Business Energy and Energy Broker Commissions – What’s The Deal?

Ofgem has come under scrutiny recently for their perceived mismanagement of energy prices. Gas and electricity prices per kWh have skyrocketed, and UK customers are paying through the nose for their utility bills.

But – there is another, lingering problem in the UK energy market. Hidden commission from unscrupulous brokers acting as TPIs. These businesses often charge hidden energy broker fees, mis-sell business energy contracts, or even flat out lie and pose as energy companies.

Of course – not all are like this. The majority are good energy brokers.

If you think that you are paying too much commission for the energy you use, or have found undisclosed commission in your contract then you should keep reading our guide.

What is a business energy broker?

A business energy broker is a professional who helps companies compare and purchase energy products such as electricity and natural gas from suppliers. The broker acts as an intermediary between the company and energy suppliers, negotiating favorable terms, prices and contracts for their clients. The goal of a business energy broker is to save the company time, money, and resources by finding them the best energy deals and managing the process from start to finish.

How does a business energy broker make money?

A business energy broker typically makes money by charging a commission fee or uplift to their clients for their services, either as a percentage of the energy contract value or as a flat fee. They may also receive commissions from energy suppliers for successfully placing energy contracts with them. The commission amount is often a percentage of the energy contract value, which provides an incentive for the broker to negotiate the best deals for their clients while also generating revenue for themselves. Some business energy brokers may also receive a combination of fees and commissions.

How Does Commission Work?

Energy brokers usually earn a commission from energy suppliers for helping them secure new business. The commission amount is often a percentage of the total value of the energy contract that the broker helped to secure. This provides an incentive for the broker to negotiate favorable terms and prices for their clients, as a larger contract value means a higher commission for the broker. The commission is paid by the energy supplier to the broker after the energy contract has been signed and the energy supply has begun.

It’s important to note that the commission does not increase the cost of the energy for the client. Energy suppliers usually build the cost of the commission into their overall pricing, so the client pays the same amount for the energy regardless of whether or not a broker is involved. The commission simply provides a way for the broker to earn a fee for their services.

Do energy brokers have to disclose commission added?

In many countries, energy brokers are required to disclose the commission they receive from energy suppliers. This is because commissions can create a potential conflict of interest, as the broker may have an incentive to recommend products that generate the highest commission rather than those that are in the best interests of their clients.

Disclosure requirements for energy brokers vary by jurisdiction, but in general, brokers are expected to be transparent about their compensation structure and to provide clients with full disclosure of any commissions they receive. This information should be provided in writing and made available to clients before they agree to any energy contract.

It’s important for clients to understand that commissions do not increase the cost of energy and are not passed on to them, but disclosing the amount of commission received can help build trust and ensure that the broker is acting in their best interests.

Are energy brokers regulated?

Yes, energy brokers are typically regulated in many countries. The level and nature of regulation varies depending on the jurisdiction, but the overall goal of regulation is to ensure that energy brokers operate in a manner that is fair, transparent, and in the best interests of their clients.

Regulation of energy brokers can include licensing requirements, oversight of business practices, and enforcement of codes of conduct. In some cases, energy brokers may also be required to hold certain qualifications or to have a minimum amount of experience in the industry.

The regulatory framework for energy brokers is designed to protect consumers by ensuring that brokers are competent and ethical in their dealings with clients and energy suppliers. This helps to build trust and confidence in the energy broker industry, and to ensure that clients receive the best possible outcomes from their energy contracts.

The Pros and Cons

Energy brokers can offer a number of advantages to companies looking to purchase energy products, such as electricity and natural gas. Some of the key benefits of using an energy broker include:

Pros:

1. Expertise and market knowledge: Energy brokers have a deep understanding of the energy market and are well-positioned to find the best deals for their clients and prevent them from overpaying.
2. Time and cost savings: Energy brokers can save companies time and money by handling the entire process of comparing and purchasing energy, from start to finish.
3. Negotiating power: Energy brokers have negotiating power with energy suppliers, which they can use to secure favorable terms and prices for their clients.
4. One-stop-shop: Energy brokers provide a one-stop-shop for all energy-related needs, reducing the need for companies to manage multiple relationships with different energy suppliers.
5. Improved bottom line: By securing favorable terms and prices, energy brokers can help companies improve their bottom line and manage their energy costs more effectively.

However, there are also some potential disadvantages to using an energy broker, including:

Cons:

1. Conflicts of interest: Energy brokers may receive commissions from energy suppliers, which can create a potential conflict of interest. Clients need to ensure that the broker is acting in their best interests and not simply recommending products that generate the highest commission.
2. Lack of transparency: Some energy brokers may not be fully transparent about the commission they receive from energy suppliers, which can undermine trust and confidence.
3. Increased costs: Although energy brokers can help companies save money by securing favorable terms and prices, they also charge fees for their services, which can add to the overall cost of energy.
4. Limited flexibility: Energy brokers typically negotiate energy contracts with specific suppliers, which can limit a company’s ability to switch suppliers if they are not happy with the terms and conditions of the contract.

Are energy contracts legally binding?

Yes, energy contracts are typically legally binding agreements between energy suppliers and their customers. They outline the terms and conditions under which energy will be supplied, including the price, duration, and quantity of energy to be supplied.

Once an energy contract is signed, both parties are legally obliged to fulfill their obligations under the agreement. For example, the energy supplier is obligated to supply the agreed-upon amount of energy at the agreed-upon price, and the customer is obligated to pay for the energy according to the terms of the contract.

It’s important to carefully review the terms of an energy contract before signing it, to ensure that you fully understand your obligations and the rights of both parties. If you have any questions or concerns about the terms of an energy contract, you should seek the advice of a legal professional before signing.

In Conclusion

In conclusion, using an energy broker can provide significant benefits to companies looking to purchase energy products such as electricity and natural gas. Energy brokers act as intermediaries between companies and energy suppliers, negotiating favorable terms, prices, and contracts for their clients. They have the expertise and market knowledge to find the best energy deals, saving companies time, money, and resources. Energy brokers also handle the entire process from start to finish, taking the burden of comparing and purchasing energy off the shoulders of companies. Additionally, they are often regulated, which helps to ensure that they operate in a fair, transparent, and ethical manner. For these reasons, using an energy broker can be a smart choice for companies looking to manage their energy costs and improve their bottom line.