Inexperienced brokers promising big savings following deregulation could be landing businesses in hot water, warns Aidan Lupton, Project Manager at energy consultancy BIU.
With brokers lining up to make commission on supply switches, it is vital to be realistic about percentages to be saved, and choose a trustworthy consultant who can analyse rates across all UK regions, he urges.
“Initial indications are as expected – the margins are very tight”, confirmed Aidan. “The percentage figures offered from suppliers are very low, with not much difference between wholesale and retail pricing – around 3-8%. So retailers need to manage customer accounts based on whatever they can make within that differential.”
However an additional concern is that suppliers pitching for business outside of their own region may not be familiar with the rates and tariff structures in other parts of the country. This could prove especially costly for companies with multiple sites in different locations.
Aidan explained: “We have been investigating a quote from a water supplier which was priced as a fixed percentage above wholesale, which if accepted would have meant costs of 1% above the default retail rate for that specific supply within the region.”
“Therefore businesses using a broker to switch water supplies must make sure they choose one who will analyse things properly, and also need to bear in mind that their broker’s percentage margin will be built into the deal – so any savings to be made will be reduced by this margin. They should also insist on a letter of authority, which states that a customer knows how their fees are calculated.”
Water deregulation came into effect on 1st April, giving 1.2 million eligible businesses, charities and public sector organisations the freedom to pay a retailer of their choice for water supplies. Despite the small margins, brokers have a lot of business to pitch for.
Aidan advised: “Companies using a broker must ensure they are experienced in analysing the whole UK market, region by region, and be aware that anyone saying they will make massive savings is being economical with the truth.”