Energy and Utility Management Consultants

No Hidden Commission

Read what the Regulator OFGEM says about third party intermediaries (TPI's).

 

If you already have a broker or you are considering employing one, how much will you be paying this broker?

 

1. If the answer is "nothing" or "I don't know" - then you could be paying too much.

 

Energy brokers work on a commission basis paid by the supplier. Typically this is in the form of an uplift agreed between the broker and the supplier on top of the base rates on offer. This uplift is included in your unit rates or standing charge earning the broker commission on every invoice you pay. For example a contracted electricity rate of 9.87 p/kWh might in fact be a base rate of 9.47 p/kWh + 0.4 p/kWh for the broker, or your £50/month standing charge might be £30 + £20/month commission.

 

As commission is not shown on your bills it is impossible to know how much you are actually paying unless the supplier is willing to tell you - is it 0.2 p/kWh, 0.4 p/kWh, more? 

 

Commission paid for medium and large users is often on a per unit basis (per kWh). The total commission earned therefore depends on the amount of electricity or gas actually used. A reasonable sounding 0.2 p/kWh can easily become several thousand pounds of commission on the large electricity or gas supplies that you might find in a multi storey office or hotel or for manufacturing businesses. It is therefore important to consider how much you use, not just the rate of commission. 

 

 

How much ARE you paying? 

 

If you would like to verify how much commission is being paid from your accounts: 

 

1) Ask your broker to complete and sign this template (giving your supplier permission to disclose commission).

 

2) Send the completed letter to your suppliers using draft email / letter

 

3) Calculate how much commission you are paying over the course of a year. Use our on-line calculator here or send in the details to us and we will advise you.

 

Almost certainly you are paying something towards the cost of your broker service, whether this is hundreds or thousands of pounds will depend on the broker you use and the service they provide. Irrespective of how much you are paying however there are a number fundamental questions you should consider if your broker is paid via commission. 

 

 

The Problem with Commission 

 

  • Impartially. If your broker is working on commission how impartial is the advice they give you? 

 

  • Which Supplier? Are recommendations based on your business needs and supplier performance or based on who can offer the most commission? Have suppliers been excluded because they limit the commission they will pay?

 

  • Savings. If Supplier A is £2000 cheaper than Supplier B, do you see all of that £2000 - how much goes to your broker? 

 

  • How Long? A broker who can lock a client in a contract for 3 years will earn commission over all 3 years giving maximum return from a single tender exercise. Is your broker's recommendation motivated by market conditions or a desire lock you in for as long as possible? 

 

  • Greed. Due to the lack of transparency there is potential for excessive commission to be paid, particularly (although not limited) on half hourly metered electricity supplies and large gas supplies. Due to the high level of usage even small changes in rates result in large changes in total cost and commissions can be huge. We have seen examples of commissions in excess of £6,000 on a single supply! If you don't know how much you are paying in commission how do you know you are getting a fair deal from your broker? 

 

 

A Professional Approach

 

Clifford Talbot Partnership have a different approach. As consultants we work on a fixed fee basis - all charges are agreed with our clients up front and paid direct. None of the supply contracts negotiated by us include any commission and so our clients can be sure that we are completely impartial and independent.

 

In addition to just procurement our Full Utility Bureau Service provides a full range of services including bill validation, dispute resolution, tenant recharging, monitoring and reporting all via a single dedicated account manager. Most brokers will only carry out the procurement exercise and will exclude these other essential services that we include.

 

Because we don't just do procurement we can offer expert advise based on our own experiences with suppliers post contract. Anyone who has had a poor supplier will know the difference this can make. 



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