How the new energy bills compensation scheme will work

The Government is set to announce that almost every business in the UK will get free support to claim compensation for secret broker fees hidden in their energy bills.

Following stories in i highlighting the practice of energy broker fees being concealed within bills, a new scheme is set to be launched helping businesses to claim up to £10,000 in compensation without having to go through the courts.

Business minister Amanda Solloway will announce the move as part of Government and Ofgem changes to tackle “cowboy practices” such as hidden broker fees, inaccurate energy bills and pressurising sales tactics for energy contracts.

While micro-businesses – firms with less than ten employees and sales under £1.8m – can already go to the Energy Ombudsman for help with energy contract disputes, the Government will extend that to companies with fewer than 50 employees. This means 99 per cent of all private businesses and charitable organisations will have access to the free resolutions service.

While the Government and Ofgem’s clampdown on secret broker fees will open up the free resolution service at the Energy Ombudsman to millions more small businesses, those with historic claims against their energy suppliers are set to miss out.

How the new scheme will work

There are 5.5 million small businesses in the UK, each with from 10 to 49 employees. While they will be able to go to the ombudsman for claims of up to £10,000 against energy suppliers, they can only do so for deals agreed with brokers after the scheme is expanded to them, which is likely to be this summer if no general election is called before then.

Due to the Government’s legislation not being retrospective, losses small firms accrued due to the scandal will not be able to be considered by the ombudsman.

The UK’s 5.2 million micro-businesses – those companies with up to 10 employees – have always been able to access the free resolution service from the ombudsman, but only for claims up to £10,000.

So, while the new regulations will apply to 99 per cent of all firms, only businesses with claims of up to £10,000 will benefit from the move to expand the ombudsman scheme.

What to do if you still can’t benefit from the ombudsman scheme

What do you do if you have an historic claim as a small business or a claim of more than £10,000 as a micro business?

Before approaching a lawyer or energy claims firm, of which many can be found on the web, write to your business energy supplier to gather the information you need.

Ask your supplier to provide detail of all the broker fees you have paid as part of your energy tariff since you agreed the deal. For example, if your company has been with the same supplier since 2000, then ask how much you have paid in broker fees since then.

You should also ask your supplier what its profit has been during the course of your deal or deals with them.

Finally, make clear to your energy supplier that you are prepared to take legal action should they refuse to refund your commission fees.

If you cannot agree a settlement with your supplier, then consider adding your name to a group action by a legal firm. You could also, at this point, also take your action to a business energy claims company.

Also be aware that a claim is not guaranteed to be successful and may cost thousands in fees if you cannot agree a no-win-no-fee deal.

What you will need to prove to a court

In order to convince a court or the ombudsman of your case you will be required to show all of the following:

• fiduciary duties were owed by the broker/agent/introducer to the customer 
• the scope of those fiduciary duties 
• breach of those fiduciary duties by the broker/agent/introducer 
• the claimant did not give its informed consent to payment of commission 
• knowledge of that fiduciary relationship on the part of the supplier 
• an act on the part of the supplier which gives rise to a liability to the customer e.g. procuring the broker/agent/introducer’s breach of its fiduciary duties  

If a claimant cannot establish any of these points, any claim may be rejected by a court.