32p/kWh per hour and the commission paid to the broker from the supplier is 2p/kWh.

Why do energy brokers add commission?

The level of commission allows a broker to cover the cost of their operations and also the value add they offer clients. This can include the finder’s fee and consultancy in advising businesses the best energy contract based on their previous and predicted levels of consumption. They also offer a whole host of services from energy legalisation to metering and client portals.

This model is the industry standard for how brokers charge and are paid for their service. It is not a model that puts a business at a disadvantage unless the business is not aware of the brokers commission rate.

Energy brokers are businesses that need to operate too, and they will have to add a markup in the form of the deals they procure for their clients so they can operate as a business. Remember that their income is dependent on your consumption, and if you consume less energy, they receive less commission from the supplier.

It is also worth noting that brokers can usually procure more cost-effective energy deals than businesses can alone. This due to a broker’s pre-existing relationships with suppliers and the discounted rates they can secure, which even when a broker commission is added is still less than what a business would see on traditional market comparison websites.

An honest broker will always be working in the best interest of their client. Energy broker firms usually also offer energy consultancy services and are actively trying to support their clients in reducing their consumption to help them reduce their costs and reach their net-zero targets.

The reason this model has become so popular is that it helps clients consolidate all payments to the energy supplier, instead of adding another vendor to their payment process if they were to pay a broker directly.

If this is how energy brokers operate, how do I know if I was mis-sold too?

You have only been mis-sold a business energy contract if the broker was being wilfully deceptive and purposely misleading you in their sales process.

A transparent broker will be upfront with their fees and the commission rate would be clearly included on the contract you agree to and/or documentation you are provided. This can be included in the unit rate of the energy, do not be surprised if energy claims companies consider this to be a bad practice.

If you cannot clearly see a broker’s fee, or they claim they offer a free service or will be paid a set fee by the energy supplier, then treat this as a red flag and investigate further the deal they are presenting you.

What to do if you have been mis-sold too

If you suspect that you have been sold a business energy contract under false pretences, you might have the right to seek compensation for any financial losses you’ve experienced.

So what are your options?

Collect Evidence

To initiate the process of reclaiming funds from a wrongly sold agreement, start by collecting all relevant evidence. This will include your invoices, the energy contract itself and all communication with your broker. In addition, make sure you have a record of all commitments that were made such as fixed rates or potential cost savings.

Check Your Contract small print

Thoroughly examine your energy contract and scrutinize it for any irregularities. Should you come across any inconsistencies, raise these issues with your energy broker or supplier. This process might become complex if you’re unfamiliar with the contract’s language or its contents. You may be able to receive support from a legal firm to help you understand the contract language.

Business energy contracts can be difficult to understand and business owners and general managers usually do not have the time to examine the finer details of a contract. However, it’s critical to remember that you have the right to fair pricing and Professional Energy Services prides ourselves on being the most transparent broker on the market. If you feel a previous broker has taken advantage and either placed in hidden fees to your agreement you may be able to seek legal advice.

Go direct to the broker

As you have a previous relationship with the broker, do not forget you can go directly to them to resolve any issues. They may be able to explain more fully how the pricing structure works or perhaps there has been an error on your invoice that can be resolved.

Seek Legal Advice

There are several claims companies that can check and investigate on your behalf. It is a complicated process that can take several weeks or months. These companies usually investigate how much you’ve been mis-sold by and with the right evidence can be successful and secure a refund of hidden fees that were not included in the original contract.

Claims companies

It’s important to not be led astray by energy claims businesses who may imply that a broker must directly disclose their commission. There have been no legal cases won that made it to court because broker costs were clearly displayed in the unit rate and available on energy supplier invoices. Businesses have ample opportunity to review all documentation and paperwork before agreeing to use a broker’s services. If you decide to seek out a claims company for support, check for insurance that they will cover any legal fees you may incur as part of their service offering.

Conclusion

To safeguard against the risk of mis-sold contracts, it’s crucial for businesses to comprehend the energy broker pricing model, ensuring transparency in fees. Factors such as contract length, billing comprehension, pricing transparency, and accurate energy requirement assessment should be considered. If suspicions of mis-selling arise, collecting evidence, scrutinizing contracts, and engaging directly with brokers are initial steps, followed by seeking legal advice. Overall, awareness, transparency, and diligence are vital for businesses navigating the complex business energy contract landscape to protect against potential pitfalls.