Assessing Energy Broker Requirements and Capabilities

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Energy Market
Utility Expense Management

The most important question to ask before formally aligning your firm with an energy consultant (aka “Broker”) is, has the Broker been licensed by the state commission where my facilities are located?

Stemming from a need to establish stringent consumer protection safeguards, Public Utility Commissions (PUCs) in the states of CT, DC, DE, IL, MA, MD, ME, NH, NJ, OH, PA, RI, TX, and VA establish, maintain and monitor strict licensing requirements for Suppliers of retail electric service and natural gas supply. Agents, Brokers and Consultants are also considered Suppliers in the broad definitions of these state licensing requirements.

In order to attain PUC approval as a licensed Broker and maintain “in good standing” status, Brokers must meet and adhere to many strict standards related to marketing practices, including consumer protection requirements. These requirements/practices include, but are not limited to: proof of financial stability; maintenance of surety bonds; formal notifications to utilities and designated news outlets; and timely submittal of annual reports, renewal applications, revenue forecasts, and gross operating revenue in accordance with the individual reporting requirements of each state.

As mentioned above, Suppliers which sell energy to end-user customers (“Buyers”), whether directly to the Buyer or through a Broker, must be licensed. Buyers should note that top-tier Suppliers overwhelmingly embrace these licensing requirements in order to maintain high industry standards for themselves, their competitors and Brokers. This is to ensure that customers are insulated from consumer fraud. Simply put, licensed top-tier Suppliers do not knowingly submit proposed offers to meet a Buyer’s energy needs through unlicensed Brokers. As a result, a Buyer’s supply options are severely limited should procurement efforts originate from an unlicensed Broker.

In conclusion, although consulting firms may employ certified market experts to assist with the development of procurement strategies tied to a client’s appetite for risk, to achieve budget certainty, and/or to offer value-added products and services (such as bill auditing, rate analysis, rate optimization, etc.), Brokers are not authorized to arrange for energy procurement through a Seller on behalf of a Buyer without PUC approval via license certification.

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