Follow Brad Foster
Subscribe to blog to get pertinent insights about energy supply and utilities.
- Energy Broker Commission: The Truth Revealed
- Broker to Broker Outsourcing Leading to Fat Energy Supply Prices
- Fake Energy Consultants Two-Timing Consumers with Double-Dip
- Going Once, Going Twice – Sold! Bad Energy Deals to Consumers in the Dark
- Businesses Hoodwinked By Energy Brokers Dodging Upcharge Disclosure
“My fee is paid by the supplier” is a common phrase used by energy brokers to describe how they are compensated. Like Energy Broker Myth # 1 (“There is no cost to you”), this phraseology is an intentional and strange word twist that creates a false understanding of how energy broker deals actually work – ultimately at a significant cost to the energy consumer.
What the consumer hears: Since the broker is receiving a commission from the energy supplier, there really is no cost to my employer to engage the energy broker.
What the energy broker means: I get a check from the energy supplier. The energy supplier cuts me a check in the amount of the energy bill that you paid that includes my upcharge. I do not get paid “commissions” by energy suppliers.
This phraseology results in a disconnect. The consumer thinks the energy broker is adding to the statement, “there is no cost to you” by inferring that the cost for the services is a commission paid by the supplier. But, that’s not what is happening. The broker is changing the conversation from how much it costs to engage the energy broker (they’ve already claimed there is “no cost”) to describing how the funds flow back to them. Because energy brokers don’t make the consumer aware that they have changed the conversation, the consumer, out of context, believes the second statement compliments the first. The combination of phrasing is intended to create the misconception that there are no costs to engage energy brokers by suggesting that energy brokers are paid commissions by energy suppliers. There are two half-truths in play at the same time, resulting in a false “truth” for energy consumers.
How Energy Broker Upcharges are Hidden in Energy Supply Prices
The energy broker adds their upcharges onto the original (and lower) energy supply price. Let’s say the original energy supplier price is $0.060/kWh (using electricity as the example). Assume an energy broker upcharge of $0.010/kWh. The billed price from the energy supplier will be the sum of the two, or $0.070/kWh. When the energy consumer pays the energy supply invoice (at a billed rate of $0.070/kWh), the energy supplier calculates how much of the total invoice represents the energy broker upcharge. Then, the energy supplier generates and sends a check to the energy broker for their upcharge.
“My fee is paid by the supplier” is ultimately a “half truth.” Energy brokers do get paid by energy suppliers, but not in the way that is implied by energy brokers. Energy brokers are not paid commissions, as their statement implies.
A Word On Commissions
If energy suppliers awarded energy brokers commissions, they would be forfeiting some of their profits built into the energy supply deal to compensate the broker. I’ve been in the energy marketing business (in sales and as a consultant) for over 20 years. I have never seen an energy supplier pay an energy broker a commission – based on a forfeiture of their profits. If it does happen, it’s rare. Energy brokers generate their revenues via an upcharge to the prices provided by energy suppliers. End of story.
Combined with Myth 1 (“There is no cost to you” – another half truth), energy consumers are left with the impression that engaging energy brokers is free. Not true.
It is very difficult for energy consumers to sort through two half truths and develop a firm understanding of how these energy broker deals actually work. Both half truths are designed to mask the fact that the energy brokers build upcharges into energy supplier’ prices. They go hand-in-hand. Energy brokers know this – that’s why they do it.
If you don’t believe me, ask any energy supplier.