Energy firms could face a £2bn legal claim over these ‘secret payments’ used to incentivise brokers to sign up customers, ignoring whether or not energy was cheaper for the end user. Law firm Harcus Parker began sending letters last week before action to energy companies in the first step in group litigation.
Nimisha Raja – owner and founder of snack firm Nim’s Fruit Crisps – was among the first businesses to sign up for the action, after she felt “backed into a corner” when she signed up for gas through an energy broker in November 2021.
The business was hit by a hefty increase in the price of gas since signing the three-year deal after the previous supplier went bust – bills soared from between £2,500 and £3,000 to about £15,000.
“Having a situation whereby our annual energy costs are higher than rent and rates put together hits the bottom line,” Raja told Food Manufacture. “Our customers (B2B) mainly are in the same boat as us, so we aren’t able to pass on majority of our costs. We are an innovative business with year-on-year growth up until now.”
The increase in energy costs have a knock-on effect for her business, with Raja now having the reconsider how to approach new product development and recruitment.
“We are always looking to introduce new products,” she continued. “This requires investment and historically we have funded our growth mainly through revenue/profits so lower margins results in less investment in innovation, which in turn means we create fewer jobs.”
Harcus Parker estimated that if commissions were not properly disclosed, Raja could be eligible to claim back £18,000.
Damon Parker, senior partner of Harcus Parker, said: “Huge numbers of organisations are unknowingly paying more for their energy than they should be because many suppliers increase the cost to their customers to pay secret commissions to rogue brokers.
“Many of our clients are telling us that the increase to their energy bills caused by these secret commissions will have wiped out their profits or, worse, forced them to close their doors. We hope that if we can help food manufacturers recoup some of these secret commissions from the energy companies it will help to alleviate their problems.”