Like many other businesses, energy brokers typically add a margin to the products they sell.
Some charge their clients a monthly fee or a percentage of savings, but the vast majority add an uplift to a client’s unit rates.
This is often preferred because it means the fees are included within the energy costs, rather than a separate bill. It can however result in transparency issues if the broker doesn’t disclose their margin.
Businesses should be wary of any broker claiming to offer a free service because, frankly, this is usually false. Energy brokers are commercial companies and, like any other, they exist to make profits.
Whilst the commission paid to brokers is sent to them by the energy suppliers, the supplier adds an equivalent amount to the customer’s unit rates, so in reality, it’s the customer that pays the broker’s fees.
If an electricity supplier offers a base rate of 11.5p per kWh, and the broker requests an uplift of 0.5p, the rate on the customer’s contract will be 12p.
To calculate the broker’s fee, simply multiply your electricity usage by the broker’s margin.
Annual usage of 200,000 kWh x Margin of 0.5p/kWh = £1,000.00 per year
(200,000 x 0.5p = 100,000p or £1,000)
Tip: If the unit rates quoted by an energy broker ever seem high, never be afraid to ask them what their margin / uplift is. There should be no reason why they’re reluctant to disclose this information.
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