Navigating deregulated energy markets can be complex and time-consuming. As we’ve discussed in earlier pages, there are contracts to compare, usage patterns to analyze, risk strategies to plan, and ever-changing market conditions to monitor. This is where energy brokers or consultants come into play. These are professionals or firms that act as intermediaries and advisors for energy buyers. In essence, a good broker/consultant can be your outsourced energy procurement department, helping you make smart decisions and saving you money (and headaches). However, not all brokers are equal – it’s important to understand their role, how they get paid, and how to choose one that truly works in your best interest. Let’s break it down:
What services do brokers and consultants provide? A reputable energy broker can offer a suite of services, for example:
- Market Shopping and Supplier Negotiation: Perhaps the primary function – they will gather quotes from multiple suppliers on your behalf. Good brokers know which suppliers are active and competitive for your region and usage profile. They can create a bidding situation for your account. They’ll present you with a comparison of offers, ensuring apples-to-apples (they’ll normalize for things like one including pass-through vs another fully fixed). They also negotiate prices and terms, leveraging their industry knowledge. This saves you from contacting, say, 5-10 suppliers individually and deciphering each quote.
- Usage Data Analysis: Brokers will look at your historical consumption (they often request your interval meter data) to understand your load factor, peaks, trends. Why? Because this informs what type of contract is best and how to negotiate it. For instance, if you have a spiky load profile, a broker might negotiate better capacity charge terms or suggest a different product. They basically translate your usage pattern into procurement strategy (maybe recommending a block product if you have a steady baseload, etc.). It’s a level of analysis that many customers themselves don’t do, but can yield a more tailored contract.
- Energy Strategy and Risk Management Advice: Tying into our Managing Risk page, brokers can help you craft a procurement strategy over the long term. Perhaps they’ll propose a layered purchasing plan (e.g., contract portions of your load at different times) or help decide how much to fix vs float based on your risk tolerance. They’ll also explain contract terms (e.g., “this supplier’s contract has a 10% bandwidth clause, here’s what that means for you”). Essentially, they act as an advisor ensuring you’re not just taking the lowest price, but the right type of deal.
- Contract Review and Management: Energy contracts can be lengthy and full of fine print. A broker will comb through terms and highlight anything concerning. They might secure modifications from the supplier on terms you wouldn’t have thought to ask (like adding a clause to protect you if you add a facility, or ensuring there’s no auto-renewal at punitive rates). Once the deal is signed, many brokers keep a calendar of your contracts and will remind you well before expiration and begin the next procurement process – avoiding lapses where you roll onto high default rates. Think of them as your admin for energy agreements too.
- Monitoring and Reporting: Good consultants keep you informed on market trends. They might send monthly market updates – “Natural gas prices are up 20% this month due to a cold wave, but summer forward prices are still low – could be a good time to lock in” – that sort of insight. If you’re on an index contract, they’ll be watching and may advise if hitting a trigger to fix is wise. They stay on top of regulatory changes in your regions and alert you if something (like a big capacity cost change) is coming. This ongoing service ensures you’re not caught off guard by market movements.
- Bill Auditing and Budget Support: Some brokers will review your utility and supplier bills regularly to catch errors (it happens more often than you’d think – wrong rate applied, tax exemption missing, etc.). They can liaise with the supplier or utility to fix any issues. They also help with budgeting – taking your contract rates and forecasting what your spend will be, possibly consolidating multi-site data. This helps larger companies allocate costs and understand what monthly spend to expect, and it’s great for explaining energy cost changes to your finance team.
- Sustainability and Renewables Advice: Many energy consulting firms also assist with renewable energy procurement – suggesting if you should buy RECs or maybe consider a PPA for your goals. They integrate this with your broader strategy (you might have seen on Sustainability page terms like RECs and green tariffs; a broker can walk you through which are available to you and handle the procurement of those too). They won’t typically implement solar projects for you (that’s more an engineering firm’s job), but they might coordinate with providers or vet offers for you.
All these services ideally make your life easier and result in better energy deals than you could get on your own, especially if you don’t have in-house expertise.
How do brokers get paid? This is crucial to understand. The common model is that brokers are paid via the supplier in the form of a commission or fee that’s included in your rate. For example, the broker and supplier agree on a fee of $0.002/kWh, and the supplier bumps your price from 7.0¢ to 7.2¢ to cover it (and pays the broker). This way, you don’t get a separate bill from the broker. Some large brokers or consultants might work on a direct fee or retainer (you pay them for their time and they pass through the actual supplier price). Neither model is inherently bad, but transparency is key: you should ask and know how much the broker is being paid. A good broker will openly tell you their commission or fee structure. If they dodge the question, consider that a red flag. After all, if they secretly slip a very high fee into your rate, it could eat a lot of the savings they claim to get you.
Choosing a broker – what to look for:
- Experience and Market Knowledge: How long have they been in the business? Do they specialize in commercial clients of your size? A broker who knows your regional market (including which suppliers are reputable) and your industry’s typical usage patterns will add more value.
- Transparency and Trustworthiness: As noted, they should be upfront about fees and willing to let you see actual supplier contract terms. Beware of any that only provide a one-page agreement with them and keep you at arm’s length from the supplier’s contract – you should always have full visibility into the actual supply contract you’ll be bound by. Also, if a broker only ever brings you one supplier’s quote and pushes you to sign, you might wonder if they are truly shopping around or just reselling for one company.
- References/Testimonials: Ask for references from businesses similar to yours. Did the broker deliver good deals? Are they responsive when issues arise? The ongoing service is as important as the initial sale.
- Breadth of Services: Based on your needs, see if they do more than just price shopping. If you value regular reporting, make sure they will provide it. If you have sustainability goals, see if they have expertise there.
- Chemistry: This is a bit subjective, but you should feel the broker listens to your objectives rather than pushing a canned solution. If your priority is risk management, do they focus on that or are they just bragging about getting the lowest price? A good one will act like an extension of your team, understanding your business’s unique needs.
Red Flags:
- As mentioned, if they won’t show you the supplier contract or if they pressure you to sign quickly without explanation, be cautious.
- If you find out later they switched you to a different supplier or product than you discussed (this would be highly unethical, but there have been cases in the industry of “slamming” where a customer gets switched without full consent – fortunately rare in commercial but just be aware).
- If their analysis or offer comparison seems one-sided or lacks detail (e.g., they just say “this deal is the best” without showing the alternatives or why), press for more info. A credible broker will happily educate you – after all, an informed client will appreciate their value more.
Do you need a broker? Not every company does. If you have a dedicated energy manager or a small footprint with straightforward needs, you might manage fine. But many mid-sized companies find that brokers pay for themselves by getting slightly better prices and avoiding pitfalls. They also save your staff time. Think of it like using a travel agent for complex travel – you could do it all yourself, but sometimes the expert finds a better route or handles the hiccups for you.
In summary, a good energy broker or consultant can be a valuable partner. They bring market intelligence, negotiation skill, and administrative support to your energy procurement. Just ensure you pick someone who is transparent, aligned with your interests (some even structure their fee as a flat annual amount so they’re not incentivized by higher usage or prices), and competent. With the right partnership, you can approach the energy market with confidence, knowing you have expertise on your side.
(Finally, as you secure good deals and manage costs, don’t forget about the bigger picture: Sustainability in Energy Procurement is increasingly important. Our last page explores how you can meet environmental goals while buying energy – something many brokers can also assist with.)