Does your energy broker really work for you?
The answer: – Do you pay them? Because they work for who pays them.
If your current energy broker does not charge you a fee for arranging your energy contract, then they are working on what is called the “uplift model”. Put simply, the broker receives the tariff at one price and then sells it on at another higher price and they pocket the difference. For a more in-depth description of the “uplift model”, click here.
“The problem with this model is, you become the product, while the power companies are the client of the energy broker”.
The pitch from all energy brokers is virtually the same, and it will go along the lines of: “We deal with a large number of business energy contracts, which means we get far better prices due to the volumes of business we give to the power companies”.
This is actually true; however, the big question is whether these volume discounts are passed on to you or tucked into the energy broker’s back pocket as commission. According to evidence submitted to Ofgem, the energy regulator, small businesses are annually ripped off to the tune of £2 billion by energy brokers, who are pocketing undeclared commissions, generated through volume and/or broker discounts.
The second part of the energy broker pitch will be words to the effect of: “We work for you, not the energy supplier. We will provide you with an account manager who will deal with any issues or complaints you have. In the event of a dispute, we will represent you against the supplier”
Herein lies the conflict of interest.
How can an energy broker that generates 100% of its income from the supplier, be working in the best interests of the product (which is the business that uses its service)? It can’t.
So how could this impact a business that uses an energy broker who is working on the uplift model?
It means, in any dispute between a business that has used an energy broker (on the uplift model) to arrange its contract, and the power company that is fulfilling the contract (see Ombudsman fit for purpose). The broker will always concede to the power company, as its whole business model is dependent on payments from the power company, while you are just one “product” amongst thousands.
How to resolve this conflict of interest?
The only real way to stop this, is to stop the money flowing from the suppliers to the brokers! In other words, if the customer pays the broker’s, then the customer becomes the most important thing to the broker and that way you will get much fairer representation in both price and litigation! This is exactly what we have chosen to do at Digital Energy Revolution!