Litigation law firm Harcus Parker has begun sending letters before action to energy companies in the first step in a group litigation to reclaim undisclosed commissions paid by suppliers to brokers without customers’ knowledge.
Gas and electricity suppliers are accused of offering these undisclosed payments to incentivise brokers to sign up customers with little or no consideration of whether the energy is or, is not, cheaper for the end user.
The commission amount does not appear on energy bills and the law firm says if the broker has failed to disclose to the customer how much they are being paid then this amount can be claimed back from the energy company.
Small and medium-sized businesses, faith groups, charities, sports groups, care homes, local authorities and other community organisations are also said to have been targeted by unscrupulous brokers.
In some cases, the secret payments have inflated bills by 50 per cent, the law firm says.
Harcus Parker says that the average claim is currently around £20,000 per customer and that long-term contracts for heavy energy users could give rise to claims of well over £1m.
The Elliot Foundation, which has signed up to the group legal action with Harcus Parker, is a charitable trust that has 13,500 pupils and more than 2,000 members of staff in 32 primary schools, including 12 in the West Midlands.
The foundation’s schools include Woods Bank Academy, Wednesbury; Croft Academy, Walsall and Rounds Green Primary, Oldbury.
Harcus Parker says that the total claim for the foundation could be as high as £300,000.
Trying to mitigate the rising cost of energy has become a priority for the foundation’s CEO Hugh Greenway as he battles to protect its over-stretched budget and minimise the money diverted away from teaching children.
The annual cost of the foundation’s gas and electricity has risen nearly four-fold since the war in Ukraine began.
Mr Greenway said: “Historically, we paid around £650,000 a year for our energy and utilities across the trust but since the energy crisis it looks like that annual figure will be around £2.3 million.
“There is no further government relief after the energy price cap expires in March to cover this increase in energy costs. We have to make savings anywhere we can. It’s a case of turn off the lights and reduce energy costs or lose teachers.”
Among a host of different energy-saving initiatives, the trust has accelerated its roll-out of LED lighting which it hopes can help cut its electricity bills by as much as 30 per cent.
Mr Greenway said: “If we could recoup this money from energy firms, in its simplest form, it would be the equivalent of paying the wages of six teachers for a year.
“Across the education sector these secret commissions could add up to millions of pounds.
“It’s shameful that so much money was being given to brokers by energy companies in the form of secret commissions when that money could have been spent on children’s education.”
Damon Parker, senior partner of Harcus Parker, said: “Schools are large consumers of energy and we are very aware that the increase in gas and electricity bills has hit them particularly badly.
“Thousands across the country will unknowingly be paying more for their energy than they should because many suppliers increased the cost of their bills to pay secret commissions to the rogue brokers that introduced them.
“From next month many will be paying a higher amount to brokers in undisclosed commission than they will be receiving from the Government’s latest energy subsidy.
“This money could be far better spent on teachers and resources to benefit pupils, rather than lining the pockets of energy firms and brokers.
“We hope that if we can help schools recoup some of these secret commissions from the energy companies, it will help to alleviate their problems and give them back vital funds to invest in our children’s futures.”
It is calculated that, at any one time, around two million non-domestic customers are paying these fees.
The malpractice began as far back as 2003, meaning millions of customers will be eligible to join the claim.
Harcus Parker, which has already signed up several hundred claimants has in excess of £10m of litigation funding to fight the case and believes the total amount owed by the energy companies could top £2bn.
Mr Parker added: “The claims are fully funded and insured and, as a result, we are able to act for clients who ordinarily would not have the resources to access justice in a claim of this kind, on a ‘no-win, no-fee’ basis.
“I would urge all schools who have used a broker to source their energy supply and were not told how much and how their broker would be paid to see if they are eligible to claim.”