Charities are being warned to check their energy brokerage contracts after so-called “secret commissions” left two organisations liable for tens of thousands of pounds.
Third Sector has spoken to two non-profit organisations who said they were facing closure after being left liable for more than £150,000.
Stella Maris Care Home, run by the Ursulines of Jesus charity, received a £140,000 bill in November last year from a debt collection agency acting on behalf of the energy broker Utility Alliance.
Utility Alliance went bust in January last year owing its creditors £4.2m at the time it filed for administration.
But Bridgid Mulvaney, who is in charge of managing the care home’s energy, said she got an “awful fright” when the bill arrived from the collection agency.
Tecwyn Williams manages the bills for the Ferndale Imperial Conservative Working Mens Club.
It received a bill for £13,000 in February on behalf of another energy broker called The Energy Check, which went into administration in November last year.
Williams said: “I wasn't aware of the rate of commission and I don't think that has anything to do with me.
“As I understand it, any commission is paid by the supplier to the broker; we pay for the energy and they get the commission. It’s out of order.”
Correspondence shared with Third Sector shows the agency collecting the debt appears to have proof both Williams and Mulvaney signed contracts that contained the fees and letters of authority to act on their behalf, but both said they felt they had been misled and the commission should have been better explained to them.
Williams said he could not remember signing the letter of authority.
Both charities are at risk of closure if forced to pay the outstanding fees.
After going into administration, The Energy Check changed its name to Reveles Energy.
Third Sector tracked down one of its former directors, who, according to Companies House, stopped being “a person of significant control” of the company in June 2021, about five months before it went bust.
David Winton said he would be “astonished” to find one customer who had entered into a fraudulent LOA with the company and said that it had saved customers more than £12m in energy costs.
“It’s nice and easy for a customer to say an LOA wasn’t signed by them when they want to get out of a contract because they get offered a cheaper rate 12 months later in a market where prices change daily,” he said.
“If it was disputed by the customer, the compliance team would have reviewed it and dealt with it appropriately.”
Both charities have been seeking advice from TPI Claims Company, which helps organisations make claims over business energy contracts mis-sold by brokers.
Mark Don, business development manager at the company, said the market had operated this way for about 15 to 20 years and it was rare that customers ever found out about what he described as “secret commissions”.
In July 2020, energy regulator Ofgem vowed to crack down on brokers that have overcharged charities, community sports clubs and care homes an estimated £2bn for their energy by hiding their inflated commission charges.
The problem persists because, unlike brokers selling mortgages or insurance, energy brokers were unregulated.
Don said brokers often tried to hide what they were paid or mislead clients to believe their services were free or that the supplier paid them, but the truth was that they were often paid by adding a commission onto the supplier’s contract with the customer.
“And given that the more energy customers use the more they earn, this is why brokers often recommend that customers take long-term contracts,” he said.