Energy markets have changed significantly over the past 10 years. Increased complexity as a result of a growth in renewable generation, additional levies and greater market competition has led more customers to rely on the services of Third Party Intermediaries (TPI’s) to help them with a range of energy related services.  

In the I&C space over 70% of UK companies now use a TPI to support their energy requirements.  A primary driver for the decision to engage with a TPI is to reduce annual energy spend, however the biggest value a TPI can often provide is the reduction in a cost which is much harder to quantify – your time.  The UK energy market is complex and there are a plethora of energy products and tariffs from over 25 business energy suppliers for customers to navigate.  Indeed, even once a product is selected, some suppliers have over 50 pages of T&Cs to review that are full of energy acronyms and jargon requiring a level of expertise and industry understanding not found within many businesses.   
With over 1000 TPIs operating in the UK it is important for customers to ask the right questions before they enter into any agreement.  

We have listed five of the key questions to pose:

1 - How do you charge for your services?

Literally the million-pound question.  There are two main methods for TPIs to charge for their services:  a flat fee agreed between you and the TPI at the outset which is invoiced directly to you, or a commission added to the supply contract which will be included in the rates on your supplier invoices.  The market for TPI commissions is thought to be worth over £300m a year so payment for services should be negotiated, and it is vital to ensure transparency from the outset.

2 - How many suppliers do you work with?

TPI’s should be approaching most of the market for the best price and product available.  Suppliers have unique perspectives on how they price risk premiums in fixed price contracts and have varying access to wholesale markets which means prices fluctuate daily, and in some cases hourly.  This means that there is no precedent for which supplier is “best price”.  A TPI who only shows you prices from a small number of suppliers may have preferable terms that mean their recommendation is based on what is in their best interest, rather than yours. 

3 - What services are you offering?

The services offered by TPIs have evolved from the procurement of energy contracts to a whole range of ancillary services.  TPIs are now expected to manage metering, bureau services, generation projects, energy efficiency, trading strategies and the ever-changing regulatory landscape.  Depending on what is important to your business you need to understand the level of service your TPI can offer in the relevant areas, and the ongoing support you will receive once a procurement exercise is finalised.

4 - How long does your average customer relationship last?

This can be an important benchmark.  Often the best TPIs in the UK have many longstanding relationships with their customers.  In such a competitive and fast-moving industry this will give a good indication of their customer service and expertise.

5 - How will you help me make an informed decision?

This is the time for your TPI to shine.  Price will always be a significant factor in any buying decision, but it is important to also consider the service you will receive from a supplier, and it is here that the expertise of a TPI will provide additional value.  Your TPI should be familiar with each supplier; the accuracy of their billing, their ability to respond to requests and their suite of products.  Further to this, they should demonstrate knowledge of the wider energy market, third party costs and other factors that could affect your business or industry to ensure these are part of your decision-making process.

If you have any questions on this article or would like to know more on how to optimise your energy costs, feel free to contact our Executions & Solutions desk here

Written by Iain Smith - Head of TPI Relationships

Brook Green Supply 

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