Looking for an Energy Broker? 5 Questions to Ask Ask the right questions to get the right deal 01
Looking for a Business Energy Broker? 5 Questions to Ask Ask the right questions to get the right deal According to the Department of Energy and Climate Change business electricity prices have risen by 35% and gas by 56% between 2007 and 2012. To remain profitable in an economy still recovering from the 2008-09 financial crisis, it s important to find ways of keeping costs down to maintain the bottom line. With energy accounting for an increasing portion of overheads, companies have to find ways to spend less on this critical element of their business. While energy efficiency strategies can cut costs, it is essential to support these by ensuring you secure the best prices for the energy you consume. That s where an energy broker can help. Since competition became a staple of the UK energy market in the late 1990s, companies have used energy brokers to find and negotiate the best rates on electricity and natural gas. Brokers assist their clients with determining the best energy supply and product options for their particular business. Competition between brokers has lowered the fees they charge clients. That makes it an ideal time to negotiate new terms or perhaps even find a new service provider. 02
When you re shopping for an energy broker for the first time or looking to replace your current one, here are five questions you should always ask during the prospecting process: 01 There s no such thing as a free lunch! How is the broker paid and is its commission structure transparent? Some brokers charge a flat consultancy fee to their clients, while others work on a commission structure. If they are working on a commission, will they disclose that information? A reputable broker will explain how much their services cost. Rates vary widely from 0.05 pence to 5 pence per kilowatt hour. If the commission is paid by the energy supplier, can you be certain the broker obtained the best contract on your behalf and not just the largest commission? Also understand if the broker s commission was added to your energy contract and the amount this totalled. 0.05p 5p p/kwh Working with a broker on a consultancy fee basis has the advantages of price transparency, plus the reassurance that they are finding you the best contract on the market, regardless of supplier commissions and market prices. According to a British Chambers of Commerce survey, nearly 40% of businesses feel that rising costs have adversely affected their growth. 03
02 Does the broker offer several types of contracts or just fixed contracts? Often, small brokers will recommend an energy contract that s easiest for them to manage, which is typically a fixed contract for as long as possible. Depending on your circumstances, being locked into a long-term fixed contract could cause you to overpay for energy during times when prices are declining. In addition, fixed contracts include a risk premium. Usually the longer the contract, the more expensive the premium. Other types of contracts may be more beneficial to your business, and your broker should be able to offer these options. They include: Flexible energy contracts. This is a risk-managed contract that lets you take advantage of fluctuating wholesale energy prices. Flexible purchasing lets you buy energy a little and often so you can take advantage of dips in the wholesale market and buy when prices are advantageous. Collective purchasing contract. These contracts allow you to combine your energy consumption with other organisations, benefiting from increased purchasing power. You can then achieve a better commodity price, get smarter contractual terms and have the option to purchase flexibly. Green contracts. For power, the supplier is required to buy a certain amount of energy from renewable sources. These tariffs can then be marketed as green and a broker can help you understand the claims made in the contract. 03 Is the broker independent and how many suppliers does it have access to? A reputable broker will obtain bids from various suppliers and send you, the client, a detailed summary with a recommendation. Remember: many small brokers will not have access to prices from all large energy suppliers! 04
An example of a diligent broker s approach to securing a new energy contract would involve: Compiling the necessary site and company data to approach the supply market. Searching and identifying the best suppliers to bid for your contracts (using all credible suppliers rather than a few favourites). Promoting your business to the tendering suppliers to ensure a good response. Negotiating prices and contractual terms on behalf of your business, clarifying terms and conditions. Giving recommendations to guide the choice of new contract term, supplier, rate, structure etc. Obtaining credit clearance. 04 What kind of service can I expect from the broker after we sign a contract? Customer service is a very important factor in your decision. Your broker should not disappear on you after procuring your energy, but should instead develop an ongoing relationship. The broker should continue working to understand your business and stay up-to-date with changes in your company and industry. In addition to finding the best contract, a quality broker should be able to help you manage your energy better. They should be able to set up bespoke energy consumption reports and identify where you could reduce energy usage and increase the efficiency of your business. You should work with a broker that truly has your best interests in mind. Remember that brokers work for you, so they should be more than willing to help you find an energy management solution and specify efficiency technologies that can meet your specific company requirements. 5% Of UK small businesses use an energy broker in comparison to 70% of larger businesses. 05
05 What additional services, including free ones, does the broker offer? There is more to determining the value of an energy broker than just the cost of the contract you obtain. Value-added services that a full-service broker can offer include: Complete energy management services. A quality broker will provide its clients with consumption monitoring and reporting services, energy efficiency consultancy, and advice on renewable technologies. Invoice checking. Will the broker check your invoices once the new contract is established? Multi-site management. Large companies with multiple locations and operations often benefit from a broker being able to bring all contracts in line so that all meters have the same contract start dates. This means less paperwork -- which the broker will handle -- and the ability to procure all energy needs together instead of several times a year. Renewal reminders. Your broker should record your contract renewal date and contact you well in advance of that date to begin negotiations for a new contract or to seek a different supplier. A quality broker will start this process many months in advance, due to the 90-day notice required by many energy suppliers. Market analysis. Does your broker have market analysts watching the wholesale energy market and can you request market intelligence reports for free? 06
Remember Energy brokers should free up your team to focus on their core business while they find the best available market deals. Ask the prospective broker for references from other clients. Also ask about the make-up of their current customer base to ensure you will fit in (e.g. whether or not you ll be a small fish in a big pond). To be sure you are entrusting this important responsibility to the right broker. Look for: Transparency Varying types of contract Access to many suppliers Good customer service A full service offer Get a free desktop audit of your current contracts to see if your business could save money on their energy bills. Apply now for a free ENER-G healthcheck 07