What Are Hidden Energy Commissions?
When an energy broker arranges a business energy contract, they often receive a payment from the energy supplier for securing the deal. This commission might be calculated as a per-unit margin added to your energy rate, a flat fee per contract, or a volume-based bonus for steering multiple clients to a particular supplier.
None of this is inherently wrong. The problem arises when the commission is not properly disclosed to you as the client. In many cases, businesses were told the broker's service was "free" or that the broker was "independent" - statements that were, at best, misleading, and at worst, outright false.
Because the commission was embedded in your unit rate rather than shown as a separate charge, you had no way of knowing it existed. You couldn't compare true market rates, couldn't negotiate on an equal footing, and couldn't give meaningful informed consent to the arrangement.
How Brokers Hid Their Commissions
The most common methods used to conceal commission arrangements from business clients included:
- Unit rate uplift: The broker would negotiate a wholesale rate with the supplier, then quote you a higher rate - keeping the difference as their fee. Your bills showed the higher rate as normal market pricing.
- Opaque contracts: Contract documentation often made no mention of commission arrangements, or referenced them only in dense, technical language that clients rarely read.
- "Independent" positioning: Many brokers presented themselves as independent advisers working purely in the client's interest, while simultaneously benefiting financially from steering clients toward specific suppliers.
- Volume bonuses: Some brokers participated in supplier incentive schemes that rewarded them for channelling a certain volume of clients, creating a structural conflict of interest that was almost never disclosed.
The legal position: Under English law, the receipt of an undisclosed commission by a fiduciary or agent is treated as a "secret profit" and can be recovered by the principal regardless of whether it caused provable financial loss. The duty to disclose is strict.
Why Didn't Businesses Know?
Business energy procurement isn't the most scrutinised area of a company's finances. Many businesses - particularly SMEs - relied heavily on their broker's recommendation, trusting that a "free" advisory service was acting in their interests. The technical nature of energy pricing made it difficult to identify inflated rates without industry expertise.
Ofgem has since tightened its guidance on Third-Party Intermediaries (TPIs), requiring greater transparency about commission arrangements. But for businesses who signed contracts before these changes took effect, the damage had already been done.
About Energy Broker Claims →