“Cold-calling liars and manipulators”: this was the verdict handed down by a Preston crown court judge in a multimillion-pound fraud case earlier this year that found small businesses had been “duped” into expensive, long-term energy contracts.
The judge ruled that Andy Pilley, the owner and former chair of Fleetwood Town FC, used a network of energy brokers connected to the business energy supplier where he was a director to defraud unsuspecting customers. Pilley was jailed for 13 years.
The ruling was a rarity in the murky world of energy “middlemen”, where an absence of regulation has allowed a culture of strongarm tactics and secret commissions to thrive over decades.
Alongside a steady stream of complaints by small companies of alleged mis-selling and fraud are tales of seven-figure pay packets, flash cars and lavish gifts handed to top energy brokers by the suppliers who profit from their dealings.
Business groups came together for the first time earlier this week to deliver a letter to the regulator, Ofgem, demanding it take action to protect small firms from inflated energy costs. The Guardian understands the watchdog will announce proposed rules on Wednesday that would force suppliers to reveal how much commission they charge.
“Looking back, I can see that what we were doing was morally wrong,” says Claire, a former energy broker who asked that we did not use her real name. Claire says she was once one of thousands of unregulated agents who routinely inflated the energy bills of small firms, charities, care homes and faith groups by adding hidden commissions to their energy bills.
Claire is now working alongside lawyers at Harcus Parker as they prepare to bring a class action suit against Britain’s biggest energy suppliers to reclaim up to an estimated £2bn in secret fees. The litigators claim that in law a hidden commission can be characterised as a bribe.
“The wages are low, so commission is important,” says Claire. “You were under pressure to charge as much as possible. I once did the lowest amount that I could for my mum’s church and I was hauled over the coals for doing the minimum.”
The most lucrative targets are typically small companies with large energy demands: care homes, which must be kept warm year round, hospices, and family-run hotels and restaurants, Claire says.
The first step is to convince a company to sign a letter of authority, a legally binding document that commits the business to dealing exclusively with the broker, meaning they cannot approach energy suppliers directly.
“If any customer questioned how you got paid you were told to say that you got paid a finder’s fee and left it vague,” Claire says. “If I’d have known then what the job entailed, I wouldn’t have applied for it.”
Callum Thompson, a former energy broker turned claims consultant, says he has dozens of cases against energy suppliers and their brokers moving through the courts including a £200,000 claim from a charity.
“Many of the claims we have brought so far have settled out of court and tend to frustratingly settle on the doors of the court, wrapped in strict confidentiality,” he says. “The claims all involve deals that were brokered.”
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One of many business owners who says they have fallen prey to energy broker tactics is Alan Brookes, a director of Cobham Care, an aged care facility in Worthing that specialises in looking after people with dementia. He says the care home’s manager was “browbeaten” by an intermediary into signing up to a new three-year energy contract with British Gas.
“They kept ringing back and saying that she had to change the contract. They stitched her up,” Brookes says. The broker convinced the care home manager to enter a new energy contract months before their existing deal was due to be renewed and at triple their previous rate.
The middleman initially claimed to be calling directly from British Gas, according to Brookes, but in the final phone call with the care home manager revealed that they were an independent broker.
In a complaint sent to British Gas days after the deal was struck, Brookes called on the supplier to void the contract on the grounds that Cobham Care had already signed a letter of authority with an established energy consultant to broker their energy contracts. The independent broker is now defunct, according to documents submitted to Companies House.
“The amazing thing is that British Gas has accepted this new contract and has probably paid these brokers thousands in commission,” Brookes says.
A British Gas spokesperson said: “The relationship between a broker and a business customer is separate from their relationship with British Gas. All brokers operating in the market are expected to ensure that their terms and conditions comply with the relevant regulatory obligations on transparency.”
