Food firms to benefit from £2bn legal claim over secret energy commissions

By Gwen Ridler

- Last updated on GMT

Nim's is one of millions of company's that could benefit from a £2bn legal claim levelled against energy firms
Nim's is one of millions of company's that could benefit from a £2bn legal claim levelled against energy firms

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Nim’s Fruit Crisps is one of millions of businesses that could be entitled to compensation from UK energy giants over alleged commissions paid to third-party brokers.

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.

Energy increase

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. 

Fewer jobs

“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.”

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1 comment

Get the facts

Posted by EnergyTruth,

The premise of this story is fictitious at best. Whilst my heart goes out to all businesses & households alike with the rising cost of energy, to suggest that these secret commissions are somehow the reason that energy bills have risen so dramatically in the past 18 months, is just plain wrong.

Yes, Energy brokers are paid a fee when they introduce new customers, or recontract existing ones to energy suppliers.... But this fee not calculated as a percentage of the overall bill, but an uplift to the unit rate. Example - Supplier pays 0.8p per kWh to the broker for every unit of energy the customer consumes.... so if a customer using 25000kWh per year is introduced to the supplier, then the broker will receive £200 for that customer introduction.

In practice, Customer A was paying 15.8p per kWh when they came to the end of the contract in November 2021 (The broker will have made £200 on the first contract). The next years energy price from the supplier was 4 times higher, DUE TO WHOLESALE PRICE INCREASES, at 60.8p per kWh. Broker still makes £200 for the next contract.

The only people ripping customers off,due to the broken energy futures market, are the retail energy suppliers.... Their baked in % margin will not have fallen... so the £ notes they are generating WILL be 4 times higher than before... and lets not forget about the additional VAT being collected, which is based on the retail price of the energy... so again another 4 x increase to government coffers.

It is time to get to the real money grabbers in this farce of a "Market", and stop looking for scapegoats.

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