What You’re Signing Away Without Realising
Have you ever signed a Letter of Authority for an energy broker?
If you have, you might be surprised to learn what you’ve actually agreed to.
Letters of Authority (LOAs) are essential documents in the energy procurement process. They give brokers permission to act on your behalf with energy suppliers. But not all LOAs are created equal, and the fine print can hide clauses that severely limit your options and control.
Many businesses don’t realise they’ve signed away significant rights until it’s too late.
What Exactly Is a Letter of Authority?
A Letter of Authority is a legal document that allows a third party (typically an energy broker) to interact with energy suppliers on your behalf. It’s necessary because energy suppliers won’t share your account information with anyone without your explicit permission.
In theory, LOAs should make your life easier by allowing brokers to:
- Request information about your current energy contracts
- Gather consumption data to find appropriate deals
- Negotiate with suppliers on your behalf
- Handle administrative tasks related to your energy supply
But here’s where things get tricky…
The Hidden Dangers in Standard LOAs
Many standard LOAs contain clauses that can severely restrict your options and put you at a disadvantage. Here are the most common issues to watch for:
1. Exclusivity Clauses
Some LOAs contain language that makes the broker your exclusive representative. This means you can’t work with other brokers or approach suppliers directly, even if you find better deals elsewhere.
According to the Energy Action Group, “If a broker feels it is necessary to do this, he is not likely to be competitive.” They warn that exclusive LOAs typically result in businesses paying higher prices than necessary.
2. Contract Signing Authority
Perhaps the most dangerous clause of all is one that gives brokers the authority to sign contracts on your behalf. This means they can commit you to energy deals without your explicit approval.
Some less reputable energy brokers will include clauses allowing them to sign contracts on your behalf. They will often do this up to a year before your current energy contract ends, meaning you’ll have no chance to shop around the market before renewal.
3. Extended Validity Periods
Many LOAs are valid for extended periods—sometimes up to three years. During this time, the broker maintains authority to act on your behalf, potentially locking you into arrangements long after you’ve forgotten about signing the document.
4. Hidden Commission Structures
Some LOAs don’t clearly disclose how the broker is compensated. This lack of transparency can lead to situations where brokers steer you toward contracts that maximize their commission rather than save you money.
Recent legal action has highlighted this issue. According to The Guardian, thousands of small businesses have joined a group legal action to recover up to £2 billion in undisclosed broker fees added to their energy bills. In some extreme cases, these hidden commissions can amount to 60% of the energy costs.
Real-World Consequences of Problematic LOAs
The consequences of signing problematic LOAs can be severe:
Financial Impact: You could end up paying significantly more for your energy than necessary. According to litigation firm Harcus Parker, broker fees typically add about 10% to the total energy bill for small businesses.
Loss of Control: You might find yourself unable to switch suppliers or negotiate better deals when market conditions change.
Long-Term Commitment: You could be locked into unfavourable contracts for years, with no easy way to exit.
Unexpected Renewals: Some brokers use their authority to automatically renew contracts without your knowledge, often at less favourable rates.
The Link Utility Consultants Difference
At Link Utility Consultants, we believe in complete transparency and putting our clients in control. That’s why our approach to LOAs is fundamentally different:
No Terms and Conditions: Our LOAs are clean, simple documents with no hidden terms or conditions.
No Exclusivity: We never require exclusivity, giving you the freedom to work with other brokers if you choose.
No Contract Signing Authority: We will NEVER sign contracts on your behalf. All final decisions remain firmly in your hands.
Transparent Commissions: We’re completely open about our capped commission structure, so you always know exactly what you’re paying.
Client Control: You maintain full control of all decisions related to your energy procurement.
How to Protect Your Business
When reviewing an LOA from any energy broker, follow these essential steps:
- Read Every Word: Never sign an LOA without reading it thoroughly, including all fine print.
- Check for Exclusivity: Reject any LOA that makes the broker your exclusive representative.
- Verify Contract Authority: Ensure the LOA does not give the broker authority to sign contracts on your behalf.
- Confirm the Duration: Make sure the LOA has a reasonable validity period and clear expiration date.
- Ask About Commissions: Request full disclosure of how the broker is compensated.
- Get a Second Opinion: If you’re unsure about any terms, seek advice from a solicitor or another energy professional.
What to Do If You’ve Already Signed a Problematic LOA
If you’ve already signed an LOA with concerning terms, you may still have options:
- Revoke the Authority: Send a formal written notice to the broker revoking their authority to act on your behalf.
- Check the Expiration: Verify when the LOA expires and mark your calendar to ensure you don’t automatically renew.
- Review Your Contracts: Examine your current energy contracts to understand your obligations and potential exit points.
- Seek Professional Advice: Consider consulting with a solicitor who specializes in energy contracts if you believe you’ve been misled.
Making the Right Choice for Your Business
Energy procurement shouldn’t be a minefield of hidden clauses and unexpected commitments. At Link Utility Consultants, we believe in building long-term relationships based on trust, transparency, and delivering genuine value.
Our approach is simple: we provide you with all the information and expert guidance you need, but you remain in control of the decisions that affect your business.
When you work with us, you’ll never have to worry about hidden terms in your LOA or unexpected contract renewals. We’re committed to helping you secure the best possible energy deals while maintaining complete transparency throughout the process.
Ready to experience a different approach to energy procurement? Contact us today for a no-obligation consultation and discover how we can help your business save money on energy costs without sacrificing control.
