Why using the wrong (or no) energy broker can cost your business
Director, Focus Energy Services Limited
5 minute read
Why using the wrong (or no) energy broker can cost your business
With recent prices being as low and stable as they have been for the last 2 years it would be very easy to be complacent about when and from who you procure your energy. Indeed, as a result of the relatively lower price level and market stability we have secured some significant contract savings for our clients recently – a notable one being a reduction of £1,159,000 on a client’s electricity costs for the next 12 months. This is made more remarkable by it being one business premise and one half-hourly electricity meter.
The sad truth, however, is that most of the factors that had contributed to the volatility in prices during the “energy crisis” are still there in the background and have not been eradicated or removed.
With 1st October 2023 signifying the start of the winter period in relation to the energy market we are ever-mindful that supply issues, strikes and even an early cold-snap can spike the market. Add-in additional factors such as hidden broker fees and rising networks costs then it’s very easy to see why energy cost competitiveness has never been so important and neither has the need for efficiency and transparency in the energy supply & retail market.
Finding the right broker is key, in a market lacking transparency and governance
The UK’s business energy brokerage market is presently unregulated. Whilst the actual energy supply companies are regulated by OFGEM, the industry as a whole is still a long way from being fully transparent – particularly in relation to undisclosed broker commissions, and energy brokers / sales people are seen by many to be too pushy and sales-driven. Many of the business owners we speak to find the constant barrage of speculative sales calls in relation to business energy a real turn-off. We have seen clients who previously had been panicked by such calls advising them that they are out of contract or that the caller is their newly appointed broker calling to introduce themselves. It is frankly amazing that a country like the UK has so little regulation or codes of conduct covering this vital commercial sector and no all-encompassing regulator governing the activities of all the agents within it.
That said, there are good and bad workers, advisers, and vendors in all aspects of life. The key for businesses is to find a good, trustworthy energy consultant/broker who can help you find efficiencies, give quality advice, and better understand YOUR needs. Not all businesses want or need the same levels of help and input, and therefore finding the right broker pays dividends by offering savings in both time and money.
Is bigger “better” with utility brokers?
In our opinion – no. If anything, size can be a distinct disadvantage in the broker sector.
We have engaged with a number of larger, multi-site or corporate clients where it was clear that they’d previously been “sold” on the advantages of going with a big broker then, after the contract has been signed and the honeymoon period has worn-off, they have been frustrated and sometimes disappointed with the level of service or not getting to speak to the same person twice.
We find it very interesting that large-scale users of energy or businesses with multi-site premises initially feel that they “need” to find a bigger broker. What we would like to highlight is that using a large broker can often be detrimental (financially) to a business rather than beneficial for the following reasons:
Economy – a large-scale brokerage could have:
- 100s of staff salaries
- 100s of pension contributions,
- 100s of computers
- Their own electric, gas, and water costs for their own trade premises.
- Spend large sums of money on digital advertising.
- Financially incentivise staff to close deals
- Operate call centres where you never get the same person twice.
These are just some of their issues and overheads BEFORE they even make profit which you are ultimately paying for.
Look at your Broker’s fees – If they do not declare them ask them why not:
Most energy brokers are paid by obtaining prices from various suppliers and then adding their margin onto the prices before showing them to the prospective customer or client. Smaller brokers with minimal overheads get exactly the same wholesale prices but add less margin which makes for lower prices for clients.
Unfortunately, most brokers do not declare their fees or commissions although this is slowly being eradicated by OFGEM requiring suppliers to state on the contract what the commissions are. Sadly, this is often not spotted until after the contract has been signed. Responsible brokers declare their fees openly and transparently at the quotation stage, they are not hidden in the contract where it’s “buyer beware” if you didn’t spot it.
Rather than have somebody “sell” you energy, we find that business owners – particularly in larger or multi-site premises find it far more refreshing to be given transparent, consultative energy advice, comparisons and quotations and be offered some industry insight to help them make a more informed decision on when and from who they buy their energy.
What does a GOOD Broker offer?
Here are the main benefits of using a good broker who is professional and trustworthy:
- They will have a genuine interest in understanding your business
- They will work hard to source the best contracts for your business
- They should be able to provide transparent figures for comparison and consideration
- They should most always be able to beat any renewal figure you are given
- They should never charge you for providing quotes and comparisons
- They save you time and let you get back to doing what you do best – your business!
If you have already had a relationship with a broker for some time, then you should still try to get a second quote to see how competitive (or complacent) your current broker still is – after all the only difference in prices should be the margin which they charge you for their services. Especially if you are in manufacturing, production or engineering – typically the larger users of business energy.
If you are uncertain about how much to pay for your business utilities or would like to discuss or compare a renewal price which you have received or have lapsed into prejudicial out-of-contract rates, then please contact us. We are happy to provide testimonials from satisfied clients and, if you are local enough, we are also happy to drop in for a cuppa and a chat about your individual requirements.
Why Consider Focus?
Focus Energy Services offer a range of services to customers:
- Instant access (mobile number and direct email address) to one of our 3 Directors, no call centre delays or info@ or support@ email address frustrations.
- A more personal service tailored to the needs of the individual business.
- Practical, consultative advice – not sales-driven.
- Access to all of the UK’s major/quality energy providers.
- Full transparency in pricing, fees and commission up front
- Lower overhead than competitors which ensures more competitive pricing.
- Fixed, Basket & Flex contracts.
- Reviews and audits to spot anomalies or incorrect billing.
- Discussions of all available options to help narrow-down the final choice.
- Availability of invoice validation for multi-site premises.
We are a UK-wide business energy consultancy and brokerage whose three directors are preferred suppliers and energy partners to the care sector but also well-versed in the energy requirements of other sectors like manufacturing, production and engineering. We are proud members of Scottish Engineering and are happy to help fellow members source the best available utility contracts for their businesses.
I will be speaking again at Scotland’s Manufacturing and Supply Chain Conference at the SEC, Glasgow on 25th October 2023 – courtesy of Scottish Engineering who are the main event sponsor. I have previously presented at other national conferences across the UK on business utilities and procurement strategies and offer transparent industry insight to help organisations purchase their utilities with more confidence. I am based in Fife; my colleagues Gavin Scott and David Woodward are based in Glasgow and York respectively.
We have three directors and no employees and, comparatively, no real overhead in comparison to our competitors and can do ALL of the things a larger brokerage offers.