The world of utility brokerage is often perceived as murky thanks to the bad reputation gained for it by so called cowboy brokers, who herald The Wolf of Wall Street as their manual, and Jordan Belfort as their idol.
I’m Josh Burns and I work within the Utilities Brokerage Sales team at SaveMoneyCutCarbon. I started my career in the energy industry at as a Third-Party Intermediary (TPI) Account Manager at Robin Hood Energy. Known as a company with its foundations firmly based around supporting its customers, RHE opened my eyes to energy and the trials and tribulations that come within the utilities industry.
A TPI’s goal is to save a company money by reducing their overall spend on their utilities bill, through reducing rates and the standing charge. Unfortunately, this market has been infiltrated by cowboy brokers who prey on businesses, using a variety of tricks designed to deceive their customer into agreeing to contracts that do not benefit them. In January 2020, The Guardian reported that businesses across the UK are being swindled out of £2bn per year by these brokers who are not regulated by OFGEM, leaving them unchecked to wreak havoc across the UK. Below I expose some of these tricks, to keep you aware and ensure you are not caught out.
The most common ploy is to overestimate a client’s gas and electricity usage. Most energy contracts include a volume tolerance to prevent losses to the provider of around 80-120%, meaning the client can use between 80-120% of the usage stipulated on their contract. If the client does not use the pre agreed amount of energy, then the energy company can charge the client for the remainder of the amount on the contract. Brokers do this is to increase their commission, as many earn this per kWh of gas or electricity their client uses. As an example, if your day rate is 16.5p/kWh, the energy company may be charging 16p/kWh, with the brokers commission being 0.5p/kWh. If that broker states that the client uses 1 gigawatt per year, that broker is earning £5,000/annum.
Another common ploy is to add in an extortionate amount of commission, sometimes as high as 5p/ kWh. In the example above this would mean £50,000/annum commission for the broker and unaffordable rates for the client. Whilst this might seem unlikely if a broker has asked a client to sign a Level 2 Letter of Authority (LOA) they can sign their client into any agreement they want, without letting the client know beforehand. Fortunately, Level 2 LOA’s are increasingly not accepted by energy companies due to their close association with malpractice.
It’s also common for a broker to spread misinformation in their attempts to frighten clients into signing a contract. Recently I spoke to a client who were renewing their contract and had been informed by their broker that their rates were set to increase on the 1 April. In fact, the broker was referring to OFGEM’s 9% price cap increase which takes place twice a year to ensure that energy companies do not overcharge customers who are on prepayment and flexible tariffs.This price change would not affect the client who was on a fixed rate contract because, as the name states, the rates are fixed.
How is SaveMoneyCutCarbon different?
The biggest difference between us and our competitors, is that we are not primarily an energy broker. SaveMoneyCutCarbon are one of the UK’s leading companies in the retail, distribution and fitting of carbon efficiency equipment. Our aim is to help companies reduce their carbon footprint and save money using the technology we provide and, more recently, by reducing the cost of their utilities rates using our in-house brokerage.
Brokers normally want clients to use as much energy as possible as this means more revenue for them. At SaveMoneyCutCarbon we want the opposite. We want to help companies on their journey to being carbon neutral, with as much money left in their pockets as possible. We do this by only offering renewable and green tariffs and specifying the breakdown of the energy, be it REGO/RGGO backed or 100% Green.
If you are ready to save money on your utilities, please email me at Josh.Burns@Savemoneycutcarbon.com