What the Paperwork Earns: Unpacking Energy Broker Commission Before a UK SME Signs

For many UK SMEs, gas and electricity sit among the largest controllable overheads on the profit and loss account — and among the least examined. A quote typically arrives as one confident headline figure in pence per kilowatt hour, accompanied by a standing charge and a contract term. Behind that figure sits a stack of components: wholesale energy, network and distribution charges, environmental and social levies, supplier margin, and often a broker's commission. None of these is improper. Intermediaries perform real work. But an owner cannot manage a cost that has been blended into invisibility, and the commission element is the one most easily overlooked.

The purpose of this piece is not to argue against using a broker. It is to set out a short, repeatable routine that puts the commission line where it belongs — on the record, before signature, alongside the renewal date.

Why the fee hides inside the unit rate

Most commercial energy brokers are remunerated by the supplier rather than by the customer. The supplier builds the commission into the rate it quotes, then pays the broker after the contract is live. From the customer's side, there is no separate invoice, no line item and often no number at all — just a rate that is slightly higher than it would otherwise have been.

The arithmetic is worth making concrete. A commission of 0.3p per kWh on an annual consumption of 250,000 kWh amounts to £750 a year. On a three-year term, that is £2,250. On a multi-site estate, or a half-hourly meter with heavier consumption, the same small-looking uplift can run into five figures across the term. The sum may still represent fair value. The point is that it should be a decision rather than an inference.

What the rules require for microbusinesses

Ofgem's protections for micro business customers were tightened some years ago and remain the reference point. A micro business is generally one that consumes below the relevant gas or electricity threshold, employs fewer than ten staff, or falls under a specified turnover or balance sheet test. If a customer meets that definition, the broker is expected to disclose its commission before the contract is concluded — in writing, and with the customer's acknowledgement — alongside a contract summary and clear information about renewal and termination.

Larger organisations may not automatically benefit from the same prescribed disclosures, but the commercial logic does not change with headcount. Asking for the commission in writing is a reasonable request at any size, and a broker who declines to provide it has told you something useful.

Benchmark against a commission-free reference

The single most effective check is comparison against a rate that carries no intermediary fee. That might come from a direct approach to a supplier, or from a quoting service that states plainly that it is not remunerated on the contract. Three figures matter, and they must be compared on a like-for-like basis: same meter, same consumption profile, same contract length, same start date.

• The broker's offered unit rate and standing charge.
• The commission-free reference rate on identical terms.
• The deemed or out-of-contract rate that would apply if no new contract were signed.

The difference between the first two is, broadly, what the paperwork costs. The difference between the first and third is what inaction costs — and it is usually far larger. Deemed gas rates and out-of-contract electricity rates are commonly several times the fixed-rate equivalent, which is why the renewal diary matters as much as the negotiation.

A short routine before signature

1. Benchmark the rate. Obtain at least one commission-free reference before agreeing terms. If two brokers are involved, check whether both are being paid on the same contract.
2. Request the commission in writing. Ask for it expressed in pence per kWh, in any standing-charge element, and as a total estimated sum across the full term. A single total figure is easier to weigh against the work performed.
3. Confirm who pays what. Establish whether the broker receives payment from the supplier only, and whether any separate fee is invoiced to you. Ask whether commission is flat across the term or loaded into the first year.
4. Read the renewal clause. Identify the notice period precisely, the last date on which notice can be served, and whether the contract rolls forward if notice is missed. Note any auto-extension provisions.
5. Diarise two dates. The first is the last date for notice, minus a fortnight's buffer. The second is a review date roughly ninety days before that, when the benchmarking exercise begins again.

Keep the paper trail

The written commission disclosure is not merely a compliance artefact. It is a record that supports renegotiation, helps a finance director explain the cost base, and becomes part of the due-diligence pack if the business is ever sold or refinanced. Retain it with the signed contract, the contract summary and any renewal correspondence. A short email requesting the figure in writing is usually sufficient; a broker who works regularly with commercial clients will have the answer to hand.

When the fee is justified

The question is not whether commission exists but whether it is proportionate. A broker who consolidates multi-site billing, manages meter installations and half-hourly data, handles supplier queries and takes responsibility for the renewal calendar is doing work that would otherwise fall to a finance team. For a straightforward single-site SME with a standard credit meter, the appropriate answer may be a modest fee and a second quote.

Set the two against each other honestly. A commission of several hundred pounds against a genuinely lower rate may be sound value; several thousand pounds against a rate indistinguishable from the benchmark deserves an explanation, or a different broker.

The takeaway

Energy procurement rewards preparation more than negotiation. Benchmark against a commission-free reference, ask for the commission in writing before signing, understand the deemed rate you are avoiding, and put both renewal dates in the shared calendar. Those four steps take an afternoon and pay for themselves in the first quarter of the contract. In a year when margins are tight, knowing what the paperwork earns is not a technicality — it is a cashflow control.