In the blog, we are going to peer behind the often-murky curtain of energy brokers and how they work. We will explore, why they are important and why picking the right broker can make all the difference to your business and your bills. We will be covering how energy brokers get paid and what a good broker looks like. So, let’s unpack and de-mystify the world of UK energy brokers together and find out how hiring the right one, could help your business save money.
What is an Energy Broker?
An energy broker works similarly to brokers in other industries, for example, insurance brokers or mortgage brokers. Energy brokers should provide expert advice on who is offering the best deals in the business energy market. This also includes when to sign a contract and how long a contract term you should sign. Very large companies will normally have somebody in-house employed to do this work for them but for 99% of businesses, this simply isn’t affordable so, an energy broker may be the perfect solution to help navigate the market.
A Complicated Market: Business Energy vs. Residential Energy and how they differ.
Next, to properly understand the role energy brokers play, we will explore the difference between commercial and residential energy contracts and why you may need an energy broker to help navigate the market and get the best deal for your business.
Firstly, let’s look at what commercial energy and residential energy is:
Commercial energy contracts are tailored to businesses, with distinct pricing and usage patterns compared to domestic energy.
Domestic energy contracts are agreements between households and energy providers for the supply of electricity and gas.
Now, let’s get into the nitty-gritty details of their differences:
Price:
The Commercial energy sector doesn’t have a price cap like we enjoy at home. It can be argued that businesses pay more for energy because suppliers are restricted in what they can charge commercial premises. That said, the larger the usage (consumption) at a business the lower the unit rate (usually) they’ll be offered.
Price movement:
Due to the lack of a price cap in the commercial energy sector, suppliers can (and do) change the prices they offer. Many suppliers update their prices weekly. If you’re in a contract your price will remain the same, but if you’re looking for a quote as your contract runs down, any price quoted is only guaranteed for a day.
Cooling-off period:
Domestic/residential agreements come with a standard 14-day cooling-off period. This means you can cancel an agreement for your home up to 14 days after signing up. Businesses signing supply agreements do not have this luxury, so make sure you’re happy with your quote and you’ve had the chance to compare it with what you’re currently paying and any other quotes you’re looking at.
Fixed-term contracts:
Any energy contract you sign with a supplier will typically last a minimum of 1 year to a maximum of 5 years. If your contract lapses at the end of your term and you haven’t agreed on anything to replace it, you be put on a 28-day rolling contract. Also known as a deemed contract. These don’t exist in the domestic market due to the price cap.
Deemed contracts:
Deemed contracts are best to be avoided. Essentially the supplier can charge you whatever they wish as you have no agreement with them. It’s like going on the standard variable interest with your mortgage provider. Deemed rates are normally at least 50% higher than a contract rate. Again, these don’t exist in the domestic market.
Termination fees:
Suppliers apply termination fees if you cancel your agreement mid-term. Obviously, if you sell your business, finish your lease, or leave the premises for any reason, these fees shouldn’t be applied. These fees, if received, are extortionate and must be avoided at all costs. Domestic termination fees for moving suppliers or contracts are small, normally not more than £100. In the commercial world, they’re often in the thousands.
KVA & Meter Operator charges:
These are for larger electricity meters and don’t apply to most meters. These charges only represent a small element of the bill should you have one of these large “maximum demand” meters. See our other blog for the definition of these charges and other energy definitions here:
Climate change levy:
The CCL is a standard charge for every kWh used. This money is a tax collected for the government to tackle climate change. Currently, the charge is 0.672p/kWh for gas and 0.775p for electricity. From the 1st of April 2024, both will be charged at 0.775. CCL isn’t charged for domestic meters.
Don’t worry if you find all this confusing. While I have been able to give you a brief explanation, an energy broker can be your go-to ally for navigating these complex energy contracts, especially in the commercial sector where fees can be sky-high if you don’t keep on top of your contract. They help you understand charges like KVA and Meter Operator fees, which can be confusing. Plus, with the climate change levy adding to costs, an energy broker could help you find ways to save money and optimise your energy expenses.
Now that we understand, why having an energy broker may help your business navigate the complexities of the commercial energy market. Let’s look at what makes a good energy broker.
Average Energy Brokers vs. Good Energy Brokers
When it comes to energy brokers, there’s a clear distinction between average and exceptional service providers. Let’s delve deeper into what sets them apart:
Average Energy Brokers:
- Focus primarily on securing contracts quickly and moving on to the next client.
- Limited involvement beyond price comparison and contract signing.
- May not provide ongoing support or assistance with contract renewal.
- Often lack personalised service and long-term relationship building.
- Limited expertise beyond basic energy procurement.
Good Energy Brokers:
- Prioritise building lasting relationships and understanding your unique needs.
- Offer comprehensive services beyond price comparison, including:
- Comparing prices with multiple suppliers.
- Evaluating contract lengths for optimal pricing.
- Assisting with contract transfer and addressing issues with outgoing suppliers.
- Providing timely reminders for contract renewal to maximise cost savings.
- Extend their expertise to secondary services such as:
- Siteworks advice for meter upgrades or installations.
- Ongoing support throughout the contract duration, bypassing traditional customer service channels.
- Assistance in resolving billing disputes efficiently.
- Additional support in related industries like water, telecoms, or payment solutions.
When selecting an energy broker, it’s crucial to consider not only their ability to secure competitive contracts but also their commitment to providing personalised service and long-term value for your business. Opting for a good energy broker ensures a complete approach to energy management, tailored to your specific needs, and aimed at maximising cost savings and operational efficiency over time.
How does an Energy Broker compare energy suppliers?
When it comes to comparing energy suppliers, energy brokers are essential guides in navigating the complex energy market. They rely on their extensive network of supplier agreements to offer customised solutions that meet the specific needs of businesses. Here’s how energy brokers compare energy suppliers:
- Tailored Solutions: Energy brokers understand the unique requirements of businesses, such as energy consumption patterns, preferred energy types (electricity or gas), and credit scores. They ensure that clients are matched with the most suitable suppliers based on these factors.
- Market Insights: Reputable brokers keep a close eye on market trends to provide informed recommendations on contract lengths. By staying ahead of market movements, they help clients optimise cost savings and flexibility.
- Supplier Reliability: Energy brokers prioritise supplier reliability by assessing factors like solvency, security, and customer service quality. This ensures a smooth energy procurement experience for businesses.
Now, that we know how energy brokers operate and the services they provide, we should explore how energy brokers get paid.
How do Energy Brokers get paid?
Energy brokers are paid by adding a fee to the negotiated price of energy, which is included in your contract with the supplier. This fee, typically ranging from 0.1p to 3p per unit of energy, is multiplied by your energy usage to determine the broker’s compensation.
It’s important to note that you don’t pay the broker directly. Instead, the broker’s fee is factored into the overall price you pay to the supplier. This means that while the broker’s commission is built into your energy contract, it’s not an additional cost you need to cover out of your pocket.
Different suppliers have various payment structures for brokers. Typically, brokers only receive their compensation once your contract with the supplier is finalised. They may receive a portion of their fee upfront, with the remainder paid at the end of the contract term. Alternatively, some suppliers opt to pay brokers incrementally throughout the contract.
Understanding how brokers are paid can help businesses make informed decisions when engaging their services, ensuring transparency and clarity in their business energy journey. Now let’s explore how to pick a trustworthy Energy broker to help your business.
How do you know if your Broker is trustworthy?
It’s crucial to have trust in your energy broker, just like you would with any other business partner. You rely on their expertise, so ensuring they provide sound advice is essential.
One way to gauge their trustworthiness is by checking their online presence. Do they have positive ratings on platforms like Trustpilot or Google, backed by several good reviews? This can be a good indicator of their reputation and customer satisfaction.
Additionally, observe how they approach decision-making. A trustworthy broker will give you the time and space to consider your options. Compared to, an untrustworthy who will aggressively pressure you into deciding on the spot.
Most importantly:
Reputable brokers are registered with the Ombudsman, ensuring they adhere to industry standards and have a complaints procedure in place. You can usually find information about this on their website.
In the energy market, businesses rely on the Ombudsman as a support system if they encounter unresolved issues with a broker or supplier. For more information about the Ombudsman and how they can assist, check out their website: https://www.ombudsman-services.org/
By considering these factors, you can ensure a positive and trustworthy relationship with your energy broker.
Summary:
Energy brokers are crucial allies in navigating the complexities of the commercial energy market. By understanding the differences between commercial and domestic energy contracts, you can see the importance of engaging with an energy broker. They offer the opportunity to optimise cost savings and operational efficiency for your business.
Choosing the right energy broker is key, as they provide invaluable support beyond price comparison, assisting with contract negotiation, and renewal, and addressing complex issues like termination fees and KVA charges. It’s essential to opt for a broker who prioritises building lasting relationships, provides personalised service, and demonstrates expertise across various aspects of energy procurement.
We have also explored how choosing a trustworthy Energy Broker is important to ensure transparency and a beneficial relationship for your business. While brokers are paid a fee embedded in the energy contract, businesses should verify their trustworthiness by checking online reviews and ensuring they are registered with the Ombudsman, to get the best services for your business.
Ultimately, partnering with a trustworthy energy broker can significantly benefit your business, helping you navigate the complexities of the energy market, optimise cost savings, and ensure a smooth energy procurement experience.
How can Invew help you?
It won’t surprise you to read that we believe we’re an excellent energy broker. Our founder and staff have worked in the industry since it was deregulated in the 90’s and Invew has been around since 2008. We pride ourselves on top-quality service and communication, by working for you and not the suppliers! Also, we aren’t the largest broker; we don’t have a massive call centre and therefore we provide a more catered individual service. We don’t use any auto-attend answering machines so when you call us, you speak to a person immediately. Most of our customers are recommended by other customers because they trust us to provide sound advice and ultimately save their business money. Check us out online to see what people think of us and give us a call on 0161 8331811 to see how we can help you!
