Navigating the Energy Landscape: Understanding B2B Supplier vs. Brokers

Written by Valda Energy

Energy, Business News

As a small, medium, or even micro business owner, you probably already carry some financial commitments and obligations crucial for your organisation's smooth operation.

Whether these financial commitments come in fixed or variable forms, regular scrutiny is key to effective forecasting and long-term business profitability.

Among these financial considerations, energy procurement is one of the most substantial expenses which can also translate into a lot of time and effort spent trying to understand and utility options and costs.  

If you're currently exploring options of how to manage your energy, understanding whether to engage a broker or work directly with a supplier is paramount for informed decision-making and cost effectiveness.

What do B2B energy suppliers do?

At the foundation of the B2B energy supply chain lies the energy supplier – a company tasked with generating or purchasing electricity and/or gas and subsequently distributing it to the business customer.

Suppliers may generate energy themselves through various means such as conventional power plants, renewable sources, or they may even acquire it from generators and wholesale markets, thereafter, distributing it through the national grid or local distribution networks.

Their primary goal is to secure favourable prices and terms to offer competitive rates to businesses. Additionally, they handle billing and customer service operations, which encompass managing billing processes, meter readings, invoicing, and addressing customer enquiries, all aimed at ensuring seamless interactions between business customers and the energy system.

Furthermore, suppliers are tasked with continuously monitoring supply and demand dynamics to adjust their offerings and procurement strategies to maintain reliability and affordability for customers.

Compliance is also a critical aspect for energy suppliers, as they have to adhere to regulatory requirements and standards to ensure compliance with industry regulations and deliver safe and reliable services to customers.

What do Energy Brokers do?

Brokers, on the other hand, are the third-party intermediaries between suppliers and businesses and play a pivotal role in assisting companies in navigating the intricate energy market, providing expertise, guidance, and invaluable services aimed at securing favourable rates and contracts.

By conducting thorough market analysis and insight, brokers meticulously monitor price fluctuations, trends, and market dynamics to identify opportune moments for procurement, considering factors such as budget, risk tolerance, and sustainability objectives.

Broker vs Supplier Difference

While suppliers and brokers are both integral components of the procurement system for businesses, there exist several pros and cons for both.

Thanks to a deregulated market, businesses customers are free to choose their utility supplier directly, which often results in competitive pricing if you are prepared to self-negotiate.

However, that same free market can also breed confusion. When selecting your supplier, it’s important to set significant time aside to understand the different pricing models, contract terms and overall customer satisfaction levels. Of course, doing this can be daunting and overwhelming so it’s often worth blocking out a couple of days in the diary to look over and understand different quotes and get the job done.

For companies that choose to go with a broker, the big advantage is that they do all the hard work for their customers, and which can sometimes result in a better rate than if they simply chose a supplier on their own. There are a variety of types of brokers, ranging from a single employee to large well-known brands. Therefore, if you’re thinking of going with a broker, be sure to do your homework. It’s also worth asking how the broker gets paid. Is it a fixed fee? Or, as is commonly the case, is it a commission fee? In that case, the broker negotiates a price with the supplier and then collects a certain amount on top of the negotiated price, which they will declare to you.

The Alternative Dispute Resolution scheme was introduced to ensure brokers are  registered and become accredited to work with suppliers like Valda Energy and has made is easier for businesses to transact with trusted brokers in the market. Once you have established a good reputable broker, hang on to them and they will bring you quotes, dive into the detail and shop around all on your behalf. Also, it's important to understand their fee structure and terms and conditions in advance.

Manny Nayee, Valda Energy’s Head of Business Development comments “Deciding which option is best for your business can be tricky to navigate. Certainly, by leveraging the specialised knowledge of brokers and their industry connections, SMEs can save time and money. Also, the aftercare that brokers provide also goes beyond contract negotiation they can provide long-term value, making them an indispensable asset in managing energy procurement effectively.

“Conversely, by doing it yourself and working with suppliers directly, you’re able to build a relationship with them and often can negotiate a competitive fee and know well in advance when contracts are due for renewal.

“In the end, utility suppliers and brokers are an unavoidable part of owning and operating a business. What’s not always simple – and which has to be an individual choice – is selecting the broker or supplier route and having the power to understand some of the background empowers you to make more informed decisions to help rein in energy spend.”