Energy Procurement: Matchmaker, Matchmaker, Make me a Match. On Brokers and Best Interest

Energy Procurement: Matchmaker, Matchmaker, Make me a Match. On Brokers and Best Interest

Show me how a person is rewarded and I will predict their actions.

Maybe it’s a coincidence that as I write this article the sports news has been dominated by the end of the 2018 January transfer window. Possibly that’s what drew me to make a parallel between football agents and energy brokers.

I’m sure a football club chairman or manager somewhere will be bemoaning the impact of football agents on one of their top players leaving or the prices that have had to be paid to secure another’s services. It’s one of the season’s constants, along with reporters stood in the wind and rain outside training grounds waiting for first sight of the big deal.

Any professional advice should be taken under trust. Trust in capability, trust in relationships, trust in reputation and trust in size and market presence. But ultimately it’s down to actions and behaviour and these are driven by reward, hence my opening quote.

Energy brokers like football agents are a case in point. Recognising that making the right decision in energy procurement is difficult, many organisations seek the advice of an expert. There’s no doubt that the right advice can be invaluable in a complex marketplace – but do all advisers act in the same way?

I’ve worked with a number of clients who have used brokers for their energy procurement. In every case they’ve had a wealth of reports demonstrating the savings they’ve made, and consequently the client was often happy. However, when we’ve been allowed to dig a little deeper our findings have been very interesting.

In one recent case the broker had produced a report after circulating the client’s energy requirements to 5 suppliers. The report demonstrated their action and justified the selection.

However, on closer inspection the broker had not approached 3 suppliers who JMCL Consulting
know to be particularly well-suited to this organisation’s needs. In many ways they would fit the profile of the client better than the 5 who were approached. There was one key difference – these 3 suppliers either didn’t pay broker commission or the commission was nowhere near as generous as the 5 that were approached!

The parallel between brokers and football agents is maybe not such a coincidence. A quick scan of case law surrounding third party intermediaries acting in the best interest of their client turns up Image View vs Rodney Jack (2009). In this case the agent stood to receive payments from the club for whom his client (who was paying for his services) was signing if the contract was completed. The courts agreed that this was a clear breach of his duties to act in the best interest of his client.

I would urge any organisation that is taking advice on energy procurement to ask their broker for details of how they are compensated, how much they have received and what future payments they expect. You may be surprised at the awkwardness or lack of transparency in the answer.

In order to know that you are getting the best price, terms and service, it’s important that the broker fully discloses their fees and that their brokerage agreements disclose any additional commissions from the supplier or other benefits. After all energy brokers are unregulated.

My preference is for relationships to be based on shared goals and mutual gain and getting the method of remuneration correct is the best way to achieve this. For this reason JMCL Consulting is not affiliated to any supplier, does not act as a broker, appoint a broker or take commission from any supplier and is proudly independent. That way our clients can be assured that we’re working to the same goals, and that any match-making with a supplier is done in the best interests of our clients.