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What does a good broker look like? Part two

In the second part of our blog series we look at the different ways brokers get paid. Quite often, this is not disclosed to the customer, therefore the ‘best’ deal that has been offered is not actually that great.

How much is the broker being paid for the service provided?

Brokers do not work for free, there are two common practices that brokers use to get paid:

  1. The broker adds an uplift to the pence per kWh quoted by the supplier. For example, the supplier quotes 10p per kWh and the broker adds 1p as their commission, selling the power to you at 11p per kWh. The broker makes 1p per kWh consumed as their commission which is paid to them by the supplier.
  2. The broker is paid a flat fee from the supplier for each contract sold, for example £50 per contract per year. This commission is added to your supply rate which is then recuperated across the term of the contract.

To ensure fair and appropriate selling, you should ask the broker how much they are being paid in commission. After all, this commission is ultimately being paid by you. When asking, ensure that you are told the:

  1. commission cost as the additional pence per kWh
  2. annual commission cost
  3. contract total commission cost

If the broker is not willing to do this then they are not operating fairly.

The broker may state that the information is ‘commercially sensitive’, but this is not a fair response, as it is the customer who is paying.

Brokers have also been known to state that it is not you who is paying the commission, but rather that the supplier is paying for this, however this is a clever play on words. The broker adds an uplift to the unit rate that you pay to the supplier, then the supplier pays that uplift as a lump sum to the broker as commission, which ultimately you pay off across the term of the contract.

Next week we will be sharing other important questions to ask your broker. For more information visit our contact us page.

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