Business Energy Brokers Explained
When running a small or micro business, you may not have the capacity to find the best business energy deals yourself. Business energy brokers can help you with this process, potentially saving you both time and money. Find out everything you need to know about business energy brokers below.
Thanks to their close relationships with energy suppliers, business energy brokers can potentially help negotiate a better contract than if you approach a provider directly yourself.
And they are a commonly used tool by Britain’s smallest businesses. An investigation by the Office of Gas and Electricity Markets (Ofgem) in 2020 found that around two-thirds of the country’s micro businesses (entities of nine employees or fewer) go through an energy broker, energy consultant or other third party intermediary (TPI) when choosing their business energy.
But do you need to use one as a small or micro business? Below, we take a look at what services a business energy broker actually offers, how they make their money, and the benefits and disadvantages of using them to secure your business energy contract.
» COMPARE: Business energy
What is a business energy broker?
Given that it is a more complicated product than domestic energy, business energy brokers can provide assistance if you feel you need a bit of guidance on the hows, whats and whens of business energy.
Among other things, they can help you compare business energy prices for both gas and electricity, negotiate your tariff, and manage your switchover.
You will pay for these services either through a commission that is added onto your kilowatt hour unit cost, or via an upfront invoice.
Why use a business energy broker?
While, broadly speaking, a business energy broker can help you get a better deal for your gas and electricity, how they do this covers a range of activities. This can include:
Negotiating your contract
Your energy broker can negotiate which tariff you are put on, and the unit cost of a kilowatt per hour (kWh), with the aim of getting the most appropriate deal for your business.
Energy brokers can obtain quotes from a number of business energy suppliers at once, saving you time while trying to seek the most suitable option for your business.
Managing your switch
If you use an energy broker to switch suppliers, they can carry out the process for you, including arranging the start date and checking that your billing details are correct.
Helping with your contract renewal
Similarly, energy brokers can remind you when your contract is up for renewal and help you decide on the best course of action for your business.
Resolving bill disputes
If you have used an energy broker to secure your contract, they can work on your behalf, helping to sort out any billing disputes or discrepancies.
If you have been charged for services you don’t use, an energy broker can help get your money back.
Business energy management advice
If you need any additional support, including tips on improving your energy efficiency and reducing consumption, your energy broker can be of assistance.
To permit an energy broker to do all the above, you will need to sign a ‘Letter of Authority’. This document will specify what you are happy for the energy broker to carry out, and which information they can collect.
However, the wording of this letter should not:
- Legally bind you to use the broker’s services.
- Give the broker exclusivity.
- Lock you into any business energy deals.
- Allow the broker to sign contracts on your behalf.
Business energy brokers vs energy consultants
When you are looking for a business energy broker, you may also come across the services of energy consultants. It is a good idea to familiarise yourself with the difference between the two, to ensure you pick the right option for your business.
A business energy broker will look to help you save money on your business energy by securing a new tariff.
A business energy consultant, on the other hand, will offer a more holistic service, including ongoing advice on how to manage your energy usage and strategy. Consultants typically work with larger businesses.
Some business energy brokers may also offer certain consulting services.
How does a business energy broker make money?
The most common way for business energy brokers to make money is through commission. Energy brokers will negotiate this with the business energy supplier when trying to obtain your contract.
The commission is normally calculated at a unit rate per kilowatt hour, and then added to the kWh unit cost of actually using your gas or electricity as set by your supplier. The more business energy you use, the greater the energy broker’s commission will be. Many business owners mistakenly believe they are not paying any broker commission, because it doesn’t appear as a separate charge on their energy bill.
Per kWh commission is not the only way energy brokers can be paid, however. Some brokers will take a share of savings payment. This is when the broker will be paid a percentage of the amount you saved on your energy bill by using their services. You should make sure you confirm how your broker is calculating these ‘savings’ before agreeing to this payment method.
Another, more straightforward, form of payment is an upfront invoice. This is where you and your energy broker agree on a fixed monthly fee for using their services.
With each payment type, it is of the utmost importance to get a full written disclosure of how your energy broker is earning money from your contract, including all commission, charges and fixed fees.
Some rogue energy brokers will use the sector’s lack of official regulation to take advantage of their customers by hiding commissions in their customers’ contracts without informing them. If you did not receive a full written disclosure from your broker, or felt pushed into a deal by your broker without fully understanding its terms and conditions, you may be eligible to make a business energy claim on the grounds that you were mis-sold the contract.
Pros and cons of using a business energy broker
Before using a business energy broker, it is important to consider the advantages and disadvantages for your specific organisation.
It can make sense as a small or micro business to go through an energy broker to secure your business gas and electricity contracts. Not least because you are unlikely to have a team large enough to dedicate significant time to sorting out your utilities. Using an energy broker can:
Save you money
A good energy broker will try to help you find the best deal, and the most suitable rates, for your business, based on your individual needs.
Save you time
Energy brokers will take over many of the time-consuming aspects of your business energy search, including comparing multiple suppliers and processing any switches or renewals.
Help manage your contracts
Not only will an energy broker remind you that your contract is coming up, they can advise you on whether to stick with the same supplier and negotiate a new deal, or switch to a different provider.
Help your knowledge of the market
If you have any other questions about business energy, including your efficiency and consumption, energy brokers can help find the right answer for your business.
However, not all energy brokers are created equal. You should be aware that:
Using an energy broker is not a free service
Even if your bill doesn’t show any costs, you will be paying some form of commission when using a business energy broker.
Hidden commissions and missold contracts
Some unscrupulous brokers may hide commissions, or mis-sell you business energy contracts, which benefit their financial interests more than your own.
If looking to use the services of an energy broker, you should always thoroughly read their customer reviews, and search for any business energy claims brought against them in the past few years.
How to choose a business energy broker
Before choosing a business energy broker, it is worth asking the following questions:
- Are they signed up to the Third Party Intermediary (TPI) Code of Practice?
- Are they an accredited broker listed by the Utilities Intermediaries Association (UIA)?
- How many suppliers do they compare?
- How transparent are they about their commission structure and fees?
- What are their customer reviews like online?
- How clear are the terms of their Letter of Authority?
» COMPARE: Business electricity
Image source: Getty Images
Connor is a writer and spokesperson for NerdWallet. Previously at Spreadex, his market commentary has been quoted in the likes of the BBC, The Guardian, Evening Standard, Reuters and The Independent. Read more