Energy Suppliers, Brokers & Consultants, all get paid for the work they do.

The three main types of commissions are;

• Kickback Commissions Using Uplifts – (adding commission to the prices.)
• Shared Savings – (taking a % of the savings for the customer.)
• Upfront Invoice – (invoicing the customer a set amount for the brokers work.)
• Complete Service – (your bills go to them, they privately invoice you monthly.)

When it comes to general business contracts, the commission structure is the same across the industry.

Bespoke commissions only exists in the Corporate side of the industry with products like energy audits and compliance, which I’ve explained below.

Summary

Energy Contracts Pay Structure Summarised

Brokers & Consultants receive a kickback commission payment for each contract they provide to an Energy Supplier.

The commission payment varies from £1 to £100,000. The payment amount is entirely dependant upon the yearly usage of the electric or gas meter. Commission payments tend to be about 1-10% of the total yearly bill.

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More Detail

What’s The Pay Difference Between Domestic & Business

Domestic Supply

Domestic supply contracts are the smallest paid deals, they work very differently and are thus paid very differently. To simplify things, suppliers earn next to nothing on a domestic supply contract and so they pay next to nothing. Commission for each domestic supply is usually £15-25.

You won’t receive many phone calls asking you to switch your home energy as the sales agent/broker would have to sign up and manage hundreds of people a month just to survive. Home energy is usually dealt with by large companies looking to make small profit on hundreds of thousands of customers. Companies like uSwitch make a killing this way.

SME & Corporate Supply

Business energy contracts, both SME and Corporate, usually pay very well. Commissions on these contracts are based on the amount of electricity or gas the meter uses. Businesses usually use a lot more electric and gas than households and therefore suppliers and brokers prioritise them due to the higher commissions. Myself included.

Uplift – What’s An Uplift & Why Do You Need To Know About It?

An uplift is the process of adding profit onto the cost of the item. Everyone along the process of selling an item, adds their profit, which is an uplift. In energy it’s the amount of pennies added onto the cost of electric or gas.

Energy Suppliers Profit

Energy suppliers don’t actually make the electricity or the gas, nor do they deliver it to you. They simply purchase the energy on your behalf and then bill you for that. It costs money to bill you and so they add their own uplift onto the price of the unit of energy to cover their costs. That’s their expense covering.

Then each supplier has a desired profit margin. They usually add on-top of the cost of electric or gas, 5-10% uplift. This is the price that they display to their sales agents or brokers.

An example for you;

Energy Suppliers Sales Rep Commissions

The sales reps working for the supplier get’s paid a basic salary and commission. This commission is based on tiers. It works the exact same as the Suppliers general profit. It’s an uplift in tiers, usually minimal commission, medium commission, high commission and max commission.

When you speak with a sales rep and they give you a high price and then come back with a lower price, they are just reducing their commission tier down from max commission to eventual minimal commission.

Most sales representatives for suppliers don’t get paid on energy usage per meter, it’s usually a tier of set commissions based on the uplift tier the sales rep can get the customer to agree to.

An example of fixed commission tiers;

• Minimal Uplift (0.2p per kwh) – £20
• Small Uplift (0.4p per kwh) – £40
• Medium Uplift (0.6p per kwh) –  £80
• High Uplift (0.8p per kwh) – £100
• Very High Uplift (1p per kwh) – £120
• Max Uplift (2p per kwh) – £200

Here’s an example of the standard commission structure of a sales rep;

Energy Brokers Commission

Energy Brokers get the same base prices as the energy suppliers sales reps. The energy broker get’s paid the same as the sales representatives. The only difference being that energy brokers are not paid a set commission for sales, rather they are paid based on energy usage per meter.

Energy Brokers have the option to add commission on top of the suppliers base price in increments of 0.05 pence per kWh. This usually can go up to a maximum of 2 pence per kWh.

Small Meter = Small Commission. Large Meter = Large Commission.

They do have to sign contracts based on uplift just like sales reps for energy suppliers.

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Alternative Commission Structures

1. Shared Savings

Shared savings is the secondary way that some brokers get paid. They basically offer the customer that whatever price they can get the customer, they will calculate the total saving they made the customer and then keep 50% for themselves and the customer can keep the remaining 50%.

 

This type of commission structure is often very dishonest. I’ve actually never heard of a supplier or broker that has this commission structure that does it in an honest way.

Honest Shared Savings Structure

The broker should look at your current bill of £1000 per year, get you a deal for £900 and then invoice you for £50, since they saved you £100.

In reality it never works this way.

Common & Dodgy Shared Saving Structure

How the shared saving structure actually works is that brokers will ignore the £1000 bill that the customers currently paying and instead look at the customers renewal offer or the best offer the customer managed to find for themselves – lets say £1300. Then they will get the customer a price for £1100, invoice the customer for £100, as they apparently saved the customer £200.

Obviously they haven’t saved the customer any money. Sometimes they even add a standard uplift onto the rate as well so they make commission twice.

Be very aware of this commission structure.

2. Upfront Invoice

The upfront invoice commission method involves the broker invoicing the customer X amount before they carry out any services for them.

I like this method, although there are some pitfalls. If you know for sure that the broker are good at their job, pay the price. The more clarity the broker offers, the better. Especially if you can get some guarantees and a refund is offered if the guarantees aren’t met.

Some guarantees you can expect;

• cheaper prices than current paying
• minimum level of service

There are different types of upfront payment methods.

Monthly Fee

Some brokers will charge a monthly fee for their services. You pay the monthly fee so long as they provided you with the energy contract and you are still in that contract.

You can expect a monthly fee of £50-250.

Annual Fee

This is the same as the monthly fee, but charged once per year.

Contractual Fee

This is a fee that the company pays to the broker per contract.

You can expect a contractual fee of £250-1000.

3. Complete Service

Brokers can offer a full service, which entails them completely taking over the customers energy. They basically become a secondary supplier. They enter into a contract with the supplier for the premise of the business. They then bill the business themselves with their own invoice.

The Energy Brokerage is free to bill the customer for any amount they wish. The bill is not based on anything other than what the Energy Broker wishes.

The Energy broker and company can agree to any arrangement they wish. A common agreement is that the customer will pay the energy brokerage a fixed amount each month regardless to how much they use. If the premises uses more than the set amount, the energy broker consumes the loss.

This method of commission is very risky for both parties. The energy broker assumes all of the risk with the suppliers. The customer gives complete control to the energy and has no transparency except if the broker wishes.

Often, customers do not even know who current supplies them.

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Other Energy Services

Energy Audits, New Meter Connections, Accreditation’s & Compliance

All of these are known as Corporate Energy Services. This part of the energy industry are paid out as custom commissions as the jobs are totally custom. Commissions vary based on company size and complexity of the legislation.

Supplier representatives don’t get commission for this work, it just contributes to their target.

Energy brokers however do get paid commission for this work. A standard energy audit for a medium sized company would bring in around £400 for an energy broker.

Most of the accreditation’s & compliance certifications are set fees and energy brokers usually get small commissions from them, usually around £50-100.

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Frequently Asked Questions

How Can A Customer Find Out How Much Commission Was Paid To A Broker?

The customer can send an awkward email asking the broker.

Alternatively, the business could contact the energy supplier – probably best to do so in writing as most customer service agents on the phone won’t have that information available to them.

Can A Business Get The Commission Paid To A Broker Repaid?

Short answer no.

A customer can get the commission repaid if it is an extortionate amount. For example commissions of over 10% of the yearly bill, is obviously extremely large amounts of money. Usually they can contact their current supplier and complain. This usually does the trick for me, and most suppliers will agree to refund the difference and then back-bill the energy broker. If that doesn’t work, the customer can contact the Energy Ombudsman and they will be able to assist.

If the commission amount is not a large amount, the customer could still be entitled to receiving a refund. However, they will need to prove to their supplier that the Energy Broker behaved in an unethical manner.

Is It True Most Brokers Are Paid £10,000’s In Commissions?

No, not true. Most Brokers get £50-£250 per contract. The headlines will report the huge rip-off commissions. All suppliers cap the amount of commission uplift brokers can add onto a unit rate.

Usually this cap is 1p-2p. This means that at most the maximum a broker can make is 15% commission. Since the average business uses £2,000 a year in energy, the max a broker can realistically make is £300 on a contract.

Also bare in mind, most businesses won’t accept prices on maximum uplift from brokers. The market is full of competition from brokers willing to undercut each other.

Can Brokers Lie About Usage & Does That Affect A Customer?

Yes they can, and they do often. They often will increase the usage in order to get more commission from the supplier. This is a bad tactic as the supplier will claw back the commission at the end of the contract.

It can affect the business if they lie about their usage. Firstly, it can work in the business’s favour as suppliers will offer higher prices for the apparent higher usage.

Likewise it can negatively affect the business as suppliers will set up direct debit plans based on the submitted usage. This means that the customer could have estimated bills hitting their bank account at 10x the amount they were expecting. This can be fixed by providing meter readings, but just adds something else they need to think about.

The worst way it can affect the customer, is that many suppliers can and will change their prices mid-contract if your consumption is significantly different from the submitted yearly usage. This can actually lead to the business paying a lot more than they would have had they agreed another contract elsewhere on a more accurate usage.

How Do Broker Payment ‘Clawbacks’ Work?

If at the end of each 12 month period, the customers usage falls below the estimated annual consumption that was put on the contract, then the supplier will want that portion of the commission the broker received – paid back to them.

Every year I pay back £2000-£5000 a year in clawback commission payments.

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Summary

Energy suppliers and brokers can make a lot of money out of you, so be aware and either work with someone you trust or shop around to make sure they’re competitive. The best thing you could do is keep in mind, this person’s services cost money.

If you’d like to find out specifically how much I’m paid per contract, get in touch and I’ll let you know. Email Me (hamed@hamed.energy) or Call Me (0208 050 5456).

What do you think about how we in the energy industry get paid? Do you think it’s fair? Let me know if you have any questions or anything I can add, all the best!