A commercial energy broker is someone who plays a key role for organizations. They negotiate better energy rates to save their clients money on energy bills. These brokers work for a wide range of companies in states with deregulated energy markets, where market participants (customers) can choose their own electricity provider.
You may be wondering more about commercial energy brokers, including what they do, how they make money, and whether one could help you. Join us as we delve deeper into commercial energy brokers and what they could mean for you.
What Does a Commercial Energy Broker Do?
A commercial energy broker serves as the middleman between a company and energy providers. This person may also go by the title of energy consultant or utility broker.
As the expert intermediaries between their clients and energy suppliers, energy brokers understand the electricity market and are better equipped to negotiate deals, such as flexible energy contracts or those that use renewable energy.
They may also offer other services, such as energy monitoring and metering technology, to help track and reduce a company’s energy usage.
Some energy brokers offer price-comparison websites, such as Energy Savings, which focuses on customers in Texas. With more than 140 retail electricity providers (REPs) in the Lone Star State, it can be incredibly difficult to sift through all the options. Energy Savings works to find the right energy plan for businesses and residential customers.
How brokers compare business electricity and natural gas plans
Much like a real estate agent knows the housing market and helps secure a good deal on a property, an energy broker can help companies secure better rates on their electricity and natural gas (if applicable).
How brokers help with contract terms, renewals, and supplier selection
Commercial energy brokers guide their clients through the entire process, such as:
- Gathering information about the organization’s consumption
- Collecting tenders from the right suppliers
- Initiating the switch when their client makes a choice
Your Power, Your Terms
Pick from short-term or long-term plans to enjoy maximum flexibility. You call the shots!
Commercial Energy Broker vs. Energy Supplier: What’s the Difference?
Commercial energy brokers are intermediaries between you and the energy supplier. Energy suppliers sell you the energy your business uses, while brokers help you get better energy rates and lock in contract terms that best fit your business usage. Utility companies are responsible for ensuring that the proper infrastructure is in place to physically deliver power to your business.
Below is a summary of how all three roles differ.
| Broker | Supplier | Utility | |
| Role | Negotiates and compares plans on your behalf | Sells your business the energy | Delivers energy through the local grid |
| Sells you energy? | No | Yes | Only in regulated energy markets |
| Can you shop for them? | Yes | Yes (in deregulated energy markets) | No (set by location) |
| How they get paid | Commission built into your rate | Supply rate on your contract | Regulated transmission and distribution Utility (TDU) charges |
How Do Commercial Energy Brokers Make Money
Many energy suppliers partner with energy brokers, but how do these brokers earn money while securing the best price for their clients? Let’s find out.
Broker commissions and margin-added pricing
Commercial energy brokers make money by adding a commission fee or brokerage fee to the business owner’s negotiated energy rates. For example, say a broker secures a supplier rate of $0.035/kWh for your business and charges a $0.001/kWh service fee. This is what the math would look like:
$0.035/kWh (supplier rate) + $0.001/kWh (broker fee) = $0.036/kWh (customer price)
Questions to ask about energy broker fees
Here are some questions you’ll want to ask to gauge whether a particular energy procurement broker is a good fit:
- What’s your fee structure?
- What’s your broker fee that gets added on to the supplier’s base rate?
- Is your energy broker commission the same regardless of the supplier, or do some suppliers pay you higher commissions?
- How do suppliers pay your commission? Upfront or over the life of the contract?
- Are there any other charges beyond the per-kWh adder, such as enrollment, monthly service, or renewal fees?
- Does your fee typically change when I renew my contract or add new locations or accounts to the contract?
When Should a Business Use an Energy Broker
There are various circumstances that make using an energy broker ideal. Below are some of the most common.
You operate in a deregulated energy market
Texas is mostly a deregulated energy state, allowing you to choose your energy provider, contract terms, and rates. That flexibility also means rates and contract terms are often open to negotiation. Energy brokers are often skilled negotiators who can negotiate contracts on your behalf.
Your business has high or complex usage
Commercial electricity brokers can analyze your energy consumption, usage patterns, load profile, and more to ensure you have the best plan for your energy needs.
Your current contract is expiring soon
Your contract may be set to automatically renew at less favorable rates and contract terms. Energy brokers can get quotes from several suppliers so that you don’t overpay for your energy or get locked into a contract that doesn’t work for your business.
You want help comparing fixed, variable, green, or custom plans
While Texas’s deregulated energy market offers more options and opportunities to save, it can also make choosing among different types of plans confusing. Energy brokers can help break down energy plans and pricing to help you make more informed energy choices.
Pros and Cons of Using a Commercial Energy Broker
Let’s have an in-depth look at the pros and cons of using a business energy broker.
Pros
Energy Strategy
Commercial energy brokers do more than get a better price on energy. They can also offer strategic direction based on an organization’s energy needs. They then combine these needs with complex risk-management analysis to identify the best energy provider and contracts, ensuring longer-term savings without constantly switching providers.
Time Savings
Energy prices can change quickly, making it tedious to find the right provider and rate. You’ll have to contact multiple suppliers, receive quotes, organize quotes, and finally call the one with the best price, hoping the price hasn’t changed.
Commercial energy brokers have all this figured out and can find you the best electricity rates without you having to handle every time-consuming aspect of the process.
Supplier Access
Can an organization attempt to negotiate its own energy rates? Sure, but as a single account, you may lack the leverage needed to convince the utility company to give you a discount.
An energy broker, on the other hand, manages a large number of accounts, making it valuable to utility companies. This can lead to a stronger relationship and more pull when negotiating your organization’s energy rates.
They also better understand the energy market and can use that to their advantage when negotiating an electricity rate.
Cons
Fee transparency risks
Not all brokers provide a clear breakdown of their fees, so be sure to ask for them to list it as a separate line item. This makes it easier to compare quotes and know if a broker raises their rates.
Contract Complexity
Commercial energy contracts are complex, often having a mix of pricing structures, a long list of clauses, early termination fees, minimum volume requirements, and more. Using a broker adds another layer of complexity because you have to sign a second contract with its own terms and agreements. It’s worth reading over your energy contract and broker contract carefully.
Incentive conflicts
Brokers may earn higher commissions from certain energy suppliers or longer-term contracts, consciously or unconsciously incentivizing them to steer you toward certain suppliers and products that may not always be the best fit for your needs.
Before working with a broker, ask them to disclose, in writing, how their commission varies by supplier and contract length so you can see where their incentives might pull them before you sign.
How to Choose a Commercial Energy Broker
Choosing the right broker isn’t about finding the cheapest quote. You’ll want someone who understands your business, is upfront about their fees, and continues to provide help and guidance even after the contract is signed. Here are the steps to follow to find a commercial energy broker who’s the right fit.
- Step 1: Clarify your energy goals – Is your priority lowering your rate? Multi-site billing? Something else?
- Step 2: Gather your usage data – Have your latest bill ready to get a more accurate business quote.
- Step 3: Build a shortlist of candidates – Ask other business owners in your industry and local business networks for referrals. You can also check with your state utility commission for a list of registered brokers.
- Step 4: Vet candidates and compare proposals – Ask questions about their licensure, business history, fees, and other important details. Then request written proposals from your top two or three candidates.
- Step 5: Check references before signing – Speak with two or three references to gain a better understanding of customers’ experiences with a particular energy broker.
Questions to Ask Before Signing With an Energy Broker
Be sure to ask these clarifying questions before signing on with an energy broker:
- Are your fees included in my rate?
- Can I see the broker fee separately?
- How many suppliers did you compare?
- Is the contract fixed, variable, indexed, or blended?
- Are there early termination fees?
- What happens at renewal?
- Do you support billing disputes?
I heard about Just Energy through a friend of mine. I went with them because of their low rate, and I save more energy too. With their service, our bills went down. Their people were nice as well.
Franklin Powe
FAQs About Commercial Energy Brokers
A commercial energy broker compares supplier rates and negotiates contract terms on your behalf.
Commercial energy brokers earn a commission from the supplier. Their commission is usually added as a small markup on your energy rate.
Generally, using an energy broker is most helpful in deregulated markets because there are many suppliers and contract terms to choose from. However, going directly to a supplier is still a great option for smaller, simpler accounts.
Always ask how the energy broker is paid, how many suppliers they compared, and what happens when it’s time to renew plans.
Can You Compare Business Energy Plans Without a Broker?
Yes, you can compare business energy plans without a broker. If your business operates in a single location, has predictable energy usage or simply prefers full control over its relationship with its energy supplier, going direct can work well.
This is where Just Energy can naturally introduce direct supplier comparison, switching providers, or getting a commercial energy quote.