Letters of Authorization & Letters of Exclusivity to Grow Your Energy Business
The retail energy market has many rules, especially when it comes to selling energy or pricing utility accounts. One important rule involves getting a signed letter of authorization (LOA) or letter of exclusivity from your customer before you can price their account. Many energy suppliers will not provide pricing information or even start the pricing process without a signed authorization. These letters protect both the customer and the broker and are essential for smooth transactions. Let’s take a closer look at these two important tools and how they help brokers grow their energy business.
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Why You May Need to Sign Both?
Sometimes, a customer may need to sign both an LOA and an LOE to get the best results.
- A Letter of Authorization (LOA) allows a supplier to access important energy data. This data is needed to generate an accurate price quote for the customer.
- A Letter of Exclusivity (LOE) ensures that the customer is negotiating exclusively with one energy broker or supplier for a specific period. This encourages more competitive pricing and allows suppliers to provide custom solutions.
By signing both letters, a customer can get data-driven quotes through the LOA and the best pricing and proposals through the LOE. This combination helps ensure an efficient and cost-effective energy procurement process.
What Is a Letter of Authorization (LOA)?
A Letter of Authorization (LOA) is a document signed by an energy customer. It gives an energy broker or supplier permission to access the customer’s historical energy account information from their local utility. Legally, an LOA allows the brokers to act on the customer’s behalf. With an LOA, the customer authorizes the energy broker to do several things. The broker can represent the customer with energy suppliers. The broker and its suppliers can also obtain historical usage data from the utility. Finally, the energy brokers and suppliers are allowed to price the customer’s account.
How Can an LOA Help with Suppliers?
A Letter of Authorization (LOA) helps suppliers provide accurate and fair quotes. By signing an LOA, the customer allows suppliers to use actual energy usage data instead of estimates. This leads to better pricing that reflects the customer’s real energy needs. With a clear understanding of the customer’s energy profile, suppliers can offer better contract terms. This may include fixed rates or customized products that reduce exposure to market price changes.
An LOA also increases transparency in pricing. Suppliers can see how much energy the customer uses and when it is used. This allows them to offer more competitive and transparent pricing, which can save the customer money. Additionally, an LOA streamlines the process. Suppliers spend less time gathering data, making it faster to present quotes. This speeds up decision-making for the customer, which is especially important when time is critical.
Today, an LOA is essential for getting accurate and tailored electricity supply proposals. By granting access to detailed energy usage and billing history, the LOA ensures customers receive precise pricing and contract offers based on their actual consumption. This helps customers compare suppliers effectively and make informed decisions about their commercial electricity supply.
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When is an LOA needed?
In the retail energy market, suppliers often require a signed LOA before they release pricing to a broker. Since suppliers usually do not communicate directly with a broker’s customer, the LOA proves that the customer agrees to work with the energy broker.
In many states, an LOA is necessary to custom price any account. Suppliers must also keep a copy of the LOA on file. Without it, the broker cannot access the customer’s historical usage data or pricing information.
What Can an Energy Broker Do With an Authorization Letter?
With a signed LOA, an energy broker can act on behalf of a customer. The broker can contact utility companies or energy suppliers to get historical billing data, invoices, or copies of energy contracts. A properly signed LOA also allows the broker to price the customer’s utility accounts with one or multiple energy suppliers. This helps energy brokerage firms negotiate and find the best rates for businesses and make informed recommendations for the customer.
For How Long Is an Authorization Valid?
An LOA is valid for the period stated on the document. This period can be agreed upon between the broker and the customer. Often, brokers suggest an LOA without an expiration date unless the customer cancels it. This avoids having to request a new LOA in the future, which is helpful when renewing energy contracts or maintaining long-term customer relationships.
Some customers prefer not to give indefinite authorization. In these cases, the LOA may expire in 30, 60, or 90 days. If the broker needs to access billing data or price an account after the LOA expires, they must get a new authorization from the customer.
What Is a Letter of Exclusivity (LOE)?
A Letter of Exclusivity (LOE) is similar to a Letter of Authorization (LOA). It allows an energy broker and its suppliers to access historical usage data, price accounts, and perform other standard tasks. The main difference is that the customer or prospect names the energy broker as their exclusive agent. This means the broker is the only representative allowed to obtain energy supplier price quotes for that customer.
How Can an LOE Help with Suppliers?
A Letter of Exclusivity (LOE) helps suppliers give better attention and service to the customer. During the LOE period, suppliers know they have a good chance of securing the contract, so they are more likely to dedicate resources and effort to the customer’s account.
The LOE also encourages suppliers to offer more favorable contract terms. This can include extended payment options, better flexibility, or renewable energy choices to win the customer’s long-term business. An LOE can also help reduce rate volatility. Suppliers can plan their energy purchasing more predictably since they know the contract is likely secured. This can lead to more stable and lower rates for the customer. Some suppliers only share their most competitive rates after receiving an LOE. This ensures that offers are not used just to negotiate with competitors. By signing an LOE, customers can gain access to this exclusive pricing.
Today, in commercial & residential electricity supply, the LOE helps customers by building trust, securing competitive pricing, and simplifying the supplier selection process. It also helps suppliers by focusing their efforts on serious opportunities, creating a structured and efficient negotiation process.
Use an LOE to access tailored energy solutions.
When Is an LOE Needed?
A Letter of Exclusivity (LOE) is useful in several situations in the retail energy market. For example, when multiple brokers are trying to price the same account with a supplier, the broker with the LOE takes priority over all other quotes. LOEs also show energy suppliers that the customer is serious about working with a particular broker. If another broker is already pricing the account, suppliers usually require a new broker to have a signed LOE before allowing them to price it. Retail energy suppliers do not give price quotes to multiple brokers for the same customer. The first broker to request a quote usually gets it. However, if a broker has a signed LOE, they override other brokers and take precedence.
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What Does an Energy Broker Do With a Letter of Exclusivity?
A signed LOE lets an energy broker do everything they could with a regular LOA, but with more authority. With an LOE, the broker can remove other brokers from the customer’s account and prevent them from offering price quotes directly to the customer. This gives the broker exclusive control over the account and pricing process.
For How Long Is the Exclusive Status Valid?
Like an LOA, an LOE is valid for the period stated on the document. Because an LOE gives more power to the broker, some customers may prefer not to grant indefinite authority.
Need Help Using LOAs and LOEs?
Letters of Authorization (LOAs) and Letters of Exclusivity (LOEs) are essential tools for energy brokers to secure accurate pricing, build trust with clients, and streamline the procurement process. If you’re looking for expert guidance on how to use these tools effectively, connect with our Great Energy1 team today and take the next step in growing your energy business.