How Does Your Energy Broker Get Paid?

Many businesses use energy brokers to find the best deals and navigate energy procurement, but a common problem is understanding how that broker is actually paid. Here we explore the three most common payment structures.

According to a report by Utility Week, 37% of businesses believe their broker provides a free service, 42% are unclear on how much they’re being charged, and 38% don’t believe broker charges are easy to understand. Clearly, many businesses struggle here. Let’s break down the three structures.

Commission-based

The most common structure. The broker sends you a price from the supplier that includes an uplift, either as a unit rate or a standing charge, and that uplift is the broker’s commission. Rates vary, with unit rates ranging from 0.05p to 5p per kilowatt-hour. Always ask whether the commission is added to the p/kWh unit rate or the standing charge, since this is often unclear and can leave businesses believing the service is free.

Share of savings

Here the broker receives a percentage of the total savings they achieve for you, normally between 10% and 50%. Be clear on what the savings are measured against to avoid misunderstandings. This structure aligns the broker’s interests with yours, since they’re incentivized to find the best possible deal.

Up-front fee

You agree on the services and a monthly rate, then receive an invoice each month in addition to what you pay the supplier. This offers price transparency and reassurance that the broker is finding the best contract regardless of supplier commissions, but it requires a higher level of trust, since you pay whether or not savings are achieved.

The bottom line: understand how your broker is paid. Each structure has advantages and disadvantages, and it’s up to you to decide which works best. Ask your broker directly about their payment structure so you know exactly what you’re paying, and can be confident you’re getting the best possible energy deal.