INFORMATION ABOUT YOUR BROKER
When working with an energy consultant or broker, it is very important to have an idea of how much they are paid. However most organizations have themselves unaware of how much they pay for the service they receive.
Based on a report published in 2017 by the energy market intelligence agency, IUA, enterprises often have no idea about how their broker is paid. The headings from the report states that:
37% of organizations believe that their broker provides them with a free service; 42% are unclear how much they are accrued by their broker; 38% of enterprises do not consider that fees made by brokers are easy to understand.
From this, it is clearly seen that enterprises often have problems understanding how their energy advisor is paid, and this can cause major problems if you deal with a poorly trained or unreliable third party. To understand how your energy consultant can be rewarded, we outlined the three most common payment schemes used by energy consultants.
Supplier Lift Payments
This is one of the most common means of payment used by third-party energy brokers / consultants.
In this way, the energy consultant will send you contract prices from the energy supplier (s), which include a “rise”, either as a single course or as a permanent fee. This raise is the broker’s commission or “commission”. Commission fees will depend on the broker / procurement consultant, with unit prices varying widely from 0.05 pence to 5 pence per kilowatt-hour.
Take as an example how the commission model works. You contact your broker to request a price. They will then go to the suppliers to request prices that include their commission. Receiving prices back from the broker, they will include a commission in the rate.
One question to ask with the commission model; Is the broker's fee included in the p / kWh unit rate or a fixed fee for your contract? Sometimes this is not explained explicitly, leaving the company, believing that their broker provides a free service. Any credible energy adviser should be clearly aware of the price they receive.
In accordance with this method of payment, you will agree with your consultant what services they will provide for you, and then you negotiate and agree with the monthly / annual or project rate. As a rule, in accordance to this model, you will receive an invoice every month with a payment that you must pay to your consultant. This will be in addition to the payment you pay the energy provider for the energy contract.
Working with a broker on the basis of a consultancy fee has the advantage of price transparency and the confidence that they consider you to be the best contract in the market, inconsiderable of supplier payments and market prices.
Share of savings payment
Another means of payment used by some brokers is part of the savings model. With this tactic, your broker will receive a percentage of the total savings they achieve for you (usually from 10 to 50%, although this varies). If this method is used by your advisor, then it is really important to clearly understand what they base their savings on so that in the future there will be no difficulties.
In closing, it is important to be clear that everyone who uses the services of an energy broker or consultation will pay. It is strongly advised that anyone who works with a third party in managing the procurement process, must ensure that they know exactly how much they pay.
We are able to stop the brokers excess commissions moving forward and are paid directly from the supplier to give you the transparency you need.