An Honest Broker: Are Non-Domestic Energy Customers Getting a Fair Deal?

02 February 2017
Sean Gammons, George Anstey, et al.

In a recently released paper, NERA Managing Director Sean Gammons, Associate Director George Anstey, and Economic Analyst Stephen Buryk examine the role of Third Party Intermediaries (TPIs or brokers) and their performance in the Great Britain (GB) energy market. The Competition and Markets Authority (CMA) recently concluded a two-year inquiry into the British electricity and gas markets, which stopped short of a full probe of complaints that TPIs had charged excessive commissions and that non-domestic customers were paying excessive amounts for their energy.

In “An Honest Broker: Are Non-Domestic Energy Customers Getting a Fair Deal?” the authors draw on evidence from the CMA investigation, as well as their own analysis of TPIs’ commission rates. They argue that relative to various benchmarks identified in the paper, the industry average rates of commission for TPIs serving non-domestics in GB appear to be broadly reasonable, but rates of 20% to 30%, as cited by the CMA, appear excessive. They conclude that any business using a TPI ought to take a long, hard look at whose interests their TPI is serving—it may not be theirs, and, even if it is, customers may benefit from reconfiguring their use of TPIs to achieve efficient outcomes.