After many years in the energy industry, and in the spirit of educating and warning customers, we have put together a list. It’s not definitive, but an example of some of the tricks energy brokers and consultants can play to dupe you into a higher rate.
Pretending to be a Supplier
A classic tactic and could be in the form of a forged email or a call from a broker pretending to be your supplier. Typically, this will be informing you of a renewal rate which, surprise surprise, is a lot larger than you were expecting. Following this fake correspondence, the broker then contacts you with a price that beats the phony renewal, of course with a hefty commission included.
A few brokers have also decided to name themselves with official-looking titles such as “the gas board” or call saying they are from the meter registry to trick businesses to use them.
ADVICE– just with scam emails and scam calls, these items can look and sound very convincing. Our opinion is always to call your supplier yourself for renewals and check any email is from a real source. Eg: EDFenergy@gmail.com is not from EDF, look a little harder if you want to avoid this scam. It’s the same with scam calls, never give out sensitive information or sign anything without verifying things first.
Making up renewal prices
Hot on the heels of pretending to be a supplier is making up a renewal price from your current supplier. The broker tells you they have received the renewal price from your current supplier. The broker then informs you, “wow that’s a high rate, I am sure we can beat that.” In some cases, customers get to know of an official lower renewal rate after signing up to a higher broker contract. How does the broker answer this? Well just, the market moved! A complete lie.
ADVICE– As with pretending to be a supplier, always check your renewal is genuine and from the supplier, and not one a broker has made up to tie you into a higher deal.
Promising sponsorship or a rebate
A new development is brokers promising money back or sponsorship in return for signing an energy contract. It works like this, the broker sells you a deal with a significant uplift in the rate, say 5p, often as part of a pass-through contract (see below) over many years. If, for example, you use 500,000 kWh, then this values the agreement at £25,000 per annum or £125,000 if it was a five-year deal. The supplier will advance the broker typically 80% on signing, a cool £100,000. I hope you have followed me this far?
So back to the sponsorship or energy saving funding or whatever. You are effectively paying £125,000 for this in the example above; the £20,000 sponsorship doesn’t look as good now?
ADVICE– always insist that you know how much the broker is getting as a fee. Insist this is fully disclosed at the beginning, in writing, with permission to get it verified by the supplier.
Abusing a letter of authority
Typically, an energy broker will ask you to sign a letter of authority (LOA) permitting them to act on your behalf. These come in various forms; basic ones include the right to get usage information, with more advanced ones allowing the broker the right to cancel your current contract or sign you into new agreements. What is wrong with that you may ask? The broker has my best interests at heart, don’t they? The problem is giving somebody the authority to sign contracts on your behalf can be very dangerous. We have numerous examples of customers locked into contracts that are much higher and much longer than they initially thought. A three-year deal is suddenly a five-year deal, and you have permitted them to do it via the LOA.
ADVICE– never sign more than a basic LOA allowing for data access and contract cancellations at the very most. Always make sure you review and approve your contracts personally.
Where do we start, please refer to our previous blog for a detailed explanation of pass-through contracts, sometimes called power only contracts, and how they work. We have heard various ways of describing pass-through agreements from; it’s like making a cake and buying the ingredients separately to, it’s a secret way big business buys to reduce costs. The reality is they are a minefield and, if you don’t know what you are doing, they can cost you a whole lot more than you first thought.
Unscrupulous energy brokers will typically play on this confusion and hide a significant commission rate in a power-only/pass-through contract and compare this to a fully-fixed rate. Currently, around 55% of your price is pass through non-commodity costs, so you can imagine the problems some businesses have when their final bill is considerably higher.
ADVICE– Always insist on a full breakdown of what is in a price, and importantly, what is not included. The most critical element of this being the broker’s commission or fee.
Non-disclosure of fees/commission
The big one and allows most of the tactics above to succeed.
Currently, the energy broker market is unregulated. This means energy brokers and consultants don’t have to tell you what commission is in the rates they present. Some may lie when asked or even say they are a free service which is very much untrue.
Transparency is the burning issue that resulted in the birth of troocost.com. We believe you should be told upfront what fee we are receiving. Our fee uniquely is not an estimate, based on how much you may or may not use. We tell you upfront the straight full charge, nothing more, nothing less.
ADVICE – Always insist that you are fully aware of exactly how much the broker commission is, that is in the unit rate. Furthermore, insist on how much the energy broker estimates they will make in total on your contract. We would also advise you get written permission from the broker allowing you to contact the supplier to verify the sums disclosed. If the broker refuses or puts you off? Run a mile! They must have a lot to hide.
As with anything in life, it pays to question and fully understand what you are signing. At troocost.com we believe a customer should be armed with all the information they need. We are unique in the way we are remunerated, hence, we can always get the most competitive prices.
What a shame all energy brokers and consultants don’t work the same way…