Energy Switching and Broker Overcharge Scam

Energy switching and broker overcharge scams involve individuals or companies that approach residential customers or, more commonly, small and medium businesses offering to find them a better energy deal. The broker takes a commission from the energy supplier — which is legitimate — but conceals the size of that commission, adds unauthorised charges, or steers the customer to a contract that benefits the broker's margin rather than the customer's costs.

In the most harmful variant targeting businesses, a broker presents a switching offer that appears to deliver significant savings but contains a contract with a long tie-in period, high exit fees, and unit rates that are not the market's best — because the broker is earning a large per-unit commission from the supplier. The business signs believing they have secured a good deal, only to discover their energy costs have not fallen as promised, or that they are locked into unfavourable terms they cannot exit without paying a substantial penalty.

A related variant involves fraudulent third-party authority: a company claims to already be managing the business's energy account, contacts the customer on behalf of a genuine supplier, and processes a contract switch the customer has not authorised — registering themselves as the broker of record to capture ongoing commissions.

Residential customers are targeted through door-to-door and phone approaches claiming to offer government-backed switching services. Some charge upfront 'comparison fees' for services that are available free through official comparison sites.

For business customers, the scam often begins with a cold call or email from a broker who has obtained the business's details from commercial directories or data brokers. The broker presents as an independent energy consultant, describes their ability to access wholesale rates, and requests a recent energy bill to assess potential savings.

Once the bill is provided, the broker prepares a comparison that appears to show significant savings versus the current contract. What is not disclosed is the commission structure embedded in the proposed contract, which inflates the unit rate compared to the best available deal. The savings are real but much smaller than represented; in some cases the proposed contract is more expensive than the market's best alternative.

The business signs a letter of authority (LOA) allowing the broker to act on their behalf. The broker then uses this authority to place the contract with a supplier of their choosing, registers as the broker of record, and begins earning commission for the full term of the contract — which may be three to five years.

For residential customers, door-to-door approaches claim to represent an official switching programme. A fee may be charged for the comparison, or the customer is enrolled in a switching service that claims monthly management fees far exceeding any saving achieved.

Energy pricing is genuinely complex, and the prospect of an expert identifying savings that the customer might miss is a plausible and appealing offer. Small business owners typically have neither the time nor the expertise to evaluate energy contracts in detail, making broker advice feel valuable.

The commission structure in energy brokerage is not widely understood by customers. Most buyers of brokered services assume the broker's interests align with their own; the reality that a broker earns more when they place the customer in a higher-rate contract is not immediately obvious.

Signing a letter of authority feels like a reasonable step in an advisory relationship. The consequences of having done so — the broker having full authority to place contracts in the customer's name — are not always apparent until the contract is in place and commission is flowing.

I can access wholesale energy rates for your business that aren't available publicly. Send me your latest bill and I'll show you the savings. No obligation.

Your energy contract is renewing soon. We help businesses like yours find the best deal — sign the LOA and we handle everything. No fee to you.

We're running a government-backed switching programme in your area. Compare your current rate for free and move to a cheaper tariff today.

Managing your energy procurement is costing you money. Our consultancy fee of [amount] per month ensures you always have the best deal.

Hi, I represent [energy supplier]. We've updated your business account and secured new rates. Please confirm the LOA attached to proceed.

Before signing any letter of authority with an energy broker, ask them to disclose in writing the full commission they will earn from the contract they propose. In the UK, brokers are required to disclose this following FCA and Ofgem guidance; elsewhere, ask directly. A broker who refuses to disclose is a risk signal.

For any proposed contract, use a verified independent comparison tool to check the unit rates quoted against the current market. Official comparison sites in many countries provide this for free without any broker involvement. The difference between the proposed rate and the market benchmark reveals the hidden commission.

Verify the broker against your energy regulator's database of licensed intermediaries where this exists. In the UK, energy brokers operating in the business market are not currently required to be licensed, which is a known regulatory gap — apply additional scrutiny to those who contact you unsolicited.

Never pay an upfront comparison fee for an energy switching service. Official comparison sites and regulated brokers do not charge consumers directly for comparison.