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Beware the rogue energy suppliers

Ofgem has warned small businesses to be on their guard against rogue “energy brokers” flogging poor-value gas and electricity contracts.

Look out for rogue “energy brokers” seeking to sell small businesses poor-value gas and electricity contracts. That’s the message from Ofgem, the energy industry regulator, which has just launched an investigation into mis-selling to small businesses.

Ofgem’s probe reflects mounting concern about brokers claiming to offer free consultancy services to small businesses looking for a better deal on gas and electricity. In some cases, these brokers choose products and services from a small panel of suppliers that pay them the most generous commissions; very often the deals recommended are poor value, carrying high charges and often locking in small businesses for extended periods.

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The scale of the scandal is potentially enormous. Ofgem estimates that of the £25bn spent on energy bills each year by small businesses, charities and public bodies, around half the money relates to a contract sold by a broker. As much as £2.25bn of the total spend is accounted for by brokers’ sales commissions, according to some in the industry.

Previous Ofgem investigations have rejected tighter regulation of energy brokers, but a growing number of legal cases where small businesses have sued brokers and secured high-value compensation payments are increasing pressure on the regulator to take action.

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