Energy Brokers - Be Aware of the Potential Risks When Entering into Contracts Through Energy Brokers

The Energy Consumer/Broker Relationship

Energy consumers should be aware of the risks when entering into agreements with Brokers. Brokers are often paid a commission by the energy supplier. When the consumer enters into a contract with a supplier through a Broker, that supplier will pay the Broker an agreed rate of commission, usually depending on the value of the energy contract. The cost of commission paid to the Broker, by the supplier, may also be passed through to the consumer by way of its energy bills, so that that the consumer is ultimately paying for the commission.

When a consumer enters into an agreement with a Broker, it is also entering into a separate contract with the supplier, and therefore two legally binding contracts may be in force. The consumer will normally sign up to the terms and conditions for the Broker and for the supplier.

The Broker's terms and conditions may contain provisions that set out that the consumer will be liable for a fee if the Broker introduces a consumer to the supplier and the consumer later decides to enter into a contract with a different supplier. The terms may also include a provision that if the consumer breaches the contract, the consumer will reimburse the Broker for any losses incurred as a result of the consumer breaching that agreement. These losses could include lost commission, and the Broker claim can be substantial.

When entering into an agreement with an energy supplier, consumers should be mindful of the terms and conditions that may apply, and take good care to comply with them as far as possible. Consumers should also be aware that they could be liable for a termination or 'breach' fee.

An Example Agreement

A consumer enters into an agreement with a Broker and subsequently a contract with an energy supplier, through the Broker's introduction. The consumer may later find a better deal with a different supplier, choose to enter into a new supply contract (unrelated to the Broker) and seek to cancel the first contract. In these circumstances, the Broker may have grounds to either charge a termination fee, a fee for breach of contract or have a claim for lost commission (these will depend on the terms of the agreement and the facts of the case). In these situations, consumers should consider the savings by entering into the second contract against any liability they may have to the Broker, and in some instances to the first supplier as well.

It is important for consumers to make sure that they are considering the terms and conditions before they enter into an agreement with the Broker, and be alive to these issues when shopping around.

It is important also to note that there may be circumstances where consumers are wrongly charged fees by the Broker or the Broker tries to recover lost commission in circumstances where it is not due. Where a consumer suspects this is the case, they should consider seeking legal advice to review the terms and conditions and advise whether they have any liability.

If you have had any issues surrounding fees or commission with a Broker, please contact Kellie Thatcher in our Commercial Litigation team, at 0117 314 5462, or alternatively please fill in the form below.