In recent years, the number of energy brokers in the UK has increased to around 3,000. Part of the reason for this is that despite the large sums of money brokers deal with, it’s relatively cheap to set up a brokerage and they face little regulation. So, how many of these 3,000 brokers are actually reputable and conducting business fairly and ethically?
Earlier this year, The Guardian revealed that small businesses are being conned out of £2 billion a year by “energy brokers” who lock them into long-term gas and electricity contracts that are simply not the best value for money. In particular, many charities, churches and care homes are paying far more than they should for their energy after falling prey to the unregulated brokers. Effectively, these brokers are defrauding clients by offering poor-value deals that they pick from suppliers that offer the most lucrative terms (high commissions for brokers over long contract terms) for the brokers themselves.
Energy regulator Ofgem estimates that businesses, charities and public bodies:
- Spend about £25 billion on energy bills every year
- Half of which is bought through energy brokers
It is estimated that around £2.25 billion of this is likely to be broker commission.
Should I not go directly to an energy supplier?
You may feel that going directly to an energy supplier cuts out the ‘middleman’, but in the case of energy procurement, this doesn’t actually benefit your business. It can be extremely time-consuming to procure your energy directly from a supplier, as you’ll need to contact each one and supply your business’ details to get a quote. Then you have the task of comparing each one to find the best solution for your needs. When you use a broker, they do all the hard work for you. As specialised intermediaries, they will likely be able to procure better rates that are better suited to your requirements. And, if you have any issues, you should have a direct point of contact at your broker.
How do energy brokers make their money?
Typically, an energy broker’s commission is built into the charges from the energy supplier. Despite the commission being built in, the quotes from a broker are generally still cheaper than if you were to go directly to the supplier.
With all this in mind, choosing the best UK energy broker is more important than ever. In this article, we highlight 10 ways to choose the best energy broker for your business’ unique needs.
Have they signed up to the Third Party Intermediary (TPI) Code of Practice?
Sponsored by energy supplier E.ON, the Third Party Intermediary (TPI) Code of Practice is a voluntary standard designed to set a benchmark for responsible, high-quality TPIs who operate on behalf of SMEs. The TPI Code of Practice audits the behaviour of its participants through a set of guidelines that ensure a high standard of service for customers.
Energy brokers that comply with the TPI Code of Practice are committed to providing a high-quality service that is open, honest and transparent.
Establish how many suppliers they work with
It’s important that the energy broker you choose to work with is independent. They should be able to procure quotes from a range of large and small suppliers to help you get the best prices in the market.
Avoiding unscrupulous brokers starts by assessing the level of transparency they are willing to offer.
- Are their answers to your questions honest, accurate and clear?
- Or do they seem evasive?
- Do they require that you sign a contract with them?
- Do they charge you directly for the services they offer?
Are they putting you under undue pressure?
Important deadlines regarding your business energy contract include your contract end date and your termination date. If you know these dates and deadlines, don’t allow yourself to be pressurised into needless actions.
Have they provided a forecast?
Your energy broker should provide you with a forecast of your new annual energy bill, as well as compare your new contract to your current one. As part of this process, they should highlight any savings or increases.
Have you been asked to sign a Letter of Authority?
A reputable broker will ask you to sign a Letter of Authority (LOA) to enable them to act on your behalf in negotiations with energy suppliers. The Letter of Authority should make it very clear what you are giving them permission to do. If you are in any doubt, be sure to ask for clarification.
Has your contract been confirmed?
A business energy contract can be secured verbally over the phone. This call should be recorded and stored by your broker and your new energy supplier (you should have access to this recording upon request). You should also receive a confirmation email of your contract agreement shortly after your call.
Is your privacy protected?
Your energy broker should adhere to the Data Protection Act, the UK’s implementation of the General Data Protection Regulation (GDPR). In addition, their own customer charter should clarify the level of service and obligation they are offering to you.
Do they offer after-sales support?
There should be more to energy procurement than just the sale; ideally, your energy broker should act as your energy consultant. They should be your first point of contact should you have any issues, and you should rarely (if ever) need to deal directly with your supplier. A good energy broker is always looking for ways to help you save money by getting the best deal on your energy and by suggesting ways for you to reduce energy consumption.
What happens if you have a complaint?
Your broker’s customer charter should outline a simple and efficient system for handling complaints and feedback.
No customer charter? No clarity over their complaint policy? It’s probably best to find another broker.
Choose the best broker, secure the best savings and service
Choosing the best energy broker for your business is a vital part of getting the best energy deals for your business, and getting the wrong energy broker could prove costly.
We hope that this advice will help you find the best broker for your needs, saving you time, saving you hassle, saving you money, and helping you with your overall business utility management.
About the author
Andy Taylor is Sales Director at Smarter Business, one of the UK’s leading independent consultancies. He has a distinguished career in the energy sector, starting out as part of the broker account management team with the newly-formed independent supplier economy power. Andy was a Senior Account Manager for the company when it was acquired by Powergen. The subsequent acquisition of Powergen by E.ON saw Taylor head up the newly re-launched Third-Party Intermediary (TPI) channel within the SME area. He continued in this role until being recruited by npower as Head of Indirect Sales in July 2014. Taylor joined Smarter Business in 2019. He is committed to enhancing the trust and transparency of the TPI industry, helping businesses across multiple sectors save money on their essential business services.