How to Choose the Right Energy Broker and Avoid Overpaying in Commissions

If you are a business owner, you might have reached the stage where you need to choose an energy broker. For example, perhaps you have just started the company, or want to switch it to a cheaper energy deal.

It’s hard to overstate how much businesses rely on energy. It is needed for powering lots of different things in workplaces — from lights to laptops, not to mention central heating systems comprising boilers and radiators.

When it comes to sourcing either an electricity or gas plan, the average business naturally has an interest in making sure it gets the most cost-effective deal. After all, there are likely to already be many demands on the company’s finances.

It is unfortunate, then, that many entrepreneurs lack the time to personally do the heavy-duty work of perusing a wide range of energy options.

One factor exacerbating the situation is that, compared to normal consumers, companies can often require a larger amount of power. Hence, the onus is on the latter users to be especially selective in attempts to secure energy deals.

This all helps to explain why more and more enterprise consumers have tasked business energy brokers with scouring the energy market on their behalf.

It has been suggested that, as of 2023, about 70% of UK businesses pay for their energy through an intermediary such as a broker.

However, it is also thought that many of these same companies are unaware of having not only been overcharged for this energy but also consequently left eligible for compensation.

Many businesses that have been mis-sold gas or electricity contracts by a broker can take legal action against them. In any case, though, it would clearly be ideal for your own company to avoid becoming a victim of mis-selling in the first place.

In this article, we are going to provide you with detailed advice on how to choose wisely from the many business energy brokers out there. We can let you know of warning signs that a broker doesn’t wholly have your best interests at heart.

Nonetheless, we also know that you may previously have been stung by a bad experience with a broker. You might even find that you are already eligible to recoup money from that broker.

Our legal firm is based in St Helens and staffed with energy experts and legal specialists capable of dispensing guidance on mis-sold business contracts.

If you suspect that you may have been mis-sold a business energy contract, we urge you to get in touch with Business Energy Claimline to make a claim.

Energy brokers: What are they and what do they do?

Energy brokers basically act as intermediaries between energy suppliers and the brokers’ clients looking to buy energy deals from those suppliers.

Contrary to what you might have thought, energy brokers don’t own, distribute or directly sell energy. Here is a distilled retelling of what their work involves:

• Learning their clients’ energy needs
• Negotiating with suppliers to find deals in line with those needs
• Recommending the best of these deals to the clients
• Arranging contracts the clients choose from those recommended

Energy brokers can work with a wide range of suppliers — from small, little-established outfits to big names such as:

• British Gas
• EDF Energy
• OVO Energy
• ScottishPower
• E.ON Next

Brokers are given set prices by their suppliers, which can be lower than purchasing business energy elsewhere. The clients can therefore see a lot of appeal in approaching the brokers, given their ability to offer energy contracts at genuinely market-leading prices.

Now, all of this enlightening descriptive detail could leave you wondering how brokers make a profit. Simple: they do so by marking up the products, but not necessarily so much that they no longer constitute financially attractive deals.

All of this basically means that, when you want to get hold of an energy contract that will satisfy your company’s day-to-day energy needs and cost-effectively at that, the broker route can be the best way to go.

Still, you would have to choose an energy broker from a broad variety of options — even if you just look at those serving corporate clients (since energy brokers are able to cater for the residential market as well).

As should be becoming increasingly clear, then, it’s not enough for you to decide that you will use an energy broker; you also need to choose an energy broker.

Knowing how brokers can differ within the business energy market alone is key to ensuring you choose an energy broker truly — rather than just according to their marketing materials — well-positioned to help you streamline your corporate outgoings.

Are energy brokers regulated?

Considering the amount of regulation that brokers offering mortgages and insurance policies are subject to, you might be surprised and disappointed to learn that energy brokers have long been spared the same kind of scrutiny.

In fact, as recently as 2020, energy brokers in the UK faced virtually no official regulation. By then, these brokers had grown to about 3,000 in number but developed a seedy reputation due to reports of mis-sold energy deals.

The brokers would mis-sell these deals by not being entirely honest with the client upfront that, by accepting the deals, they would be paying a certain amount of commission to the broker.

Furthermore, the energy suppliers these brokers worked with were found to be complicit in this scheme, as they assisted in preventing the broker commission from standing out on energy bills.

The UK energy regulator Ofgem has traditionally been slow to take action against unscrupulous brokers. For example, though it was back in 2014 that Ofgem first proposed plans to shield small businesses from such brokers, those plans were later dropped.

This was due to the regulator uncovering “inconclusive evidence” of wrongdoing. However, in 2018, Ofgem acknowledged that there was “room for sharp practices by some brokers” and opted to once again look into the issue of broker mis-selling.

Encouragingly, since then, Ofgem has shown further signs of clamping down on mis-selling in the business energy market.

In June 2021, Ofgem was reportedly intent on forcing “unscrupulous” energy brokers to make a habit of fully disclosing, at the point of offering an energy contract, any commission fees attached to it.

Ofgem has also insisted that micro-business customers should be entitled to a 14-day cooling-off period after putting pen to paper on a new energy deal.

Customers in this category can be hit especially hard by unfairly imposed commissions, as micro-businesses — including sports clubs and public bodies — annually incur roughly £25bn in energy costs.

Everything you need to know about energy broker commissions

Business energy brokers make money by arranging energy contracts for their clients — and, on each of these contracts, placing what is referred to as a commission.

In this context, the term ‘commission’ usually represents a percentage of the client’s energy bill. Exactly how large that percentage is will depend on a number of factors, such as:

• The type of energy contract
• The contract’s length
• The unit rate per kWh (kilowatt-hour) of energy

As you pay your energy bills on a contract obtained from a broker, a commission can channel some of that money back to them.

This commission will remain in place for as long as the contract itself lasts. As a result, whenever you make a monthly payment on your energy bill, a cut of that money will trickle through to the broker.

Commissions can obviously benefit brokers by providing them with regular streams of income. However, in theory, the commission structure can also be a boon of sorts to consumers — by incentivising brokers to:

• Consider deals from a wide range of business energy suppliers
• Find the contract that would truly best fit the client’s needs
• Uncover a quote the client would likely want to opt for
• Provide a high standard of customer service

This is all essentially because the broker knows they will only be able to get commission money from you if you agree to get a deal through them specifically.

Hence, the commission system can also — again, at least theoretically — help to keep business energy prices low by spurring a more intense level of competition between brokers.

After all, surely a broker won’t be tempted to insert too hefty a commission into a given energy contract if they know a rival broker could easily undercut them on this score?

In practice, however, there is a dark side to the commission way of doing things — not least because a broker can, despite the legal risk of doing so, fail to let you know of a commission they have added to a contract before selling it to you.

How does mis-selling occur in the business energy broker world?

A broker can have ties with numerous business energy suppliers. During your interactions with a broker, you might take it as a given that your needs, and yours alone, will primarily affect which of these suppliers they get you a contract from.

Sadly, though, history suggests that you would be overly hasty to assume so. These business suppliers can significantly differ in the financial incentives they offer for the broker to push their particular deals.

It might often be on the basis of these incentives that the broker picks out certain deals for your consideration. The broker might know that they would land an especially high financial reward for registering you to a specific deal.

This situation could paradoxically lead them to recommend to you a gas or electricity plan that is not strictly the best for your business but, for the broker, does dangle a tempting carrot in the form of a larger commission.

Whatever exactly leads a broker to advocate a specific deal, however, they are legally required to let you know when a commission is attached to it.

Unfortunately, the broker could decide against disclosing that commission to you, or instead hide it within the contract’s payment terms. Either of these scenarios would constitute an example of deliberately mis-selling a business energy deal.

Even if the broker is open and honest about the fact that a commission is involved, there will remain an ethical problem if they don’t impart to you the exact amount they would get paid in commission due to you taking up that contract.

If the broker actually gets away with this deceitful behaviour, they can potentially rake in a lot more money than they would otherwise have earned.

Mercifully, if you extensively read up on warning signs that a corporate energy contract has been mis-sold in the above-described manner, you can help yourself to more reliably judge whether you have fallen victim to this scam.

How do you know if you’re overpaying on your business energy commissions?

When giving their customers a list of commercial energy plans to choose from, brokers should include all of the details of any commissions that have been thrown in as well.

Alas, this information could have come to your notice a little too late if you have already taken out a business energy deal with a broker’s assistance — but here are a few potential indicators that you are overpaying on commissions:

• The broker claimed to offer free services — When you were initially dealing with the broker, they might have told you that they compare business energy deals for free. Some brokers may say this to avoid transparency.
• The broker told you the supplier pays their fee — Did the broker tell you that the business energy supplier pays them a fee if the broker’s client accepts the contract? This explanation would be misleading.
• You are paying suspiciously high business energy prices — It is good practice to keep a record of not only how much energy your business consumes but also how much it spends on this energy.
• Other corporate energy contracts offer better value for money — You could have started looking at those alternative offerings if the deal you have with your current supplier is on the brink of expiring.
• The contract renewal date seems strangely far away — This could be because the broker, in order to secure a more lucrative commission, convinced you to sign an energy contract longer than you really needed.

Regardless of when that renewal date is set to arrive, however, it would be shrewd of you to watch out for it. Business energy prices can be volatile, so it could be worth your while for you to switch to a different deal later down the line.

Preparing well in advance like this could also give you more than enough opportunity to familiarise yourself with how the switching process works. When you are ready to switch, though, what energy brokers should you consider?

Tips for choosing the right energy broker

If you indeed originally obtained your company’s energy contracts from a broker but much of your current corporate budget is being eaten up by energy costs, why not look into whether you are eligible to make a business energy claim?

While you are exploring that possibility, you might also want to start seriously thinking about possibly taking up a new energy package. Do heed, though, that the window for switching will be narrow…

It bears emphasis that, compared to domestic energy contracts, the corporate equivalents leave users with fewer opportunities for switching.

This discrepancy goes some way towards explaining why, if you take issue with how you are fetching the gas or electrical power for your workplace right now, you should set aside a lot of time for planning a change.

Nonetheless, you should also act with a sense of urgency. If you don’t, there is the risk that the contract you are currently on automatically renews itself.

Many businesses that inadvertently allow this to happen with their own contracts could subsequently need to pay charges just to sever themselves from them. It would be a shame for you to have to absorb avoidable expenses like these.

Anyway, all of this is rather digressing from the main topic at hand — as, even once you have determined how you will extricate your company from its long-held contractual obligations to a broker, you will have another decision to make.

That decision will concern what business energy deal you plump for next. For reasons detailed earlier in this article, you may be inclined to choose an energy broker’s services again to get valuable help in your search for the right deal.

However, if you aren’t more careful this time with your choice of broker, you could too easily end up in an ‘out of the frying pan, into the fire’ situation.

Basically, if you are determined to make financial savings on your commercial gas and electricity bills, you should pay close attention to what any given broker does or says before you decide whether to go with them.

By acting on the following tips, you can choose an energy broker genuinely primed to meet the power requirements of your company and its team.

Look closely at the per-unit energy rate

Key to the beauty of asking a broker to fetch you an energy deal is their ability to prepare a bespoke quote that will have been tailored to your specific needs.

Of course, being able to take a course of action and actually taking that course of action are two different things. One crucial implication here is that the quote you are offered might not be quite as bespoke as you assume it to be at first.

Before we address the subject of exactly why, though, you must remember that how much you should be paying for energy depends on such factors as:

• The workplace’s size
• Whether you need power for more than one workplace
• What precisely the business needs energy for

When your organisation is on the hunt for a good-value energy contract, one good rule of thumb is for you to look at what other businesses similar to yours in terms of demands for energy are actually spending on it.

Let’s assume that these businesses are generally spending around 40p for each kWh of energy they consume. This would give you good reason to be suspicious if the rate you are offered is closer to 50p per kWh.

However, it’s possible that this glaring chasm could be at least somewhat explained by the broker being a little gung-ho with the commission they have added. Yes, that’s right — the commission will be included in the rate.

In light of this, it’s clearer why many corporate clients of energy brokers can so easily be kept in the dark about commissions.

To further clarify this situation, let’s return to the earlier-mentioned scenario of a broker offering your business a 50p-per-kWh energy contract.

If you agree to have the broker implement this contract for your business, the resulting energy bills will indicate that you owe every single penny of the 50p to the energy supplier, not the broker.

However, once the supplier obtains that money from you, they could send a cut of it to the broker. Hence, when paying this bill, you will essentially pay the broker commission as well, albeit not directly to the broker.

The above-cited example rate, then, could be concealing a relatively high commission that is inflating the overall price and leaving it as below-par value compared to other options on the market.

Consider a fixed-rate contract

As we have explained, many different factors can influence how much a business pays for energy. One of those factors you should be careful not to overlook is whether the contract is on a fixed rate.

Here, the term ‘fixed rate’ means that the amount you pay per unit (kWh) of energy won’t change for the entire term of the contract.

As a business owner, you could be magnetically drawn to the idea of picking up a fixed-rate contract due to the greater ease with which it would enable you to project your outgoings on energy over the long term.

When you are trying to decide whether to go for a fixed rate, it could help you to know what the following alternative types of business energy contracts entail:

• Deemed — You will usually be on a deemed contract by default if you move your company into new premises without explicitly agreeing on an energy contract. Alas, though, deemed contracts are on the more expensive side.
• Variable — This differs from a fixed contract in that the rate per kWh can fluctuate in response to market activity. From month to month, your outlay on energy could rise or fall even if your energy consumption levels don’t.
• Rollover — You can usually anticipate being placed on a rollover energy deal if your current contract lacks any renewal provisions but, prior to its end date, you fail to sign a replacement contract.

During your early exchanges with a commercial energy broker, you might want to request a fixed-rate deal if you think it would be best for your peace of mind.

Whether it strictly would be, though, is another question. You might be more attracted to a variable plan if conditions in the energy market are currently tough but you expect them to improve in the foreseeable future.

Besides, it’s worth acknowledging that taking up a fixed-rate contract would only fix the rate — rather than the total amount of money — your firm pays on energy.

The latter will continue to depend on how much energy is used — and that, in turn, can obviously be unpredictable and change with the circumstances.

If you are offered a long contract, ask why

As we have already implied, some business energy brokers can be eager to tie you down to a lengthy energy contract largely because, if they succeed in this endeavour, they will get a more generous commission from the supplier.

What, then, would count as a ‘long’ business energy contract? Ofgem reports: “Business energy contracts often last up to five years or more in length with most one to three years.”

In the past, brokers have been found to push many overpriced energy supply contracts in the three-to-five-year bracket to companies.

All the same, though, be careful not to jump to the conclusion that being offered a contract longer than three years is a sure sign that something is wrong. Certain firms could actually appreciate the assurance such a contract can bring.

For example, if you run an especially power-intensive business, you could be more than willing to select a longer-than-average contract if it charges at a fixed rate. Good examples of such companies include those operating in:

• Retail
• Finance
• Health and wellbeing
• Education

The UK has had to navigate choppy economic waters in recent years — with Brexit, the COVID-19 pandemic and the energy crisis all having taken their toll.

One vital takeaway from all of this is that, for any business owner, the future can be unforeseeable and treacherous. When you register for a contract term of at least five years, you can add at least a little bit of certainty to that equation.

All of this naturally leaves the question: how can you tell when a contract is long in a ‘bad’ way? Well, you could try by asking the broker to clarify to you in detail why they have decided to offer you a contract that long.

Research the broker’s reputation

One reason why Ofgem has started cracking down on misbehaving brokers is that the situation was threatening to slowly worsen.

This is despite the fact that it is always in a company’s interest for them to be honest and transparent with their customers. A business that fails to do this would risk negative word of mouth spreading about how it operates.

As a legal firm, we are aware of this ourselves. This is why our expert team here at Business Energy Claimline is committed to protecting our clients’ privacy.

We have gone to great lengths to educate ourselves on how to effectively protect this privacy. For evidence of our efforts in this area, just look at how we use web cookies to collect data about usage of the Business Energy Claimline website.

Different companies might safeguard their customers’ interests in slightly different ways — but the main point stands that if a business isn’t working hard to please, this negligence can besmirch its reputation.

Of course, one upside of this situation is that, if you need a business energy deal but are so pressed for time that you reckon you have no practical option but to use a broker, you could easily research a wide range of brokers online.

That can include looking up customer reviews to see what experiences businesspeople like you have already had with those brokers.

For the most reliable insights, it would bode well for you to pay particular attention to the latest reviews customers have posted online about those brokers.

This is important to remember because it is perfectly possible for a broker with a track record of mis-selling energy deals to later clean up its act — such as in response to negative reviews published in the past.

Naturally, you could also be happy to choose an energy broker a friend or relative has recommended to you.

Be on your guard if you are a small business

Any company — from a major international corporation to a modest, cash-strapped startup — can potentially be mis-sold business energy.

Nonetheless, you might have heard on the grapevine that some brokers have made a priority of striving to pull the wool over the eyes of organisations perceived as relatively low on the sophistication scale.

Here are selected examples of those bodies:

• Small businesses
• Village halls
• Care homes
• Schools
• Faith groups

One lesson to learn from this situation is that, if you run any such organisation, you ought to double down on scrutiny when a broker offers you a business energy deal.

You might even already be on a commercial energy contract sourced via a broker — in which case, look closely at your organisation’s existing energy bills for any possible giveaways that they are hiding commission payments.

Chances are that some brokers are banking on you being naïve about what commission-inflated energy bills look like, or even just how the commission structure in the energy broker market fundamentally works.

Thankfully, though, by educating you about these specialist subjects in depth, we can make it harder for immoral brokers to dupe you.

Making a claim with Business Energy Claimline

Having read this article, you might now know a lot more than you once did about how to choose an energy broker wisely. However, what if a broker has already led you to sign up for an energy deal that wasn’t right for your firm?

If you genuinely feel like you have not only been wronged by a commercial energy broker but also shelled out excessively in commission fees as a result, you could still feel daunted about the prospect of challenging that broker directly.

The good news, though, is that you wouldn’t actually have to — as we would be able to take action against that broker on your behalf. This is no small advantage, as we are highly experienced at liaising with business energy brokers.

We can initially apply this experience to your particular case by assessing the strength of your claim for a corporate energy rebate. Rest assured that we can carry out this assessment at no financial charge to you, too.

For your business, this basically removes risk from pursuing an energy claim, as you will not need to pay us anything even if the assessment establishes that the broker would not be liable for the compensation you seek after all.

You might be familiar with the well-worn saying that “time is money”, but even just making an initial enquiry with Business Energy Claimline is a time-efficient process. We will ask you a series of questions as well as request the following:

• The name of the business energy broker you used
• Copies of your invoices from the energy supplier
• A copy of the contract you signed with this supplier
• Any other documents you think could help in your claim

Don’t panic if you don’t quite have all of the documents listed above, as you would even be able to trust us with sourcing any of the missing paperwork.

Once we have all of the required paperwork, we can proceed with valuing your claim. At no point will you need to personally contact either the broker or supplier, as we can do that as and when necessary on your behalf.

All the while, we will regularly update you on the latest developments. Of course, that will include letting you know if the mis-selling claim ultimately succeeds — and we are always delighted to break this news to the client when it does happen.

After taking a cut from the rebate to cover our fees, we will send you the remaining compensation in a smooth, hassle-free manner. Start your journey with us by using this online form to ask that we investigate your business energy claim.