A letter of authority (LOA) gives a business utility broker or consultant permission to act on behalf of a business customer to help arrange their utility contracts.
Each LOA sets out specific activities the broker or consultant is allowed to perform on behalf of their customer.
This guide explains how LOAs are used in business utilities and the activities they enable.
What is a Letter of Authority in business utilities?
A letter of authority gives a Third Party Intermediary (TPI) permission to act as a middleman between utility providers and a commercial user. The term “Third Party Intermediary” covers business energy brokers, business energy consultancies, commercial water brokers and other utility consultants.
The LOA authorises a specific set of activities the TPI is allowed to perform on behalf of their customer.
Business energy brokers and consultants typically require all new clients to sign an LOA, allowing them to act on the client’s behalf.
Is an LOA the same as a supply contract?
No, a supply contract is a commercial agreement for the supply of electricity, gas, water, etc, between the end-user and a licensed utility retailer.
In contrast, an LOA is a permission document that allows a broker to act on behalf of an end business user in specific ways. An LOA typically gives a broker or consultant the necessary rights to assist in negotiating and arranging a supply contract on behalf of their client.
Why do brokers ask businesses to sign an LOA?
Requesting a signed LOA from customers is a standard part of industry practice for business utility brokers and consultants.
Under their licensing conditions, utility providers will refuse to share account information or carry out actions requested by a broker or consultant unless they have a signed LOA from the customer.
With a signed LOA a broker is able to receive information about their customer’s supply, request bespoke quotes from prospective suppliers, and handle the admin required to facilitate a switch once a contract has been signed by the end-user.
What can a broker do under an LOA?
Signing a letter of authority enables a business utilities broker or consultant to carry out a defined list of specific activities on behalf of a customer.
Brokers and consultants typically use different levels of LOA depending on the service being provided to their client, each enabling a varying degree of actions.
This section explains the typical activities that are authorised by LOAs in business utilities.
Request and receive account information
In business utilities, a letter of authority allows a broker to request and receive current and historic account information from commercial water and business energy suppliers.
Information rights in a letter of authority typically include:
- Contract end dates – The end date on any active fixed-term business energy or water contracts.
- Tariff rates – The current business electricity prices, commercial gas rates, or business water rates included within current tariffs.
- Meter readings – Records of historic electricity, gas or water meter readings.
- Annual consumption – The Expected Annual Consumption (EAC), or Annual Quantity (AQ) associated with each supply point.
- Copies of bills – Copies of historic business energy and business water bills.
Obtain prices
A letter of authority typically allows a business utility broker to request quotes on behalf of a customer from commercial energy suppliers and business water suppliers.
Business energy brokers typically have relationships with a panel of suppliers. By requesting multiple quotes, the broker can offer a commercial gas, business water, or business electricity comparison service.
Contract submissions
When a business utility broker obtains quotes, they will receive a draft contract from the supplier to sign up the customer to the new service.
A Letter of Authority with a right to submit new contracts allows a broker to submit a signed contract to the supplier on behalf of the customer.
For clarity, contract submission rights alone do not allow the broker to sign a contract on behalf of their customer. The broker should only submit a contract to a supplier after receiving a signed contract from the customer.
Raise and deal with complaints
Letters of authority in business utilities can enable a business utilities broker to raise and deal with any ongoing complaints with current utility suppliers.
Contract termination notice
Fixed business energy contracts typically include a clause that requires a termination notice to be received in advance of the contract end date, to avoid automatically rolling onto out-of-contract rates.
Some LOAs provide permission for a business utility broker to send contract termination notices for existing tariffs. This is an essential part of the process for switching suppliers where a customer is currently on a fixed tariff.
Raise a Change in Tenancy
In commercial utilities regulations, Change in Tenancy (CoT) is the process where the occupier and the business responsible for paying energy bills changes.
Change in Tenancy rights in an LOA allow a business utility broker or consultant to complete the CoT process on behalf of a customer.
Find out more in our guide to Change in Tenancy for SME businesses.
Supply transfer objections
When switching from one supplier to another, the outgoing supplier can object to the transfer on the basis of an outstanding debt or an ongoing fixed contract.
Letters of Authority can authorise a business utilities broker to attempt to resolve supply transfer objections on behalf of their customer.
What should a LOA include?
A business utilities letter of authority should clearly state the following:
- The customer’s identity – The details of the business which is authorising the broker to act on their behalf. This typically includes the registered company number and address.
- The identity of the TPI – The limited company name, registered address and registered company number of the broker or consultant.
- Supplies covered – An LOA will confirm the specific types of utilities where the broker is authorised to deal on behalf of the customer.
- Permissions – For the supplies covered, the LOA will list the specific activities the broker is authorised to perform. See above for a description of the types of permissions typically included with business utility LOAs.
- Expiry date – The permissions in an LOA are typically time-limited. An LOA will typically define how long the permissions last for.
- Commission disclosure – An LOA will typically explain that the broker may receive commission from a supplier for their role in the procurement of a new contract.
How long does a business utilities LOA last?
It depends on what you agree with your broker or consultant. Letters of authority typically define an expiry date after which the permissions are no longer granted.
Typically, the terms used in an LOA include:
- A set period of time defined as a number of months or years.
- A period that depends on the length of any contracts arranged on behalf of the client.
- A period that expires only when notice is provided by the client.
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