Octopus calls for cap on energy broker commissions  

Octopus Energy is calling for energy broker commissions to be capped, after research it conducted found millions of small businesses had a negative experience with a broker in the last year.

A new report by Octopus Energy for Business examines issues with brokers such as a lack of transparency, as well as “damaging practices” such as concealing commissions and aggressive sales tactics.

The report highlights the widespread use of brokers by small businesses, with more than two thirds of these using brokers to negotiate new energy contracts with a supplier.

Yet a nationally representative survey polling 1,000 small businesses in the UK found that 59% had a negative experience with a broker in the last year.

The report said: “From our conversations with small businesses we know just how widespread and damaging this behaviour is. From high volumes of unsolicited calls, to pressure to switch suppliers, hiding commission and much more – this area of the market needs urgent action.

“At Octopus Energy for Business we don’t work with brokers as we don’t believe they provide the best value for customers. While small businesses often feel they need to get advice when taking out their energy, for many, their consumption isn’t more than a typical home, so going through a broker isn’t typically needed and only adds costs. This has meant many small businesses are often unknowingly and unnecessarily paying more by going through a broker.”

Further research by Octopus found 78% of small businesses want commission clearly stated at the point of sale, while 70% want a cap on broker commissions.

As such the retailer, which serves 60,000 business customers, has outlined three steps it believes will create a fairer, more transparent broker market for small businesses.

These include no hidden broker commissions, as well as a cap on commissions. At the point of sale, brokers must clearly show how much extra they are charging as opposed to going directly through the energy retailer. This, Octopus added, should be made a requirement on the customer’s contract before they sign their deal.

It further calls for an end to unsolicited contact from brokers.

“Small businesses should have greater control over how they engage with brokers, for example by a double opt-in to show they’re open to being contacted. Currently many energy suppliers share business customer details with brokers who contact these businesses near the end of their contract to sign up to a new deal,” it said.

Finally, the supplier recommends brokers are properly regulated and that the government give Ofgem the powers to do so.

Zoisa North-Bond, chief executive of Octopus Energy for Business, said: “The pandemic, inflation and the cost of living crisis have increased pressures on small businesses to colossal levels. It’s simply not right that some energy brokers have been capitalising on this. The business energy market has become the wild west, and bad broker behaviour is running rampant.

“It’s fundamental we raise awareness of these damaging practices – and there are things that can be done now to drastically improve transparency in the market. We need to stand up for small businesses to help drive down bills – and we need to get moving today.”

Octopus’ report comes as several energy retailers, including British Gas, EDF and Scottish Power, face legal action over their alleged payment of hidden commissions to brokers.

Earlier in the summer Utility Week reported how JMW Solicitors was planning to launch a case on behalf of hundreds of microbusinesses, which were recommended “high cost” long-term energy deals by brokers.

The firm claims the commissions, which were paid without the full knowledge and consent of customers, often made up a “significant portion” of their energy bills.

JMW said if successful, the case could enable the millions of other businesses that use energy brokers to also reclaim commissions.