Business Energy Claims: Am I Eligible?
If you have used an energy broker in the past, they may have mis-sold you a business energy contract, which means you could be eligible to make a business energy claim. Find out more about making a claim and what to do next.
As a small or micro business owner, it makes sense that you would be looking for the best deal for your gas and electricity. One way you may have done this is through the services of an energy broker or consultant.
Energy brokers can negotiate with a business energy supplier on your behalf, potentially securing you a better contract than if you had gone to the provider directly.
Yet, the energy broker market doesn’t have the same level of regulation as other areas in the sector, such as mortgage brokers. This has allowed some energy brokers to make misleading statements about their commission structures, why they are recommending certain suppliers, and whether or not they have actually carried out a full-market comparison in the first place.
Small business owners making a claim for mis-sold business energy can seek compensation for such situations. Find out more about business energy claims, whether you are eligible, and what to do next with our handy guide.
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Business energy claims explained
Following an investigation into energy brokers in 2020, the Office of Gas and Electricity Markets (Ofgem), found that micro businesses were too frequently being mis-sold business energy contracts.
A micro business is defined as having fewer than 10 employees, an annual turnover of less than €2 million, annual electricity use of less than 100,000 kWh, and an annual gas use of less than 293,000 kWh.
The independent regulator pointed to a number of scenarios in which business energy was being mis-sold, largely revolving around a lack of transparency.
Examples included energy brokers and other Third Party Intermediaries (TPIs):
- Only offering their client one business energy deal, despite stating they would conduct a full-market comparison.
- Locking customers into long, multi-year contracts without making the length of the contract clear at the point of sale.
- Hiding commission fees of up to 50% of the customer’s business energy spend in the contract without disclosing this cost at the point of sale, nor documenting it in the contract itself.
This has led to a rise in law firms now willing to consider business energy claims if you fear you have been mis-sold your contract.
Although not exactly the same thing, it can be useful to think of business energy claims as similar to the mis-selling of payment protection insurance (PPI). While PPI took place in the consumer market, rather than the non-domestic sector, it involved a similar lack of transparency, and in some cases even hidden costs.
How do I know I have been mis-sold business energy?
It can be hard for you as a business owner to know whether or not you have been mis-sold business energy. Not least because the reason you may have been mis-sold it in the first place is a lack of transparency on behalf of the energy broker.
However, an initial red flag is if your energy broker or consultant failed to issue you with a full written disclosure of how much they earned from your contract. This would be any commission or fees they received from the supplier for recommending you as a customer, whether that is a one-off charge or an on-going cost.
If your energy broker wasn’t up front about their charges, there is a chance they have hidden these fees in your business energy contract.
It is important to remember that many business energy brokers will be acting in good faith, and with your best interests as the basis of their recommendations. So just because you have used an energy broker doesn’t mean you automatically have a business energy claim.
At the same time, a business energy claim doesn’t just have to be for an old contract. You can also bring a claim against your current business energy deal.
What is the average business energy claim worth?
The compensation you are entitled to will vary depending on the specifics of your individual claim.
This will be informed by your industry, how long your business energy contract is, how long you have been under it, how much it costs you and the exact form of mis-selling that went on.
According to specialist energy and legal expert BusinessEnergyClaims.co.uk, the average claim it has been involved in is over £25,000. To illustrate how much claims can vary, however, energy management firm PanoServe estimates an average claim value of £80,000 for hospitality companies compared with £240,000 for engineering firms.
Other legal firms estimate you could recover up to 20% of your previous energy bills if you were mis-sold your contract.
How to make a business energy claim
A solicitor or service explicitly dealing with business energy claims can help you assess whether or not your contract was mis-sold, before then carrying out the claim itself.
This includes working out if your contract was obtained through an energy broker, and the various types of mis-selling that may have occurred. To do so, they may ask for:
- your business energy contract agreement date (i.e. when it was signed), as well as its start and end date
- your estimated annual gas or electricity usage, depending on if you are searching for claims on both utilities
- the unit cost per kilowatt hour of your gas and electricity
- the distributor ID for your business electricity
- the profile code or class of your electricity meter
- the name of your business energy supplier
- if known, the name of your energy broker
- your business details, including number of meters
If you then give permission for the legal service to begin their inquiries, they will contact your energy broker and supplier on your behalf. If they progress to making a claim, you will need to cooperate with your solicitors’ requests to ensure it runs smoothly.
How much do business energy claims cost?
The cost of your business energy claim will, of course, be based on which company you use. However, many of the legal firms and experts dealing with business energy claims operate on a ‘no win, no fee’ basis.
This means if your claim was unsuccessful, you likely wouldn’t pay any legal fees. If your claim is successful, meanwhile, the legal fees may be deducted from your overall compensation, depending on the terms of the agreement.
Will the business energy claim go to court?
Most business energy claims do not go to court and are instead settled through compensation.
However, this is not always the case. If your claim does go to court, your legal service should be there to support you.
What will happen to my business energy contract?
If you take out a business energy claim against your current supply contract, you may be able to negotiate a reduction in costs due to the hidden or inflated fees being removed, or an offer to cancel the contract and move to a new supplier.
How to avoid being mis-sold business energy
If you want to avoid being mis-sold business energy, it is a good idea to ask your energy broker the following questions:
- How do you make money as an energy broker?
- What is your commission as an energy broker?
- How much are you being paid by the provider you are recommending?
- Do you compare quotes from all suppliers?
- Can you explain why this is the right tariff for my business?
You can use the transparency with which the broker answers these questions to decide whether or not you want to do business with them.
Image source: Getty Images
Connor is a writer and spokesperson for NerdWallet. Previously at Spreadex, his market commentary has been quoted in the likes of the BBC, The Guardian, Evening Standard, Reuters and The Independent. Read more