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Understanding Energy Brokers

Energy brokers help individuals and businesses find the best deals for electricity and gas in deregulated markets. There are two main types of energy brokers: residential energy brokers, who work with individual households, and commercial energy brokers, who work with businesses. This article focuses on commercial energy brokers—what they do and how they earn money. Residential energy brokers operate similarly but work with a different type of customer.

Deregulated energy market?

Energy brokers act as go-betweens in deregulated energy markets, enabling transactions between retail energy providers (REPs) and end customers. In deregulated electricity or natural gas markets, REPs purchase energy from wholesalers and sell it to retail customers. REP charges are often included on customers’ local utility bills, even if they purchase energy from a third-party source or REP. Customers enter into retail energy supply agreements with REPs that specify terms such as price and duration of supply.

Confused by Deregulated Energy Markets?

01 Multifaceted Role of Commercial Energy Brokers

Commercial energy brokers actively secure electricity and natural gas supplies for their customers. They maintain agreements with numerous energy suppliers, providing competitive price quotes to commercial customers. Beyond procurement, energy brokers offer a range of services to enhance value for their clients.

02 Energy broker sales proposition

In deregulated markets, energy brokers are essential since they help sell retail energy contracts without having to buy energy themselves. By offering services and encouraging competition among suppliers, they create value. Numerous retail energy suppliers offer pricing in deregulated markets, making it difficult for consumers to compare and choose the best deal. These pricing offers, which are based on the volatile energy market prices, frequently have brief expiration dates—24 hours, on average. It can be daunting for customers to compare estimates from more than thirty suppliers on the same day. By using their long-standing connections with supplier price desks to quickly collect and present competitive prices, energy brokers streamline this process.

03 The Rise of the Energy Broker: How Deregulation Changed REP Sales Strategies

Retail energy providers (REPs) competed with their own sales teams to sign up consumers and businesses during the early stages of the deregulated energy markets. But things were upended when authorized retail energy brokers started to appear in these deregulated areas, giving consumers a completely new means of navigating the market. Brokers and REPs partnered to serve as commission-based sales organizations for suppliers. Many REPs discovered that it was more cost-effective to contract with energy brokers for their sales work rather than keeping internal teams as the markets changed and additional brokers joined the market. This change encouraged the energy broker industry’s explosive growth.

The Advantages of Energy Brokers in
Deregulated Markets

In a deregulated market, using an energy broker enables your company to obtain reasonably priced energy solutions. Because of their extensive knowledge of commodity markets and solid supplier contacts, they are able to negotiate low rates, which might save you a lot of money on your electricity costs. In addition, energy brokers keep an eye on market developments to reliably deliver savings on contract renewals.

Having an established energy broker not only reduces costs but also streamlines your operational tasks. Reaching out to your broker simplifies and expedites several activities, such as answering queries, renegotiating prices, or dealing with billing problems related to utilities.
Should you choose not to use an energy broker, these will be internal responsibilities of your organization. However, for those thinking about using a broker.

Start Enjoying Reduced Costs with an Energy Broker

Energy Usage Evaluation

Did you know your business can qualify for lower energy supply rates based on its energy usage patterns? Experienced energy brokers assess your energy load profile to match you with the best supplier and pricing structure for optimal savings. Navigating energy plans tailored to your business can be challenging without this expertise.

Market Guidance

Finding the lowest energy tariff in a deregulated market is only one part of the puzzle. The true issue is timing your purchases to take advantage of market volatility. Astute energy brokers turn into your guides through the market! They’ll assess the volatility of the market and provide you with advice on when it’s best to lock in favorable rates. Over time, your company may save a substantial amount of money thanks to this calculated decision.

Contract Negotiation

A professional energy broker is your guide and protector for energy supply contracts, which can be a financial maze. They bargain for your business to get a contract that meets your requirements. They make sure your firm receives the best deal possible by negotiating advantageous terms and protecting against unpleasant clauses and hidden expenses.

Utility Bill Audits

It can be difficult to identify and correct problems on business utility bills without knowledge of utility tariffs and billing calculations. Some energy brokers provide utility bill auditing services to identify overcharges, repair errors, and demand refunds on your behalf.

Expert Advice

Commercial energy bills might be confusing, but they are the key to efficiently managing your costs. This is where energy brokers become your secret weapon. They’ll explain the complicated lingo, reveal cost-cutting choices you didn’t know existed, and answer any energy-related queries you have. With their assistance, you can have the ability to optimize your energy consumption and reduce your expenses.

These benefits underscore why
businesses rely on energy brokers

Savings

Secure low-cost energy and reduce utility bills.

Convenience

Eliminate the hassle of obtaining price quotes

Service

Access reliable support whenever needed.

Management

Utilize market experts to optimize savings opportunities.

Ready to Save on Energy?

How Energy Broker Quotes Work

Energy brokers commonly create supplier comparison charts for their customers. These charts list price quotes from all energy suppliers in $/kWh (Kilowatt-Hours), outline contract terms, and specify any special provisions. Brokers don’t just find you competitive rates, they present them in a clear format for easy comparison. This side-by-side view simplifies the selection process, saving you time and hassle by streamlining the whole proposal gathering stage. In these and other ways, energy brokers deliver significant value to their commercial clients.

- Contract Language

Energy brokers with experience cut through the legalese of retail energy contracts, making them easier for their clients to understand. Energy supply rates can be intricate, involving various product options and terms. Energy brokers assist their clients in comprehending details such as capacity charges, bandwidth clauses, transmission charges, Kilowatt-Hours (kWh), pass-through charges, and other nuances. Without the guidance of an energy broker, customers would face the challenge of understanding these aspects of energy supply agreements on their own.

- Supplier Vetting

Not all retail energy suppliers are the same. Some are major, publicly traded corporations with substantial revenue and control of energy generation facilities. Others may be smaller operations with only a few staff in modest premises. Energy brokers play an important role in assisting their customers in assessing suppliers’ capabilities and determining if they have the financial stability to honor fixed-price contracts. This guarantees that clients are not enticed by supposedly low fixed-rate offers from less reputable suppliers, who may later add additional expenses to their electricity bills. Energy brokers help customers find legitimate providers and avoid falling prey to energy frauds.

- Customer Service

Energy brokers regularly provide customer service to their commercial clients. Energy brokers act as your advocate, even for infrequent issues. From resolving billing mistakes to answering inquiries, their direct lines to suppliers ensure swift and efficient solutions, keeping your energy worries at bay.

Why Energy Brokers Work for You

Energy brokers work for you, not the supplier. They get commissions based on your consumption, so they are motivated to find you the best rates, as opposed to consultants who charge you directly.

Energy broker licenses enable brokers to add a margin to the rates offered by retail energy suppliers and earn a commission when customers pay their bills.Suppliers frequently raise their charges to compensate the costs of hiring salaried salespeople who interact directly with customers. Energy brokers can often negotiate lower rates from suppliers than clients can on their own, therefore the additional broker fee or margin rarely has a direct impact on the customer. Here’s an example of how energy brokers make money:

Energy Supplier’s Cost: $0.050/kWh
Energy Broker’s Fee: +$0.015/kWh
Total Price for Customer: $0.065/kWh

In this scenario:

The energy supplier pays $0.050 per kWh for electricity or natural gas.
On top of that, the energy broker charges $0.015 per kWh.
This puts the total cost to you, the consumer, to $0.065 per kWh, which includes the supplier’s base price plus the broker’s commission.

The Energy Broker earns $0.015/kWh as their commission for facilitating the energy transaction. This commission is typically compensated by the supplier based on the actual energy consumption of the customer over the duration of the energy supply contract.

Month	Electricity Usage (kWh)	Broker Fee ($/kWh)	Broker Commissions ($
JAN	22,000	$0.01	$132
FEB	25,000	$0.01	$150
MAR	11,000	$0.01	$66
APR	14,000	$0.01	$84
MAY	18,000	$0.01	$108
JUN	20,000	$0.01	$120
JUL	28,000	$0.01	$168
AUG	24,000	$0.01	$144
SEPT	17,000	Combo	$102
OCT	16,000	$0.01	$96
NOV	19,000	$0.01	$114
DEC	23,000	$0.01	$138

- Comparing Compensation Models for Energy Expertise

In the retail energy market, several companies compete for your business. Energy brokers and consultants collaborate directly with you, the customer, to acquire the greatest energy sources for your business. However, their compensation tactics differ. Brokers are compensated by the energy suppliers they link you with, and their costs are built into your final energy bill Consultants, on the other hand, work directly for you and charge extra fee for their knowledge and advice. This greater experience frequently extends beyond simply locating a provider, to include issues such as demand response, lighting renovations, renewable alternatives, and even wholesale energy possibilities.

- Licensing for Energy Consultants

Unlike energy brokers, who must obtain licenses in specific deregulated states to add margin to retail energy prices, energy consultants are not typically required to be licensed. Instead, they collect fees directly from their clients. It’s important to note that unlicensed energy consultants are prohibited from adding margin to retail supplier rates.

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Becoming an Energy Broker

Interested in entering the dynamic field of energy brokerage? You’ve chosen an industry with immense potential for a rewarding career. Here are several paths to becoming an energy broker:

- Start as an Agent

Begin your journey in the energy broker realm by becoming an energy sales agent. Energy agents operate under a licensed energy broker and are trained to sell energy without needing to undergo the rigorous licensing process themselves. This approach allows you to learn the ropes with support from your broker. Explore our Energy Agent Sales Program for more details.

- Become a Sub-Broker or Channel Partner

If you manage an organization with multiple sales professionals and aspire to establish your own energy brokerage firm, consider becoming a sub-broker under a larger licensed broker organization. This structure offers numerous advantages:

Avoid Rigorous Regulatory Compliance
Immediate Access to Deregulated Markets
Ability to Sell for Multiple Energy Suppliers
Improved Payment Terms with Upfront Commissions
Access to Support Staff Without Hiring Employees

Starting an independent Energy Brokerage Company can be challenging due to stringent supplier application processes and less favorable commission terms. Partnering with a larger broker through a sub-broker program provides a turn-key solution for launching and operating your brokerage business effectively. Learn more about our Broker Partner Program here.

- Get Licensed

For those with experience, financial resources, and the capability to manage regulatory requirements, obtaining your own energy broker license is an option. Be prepared for a thorough and demanding application process scrutinized by regulatory bodies. You’ll need to maintain ongoing compliance, forge relationships with energy suppliers, and manage operational aspects. Explore state-specific license requirements to determine if licensing is necessary for your area of operation.

These pathways offer diverse opportunities to establish yourself in the competitive energy brokerage industry.

State	Electric Broker License	Nat. Gas Broker License
California	No license required	No license required
Colorado	No deregulation	Limited deregulation
Connecticut	License required	No deregulation
Delaware	License required	No deregulation
Florida	License required	Limited deregulation
Georgia	No deregulation	No license required
Illinois	License required	No license required
Indiana	No deregulation	Limited deregulation
Iowa	No deregulation	Limited deregulation
Kentucky	No deregulation	Limited deregulation
Maine	License required	No deregulation
Maryland	License required	License required
Massachusetts	License required	License required
Michigan	No license required	No license required
Montana	No deregulation	Limited deregulation
Nebraska	License required	License required
New Hampshire	No deregulation	Limited deregulation
New Jersey	License required	No deregulation
New Mexico	No deregulation	Limited deregulation
New York	License required	Limited deregulation
Ohio	License required	Limited deregulation
Oregon	No deregulation	No license required
Pennsylvania	License required	No deregulation
Rhode Island	License required	No deregulation
South Dakota	No deregulation	Limited deregulation
Texas	No deregulation	Limited deregulation
Virginia	License required	Limited deregulation
Washington D.C.	License required	No deregulation
West Virginia	No deregulation	No deregulation
Wyoming	No deregulation	Limited deregulation

Becoming a More Effective Energy Broker

Navigating the complex and competitive retail energy broker market requires finesse. Energy brokers and sales agents range from recent college graduates operating from home offices to seasoned professionals advising companies with significant electricity expenditures. Setting yourself apart is crucial for achieving success in the energy brokerage profession. The following insights are tailored for experienced energy brokers seeking to elevate their performance to new heights.

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