How Do Energy Brokers Make Money?
Transparency into the retail energy market is vital for consumers. Understand how brokers make money in the energy industry before you sign your next agreement with one.
Understanding Electricity Deregulation in the U.S.
Like many other businesses in a deregulated energy market, you may have worked with an energy broker on your last electricity or natural gas renewal agreement. If you are one that did not, perhaps you shopped on your own online and identified what you felt was a strong offer from one supplier. But were you confident in the agreement that you executed?
More often now than not, businesses are utilizing an energy brokerage service to determine the best energy agreement for their consumption to better manage their electricity costs. Reducing energy costs and locking in an electric rate are common practices in a deregulated energy market. Comparing rates though is not always easy. Rates are made up of fixed, variable, and pass-through products. Knowing which is the best fit for your business can be tricky. This is where finding the right energy broker relationship is vital.
How Energy Brokers Make Money
Energy 101
Generators produce energy that is then sold on the wholesale market to suppliers. Suppliers then sell that energy to consumers (you) at a profit. While some electricity suppliers are also generators, there are a lot of companies that are strictly generators or suppliers.
Because of all the different supplier and generators out there, knowing which one to purchase energy from can be confusing. On top of all the different products on the market, you also have an ever-changing energy market, very similar to stock trading. Rates change daily and one quote you received yesterday may not be good today. So how do you manage your time efficiently in pursuit of the best electricity agreement for your company?
Hire someone on payroll to manage your energy purchasing that is specialized in utility procurement? Or, if another annual salary is not in your fiscal budget, look to an Energy Broker. Finding an Energy Broker to partner with can seem easy. Finding one you can trust may be a little more difficult.
Broker Partnership
Most energy suppliers in today’s market partner with energy brokers. Suppliers understand that there is a relationship and trust between the consumer and the broker and therefore see the value brought by partnering with brokers themselves. Not only does this supplier-broker partnership benefit the consumer, but it also eliminates the need for suppliers to expand their sales team.
A partnership with an energy broker does come at a cost. One that other brokers may choose to dance around if you ask them. Not here at EnergyPricing.com though. We want you to know from the very start of your proposal exactly what we add into your energy rate, regardless of the pricing outcome at the end of our request for quote (RFQ).
So how do Energy Brokers make money? For example, a supplier purchases your energy at $0.05/kWh, EnergyPricing.com then negotiates the agreement to include their broker fee of $0.001/kWh, making the all-in rate $0.051/kWh.
The Value an Energy Broker, like us, brings to the table
Buying electricity is complex, no matter how you look at it. From the different product types to the little details located in the terms and conditions, there are several factors to investigate before executing. Most businesses do not have someone on payroll to review their usage, analyze the energy market and then negotiate the agreement for them. If you are a business owner, finance officer or purchasing executive, you have other responsibilities that take priority as they should.
Partnering with an educated and experienced Energy Broker makes sense. At EnergyPricing.com, we analyze the current market, review your usage, and educate you on the different solutions available. Our services go beyond a rate. Due to market volatility, we utilize technology to transparently provide our customers insight into the RFQ process. By announcing a customer’s issuing a reverse energy auction, we can invite all the available suppliers in our network to one location at the same time to bid on your usage. In real-time, you can see suppliers bidding and driving the price down even further than a traditional RFQ. Once the auction is completed, we review all options with our clients, analyze the best contract language for their business and they execute the agreement.
The partnership does not stop at the signed agreement. We continually check in, ensure the transition happened smoothly and provide market updates throughout the life of the agreement. There is no time wasted on hold with the supplier trying to ask questions about your recent charges. With EnergyPricing.com, you will work with the same advisor who is a direct dial away from answering any of your questions.
Do you know how much your current Energy Broker charges?
Energy brokers do provide a service, but they should only be including a realistic fee on their pricing. Traditional brokers like to dance around their fee. They send out a dated proposal, analyze the rates that come back and then look for the best option to inflate their fee sometimes 8X’s what we include in our rates.
With EnergyPricing.com, from day 1 of the process, you will know what our margin is on your RFQ, regardless of where the pricing comes in at the end. No added mark up at your expense. Our average broker margin is $0.001-0.002/kWh or $0.01- $0.02/therm. There are no smoke and mirrors here. Do you know how much your current energy broker is charging?