Is Your Energy Broker Leaving Your Business Broke…?

Author - Michael Hughes | Out-Of-Contract Utilities?

Using commercial energy brokers (in theory) will help your business avoid uncompetitive renewal offers from your existing supplier, and instead allow you to explore a range of prices and tariffs from the market...

However, typical brokerages will often restrict businesses to a fraction of the overall savings which could have been made and today we lift the lid on what actually goes on ‘behind the curtain’ and explore 5 reasons why your current energy broker is probably leaving you broke...

1. Huge Operating Costs:

Most typical brokerages incur huge operational costs including; large office spaces, 100+ staff salaries, Directors, Operations Managers, Sales Managers, outbound cold-calling teams, inbound teams, field sales, marketing, data purchased for prospecting, as well as endless pots of cash made available for incentives to drive sales.

And guess who pays for all of this? That’s right, you!

2. Exorbitant Commission Uplift:

Commission… hold on a minute, didn’t our broker tell us we don’t pay them anything whatsoever, and that it's the supplier which pays them?

Actually the supplier does pay the broker, however it's the broker which pre-determines the amount of commission they earn, which is then added as an up-lift to the overall rates. Many suppliers allow for an uplift of 3p (per unit or kWh) to be included as commission. The supplier then forwards this to the broker once your contract is live...

This means that if you sign an electricity contract at 23p/per kWh, 3p/per kWh might then be forwarded to the broker as commission, which is essentially being taken from the overall savings which could have been made by you!

3. Undisclosed Fees / Non-Micro Businesses:

New industry regulations have meant that brokers are now obliged to disclose their earning to micro-businesses, however these amounts do not have to be disclosed for non-micro businesses, and you can bet your bottom dollar (if you’ve been left with any) that brokers will try to earn maximum commissions on non-micro business contracts!

4. Blacklisted Brokerages:

Suppliers reserve the right to decline contracts from brokerages with a history of unethical practices or complaints. This has led to many brokerages essentially being blacklisted from using certain suppliers, which often results in the most cost-effective options not presented by the brokerage as they simply no longer have a relationship with the supplier.

5. Preferred Or Disregarded Suppliers:

Suppliers pay commission to brokers in a variety of ways, some suppliers which brokers often refer to as 'tier 2 suppliers' pay monthly in arrears, while others often referred to as 'tier 1 suppliers' are happy to pay 80% of the total commission value of the contract to brokers up-front.

This leads to many brokerages favouring suppliers which pay them immediately up-front, while disregarding tier 2 suppliers which could have been offering significantly lower rates and greater overall savings.

Unfortunately tier 2 suppliers not being offered, compounded with exorbitant broker commissions being added, can prove extremely costly for businesses.

As shown in the examples below:

2p potential loss of a tier 1 supplier being offered as apposed to a more competitive tier 2 supplier + 3p broker commission uplift = 5p loss

5p x 150,000 kWh of Electricity (annual usage of a medium sized care home) = ￡7,500 loss x1 year contract, ￡15,000 loss x2 year contract, ￡22,500 loss x3 year contract.

5p x 300,000 kWh of Electricity (annual usage of a medium sized pizza outlet) = ￡15,000 loss x1 year contract, ￡30,000 loss x2 year contract, ￡45,000 loss x 3 year contract.

5p x 1,000,000 kWh of Electricity (annual usage of a small food manufacturer) = ￡50,000 loss x 1 year contract, ￡100,000 loss x2 year contract, ￡150,000 loss x3 year contract.

Fortunately many of these exorbitant charges and unnecessary losses can be avoided by building a long-term utilities relationship with a company you can trust...

Working With Out-Of-Contract Utilities?

Building a long-term utilities relationship with Out-Of-Contract Utilities? will allow our agency to act as your procurement specialist, helping you to navigate an extremely volatile market.

We can submit corporate tenders and obtain bespoke pricing from 25+ suppliers for different length contract terms.

We can help you steer clear of uncompetitive pricing, and because we work with ALL suppliers under exactly the same terms and forfeit up-to 75% of the commission payments providers expect to pay us, this then adds to the overall savings you make!

If your Gas or Electricity contract is expiring speak with me directly on?0191 308 4556?or email?[email protected]?and?I can elaborate?further on the points made in this newsletter, and we can build a strategy to help your business move forwards in the current climate.

Thank you for reading!

Michael Hughes | Out-Of-Contract Utilities??