Sandra here in Memphis with MLGW territory. Working with a manufacturing client who uses about 2.5 GWh annually. They're asking whether to work through an energy broker or approach suppliers directly for their deregulated load. Current broker charges 0.3 cents/kWh commission which adds up to $7,500 annually. At what point does it make sense to cut out the middleman and deal directly with Constellation, Direct Energy, etc?
When is it worth paying a broker vs going direct to suppliers?
Glenda from Nampa, Idaho. Even though we're Idaho Power territory with limited choice, I work with clients in other states. Generally, if you're over 1 GWh annually and have someone internally who understands energy markets, going direct can save money. But that 0.3 cents/kWh might be worth it if your broker is actively managing the contract and watching for better opportunities.
Jesse from Glendale with SCE territory. The math changes based on your risk tolerance too. Direct supplier relationships mean you're negotiating rates, terms, credit requirements yourself. Good brokers earn their commission by shopping multiple suppliers and handling all the paperwork. For 2.5 GWh, I'd probably try direct first - worst case you can always go back to using a broker.
Randy here in Memphis - Sandra, I've worked with several MLGW territory clients on this exact question. At 2.5 GWh you're big enough for suppliers to take seriously, but not so big that you get their best pricing automatically. The key is whether your client has time to manage RFPs, compare 15-page contracts, and stay on top of renewal dates. That broker commission might be worth it for the headache prevention alone.
Randy makes a good point about the administrative burden. My client's facilities manager is already stretched thin. Maybe we compromise - try direct procurement for this renewal to see what rates we can get, then decide if the savings justify the extra work. If direct quotes are only 0.1-0.2 cents better than what the broker can deliver, stick with the broker.
That's a smart approach Sandra. Run parallel processes - get direct quotes AND have your broker shop it. Compare not just the rates but contract terms, credit requirements, early termination options. Sometimes the broker's relationships get you better contract flexibility even if the rate is slightly higher. Worth testing both approaches before committing either way.