Business Energy Broker Commission Explained

Most business energy brokers are paid through a commission that is added to the unit rate you pay for electricity or gas, measured in pence per kWh. This means the cost sits inside the price of every unit you use, rather than appearing as a separate line on your bill. So a broker who advertises a "free" service is usually being paid by you, just not in a way you can easily see.

This is not necessarily dishonest, and a good broker can save you money and time. But you should understand how they earn before you sign anything, because the way commission is built into the rate makes it hard to judge what you are actually paying for.

How broker commission usually works

Brokers are known formally as third party intermediaries, or TPIs. In most cases a TPI negotiates a rate with a supplier on your behalf, then adds an uplift to the unit rate. The supplier collects this uplift through your bills and passes it back to the broker. You see one combined unit rate, with the supplier's price and the broker's margin blended together.

Because the commission is per unit, the total amount depends on two things: how much energy you use and how long your contract runs. A small office that uses very little will pay relatively little in commission. A business with high consumption on a multi-year deal can hand over a large sum over the life of the contract without ever seeing a single figure for it.

The longer the term and the higher the usage, the more an uplift adds up. An uplift that looks tiny per unit is multiplied by every kWh across every month of the agreement. This is why a slightly higher unit rate can matter far more than a one-off fee.

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Why "free" is rarely free

If a broker tells you their service costs you nothing, ask how they get paid. The answer is almost always commission built into your rate. There is nothing wrong with a broker being paid for their work, but "free" is the wrong word for it. You are paying, through your unit rate, for as long as the contract lasts.

The problem with an undisclosed uplift is that you cannot compare it. If you do not know how much margin is in the rate, you cannot tell whether the broker has found you a genuinely competitive deal or simply added a generous markup to a middling one. Two brokers could quote you very different rates for the same supplier, and the difference might be their commission rather than the underlying price.

Your situation may be slightly different. ask a question below ↓ and our editorial team will reply with our advice.

Disclosed fee versus hidden uplift

There is a meaningful difference between an honest, disclosed arrangement and a hidden one. A broker who tells you, in writing, exactly how much commission they will earn, whether as a fee or as a per unit uplift, is giving you what you need to make a decision. A broker who buries the margin in the rate and avoids the question is not.

You are entitled to ask. You can ask the broker directly, and you can ask the supplier to confirm in writing any commission paid to a third party in connection with your contract. A supplier should be able to tell you the commission figure. If a broker is reluctant to put their commission in writing, treat that as a reason to slow down rather than sign.

When you compare quotes, ask each broker to state their commission separately from the supplier's price. That lets you judge the underlying deal and the broker's charge on their own terms.

The rules are tightening

Ofgem has tightened the rules around commission transparency, with particular attention to microbusinesses, which are the smallest business customers. The direction of travel is towards clearer disclosure of what brokers are paid and when. The exact definitions, thresholds and requirements change over time, so check the current position with Ofgem rather than relying on what was true a year or two ago.

Energy regulation applies across England, Scotland and Wales, though wider business support and advice services can differ between the nations, so check what is available where you trade. If you have a dispute with a supplier you cannot resolve directly, the Energy Ombudsman may be able to help, and Citizens Advice offers free guidance for businesses.

Bear in mind that a business energy contract is harder to leave than a domestic one. You usually will not have a cooling-off period, and ending a deal early is often difficult or costly, so check the terms before you commit rather than after.

A practical approach:

• Get more than one quote.
• Ask every broker to disclose their commission in writing.
• Ask the supplier to confirm it.
• Weigh the total cost over the full contract term rather than the headline rate alone.

A broker can be worth using. You just want to know what they cost.

The Next Step

Now that you have read through the advice above, you might want to put it into practice. Our Hidden Energy Broker Commission Checker lets you see what hidden commission your energy broker is adding to your business unit rates, and how to make them disclose it. Try it now →