Hidden Commissions in the Energy Broker Industry

Energy brokers play a vital role in helping businesses secure competitive energy deals. However, a dark shadow looms over this industry – hidden commissions.

In this blog post, we will explore what hidden commissions are, why they pose a problem, and how businesses can protect themselves from potential exploitation.

What Are Hidden Commissions?

Hidden commissions, also known as undisclosed commissions, refer to the extra payments or incentives that energy brokers receive from energy suppliers that are not disclosed to their clients. These payments can take various forms, including monetary kickbacks, usually in the form of an uplift to the kw/h price paid by businesses.

Why Hidden Commissions Are a Problem

Conflict of Interest:

Hidden commissions create a conflict of interest for energy brokers. When they receive undisclosed payments from suppliers, brokers may be incentivised to prioritise deals that benefit them financially over deals that are genuinely in their clients’ best interests.

Higher Costs for Clients:

Businesses may end up paying more for their energy than necessary because brokers may steer them towards deals that offer them higher commissions, instead of the most cost-effective options. Something that looks like a small amount added to the kw/h price can translate into 10’s of £1000’s over the lifetime of the contract, especially for high energy use businesses.

Lack of Transparency:

Hidden commissions undermine the trust between clients and brokers, eroding the transparency that should exist in the energy procurement process.

How to Protect Your Business

• When engaging an energy broker, insist on transparency. Ask them to disclose all incentives they receive from suppliers. A reputable broker will be open about their earnings.
• Always request a written agreement that clearly outlines the broker’s fees and any commissions they receive. Ensure the agreement specifies that the broker must act in your best interests.
• Don’t rely solely on one broker’s recommendations. Compare offers from multiple brokers and directly from energy suppliers to ensure you’re getting the best deal. An hour of your time comparing deals could be the best hour you spend all week.
• Look for brokers who are members of professional associations, such as the Utilities Intermediaries Association (UIA) in the UK. Membership often requires adherence to ethical standards.
• Carefully review energy contracts before signing. Ensure that all fees, commissions, and terms are explicitly stated in the contract.
• Periodically audit your energy bills and contracts to ensure they align with the terms negotiated by your broker. Any discrepancies should be promptly addressed.
  
  

Hidden commissions in the energy broker industry can erode trust and potentially lead to higher costs for businesses. However, by demanding transparency, seeking written agreements, comparing offers, and staying vigilant, businesses can protect themselves from potential exploitation and ensure they secure the best energy deals that align with their needs and budget.