Commercial energy prices are constantly fluctuating, making it increasingly challenging for businesses who are looking to reduce either costs and consumption.
Many business owners do not have the time or, in many cases, the experience to negotiate with multiple suppliers in order to secure the most competitive rates for their business energy. Hiring an energy broker means that they can negotiate these on your behalf, but do you know how they are paid?
If you use or are considering using, an energy broker then we recommend you ask them how they are paid BEFORE you agree to use their services.
According to Cornwall Energy, 37% of businesses think that a free service is provided by their consultant, while 42% are unclear how much they’re charged.
For many businesses, their energy costs form a significant proportion of their overall business costs. So it’s important to know how much the energy broker charges for their services. There are a variety of charging models in place.
Commission Based
One of the most common methods used for brokers to be paid.
In this instance, the energy broker negotiates a ‘base-rate’ by contacting a range of suppliers and requesting prices. They would then apply an ‘up-lift’ or ‘mark-up’ to this base-rate and this forms the basis of their commission. They provide the customer with the combined price and this is the rate the customer will be charged by the energy supplier, should they decide to proceed. The broker is paid the ‘up-lift’ as their commission but, ultimately, the customer is paying the commission via their energy bills.
Ask your broker if they apply an ‘up-lift’ – if they do, ask them how much. Some brokers will apply very low ‘up-lifts’ (anything from £0.001 to £0.003 per kWh). Others will apply significantly more (in some cases these can be as high as £0.02 to £0.04 per kWh).
Fixed Fee
Some brokers will not apply an ‘up-lift’ but instead will agree a fixed fee with the customer. This is often the case for very large energy users. The fees can vary from a few hundred £s to several thousand £s, depending on the complexity of the process and the size of the business.
Share of Savings
This is used by some energy brokers as another means of payment. Through this option, the advisor would receive a certain percentage of the total savings that they have generated on behalf of the customer.
If this is the path that you have decided to take with your energy advisor, then make sure it’s clear what the savings are based on. This is purely to counteract any confusion in the future.
If you would like to find out more about how our bespoke services can help save your business money via your energy contracts, get in touch, via our contact page or by telephone on 020 8012 8244
