How to Start an Energy Broker Business | SkillsAndTechSkillsandTech | July 1, 2022 |
In theory, deregulating the energy industry gives consumers a chance to cut costs on their power or gas bill. In practice, figuring out which supplier offers the best deal leaves people confused. That’s what created the business of energy brokers — experts who help consumers and energy providers find each other.
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The Business of Energy Brokers
States began deregulating electric and natural gas utilities back in the 1990s. The theory was that letting consumers choose their supplier would lead to lower bills through free-market competition. More states have signed on with electricity deregulation than natural gas.
The miracle of lower costs didn’t materialize, however; rates remained comparable between regulated and deregulated states. While commercial customers were usually willing to look at a new supplier, most residential customers default to using the same company they’ve always used rather than hunting for a cheaper option.
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That’s where energy broker jobs come in. Brokers help energy suppliers find customers and vice versa. If it all goes smoothly, customers end up with lower bills, and competing utilities get to turn a profit.
State by State
Deregulation happens at the state level. If you want to get into the business of utility brokers, your first step is to find out if there’s an opening in your state. If the utilities are still regulated, there’s no need for energy brokers. Your state department of energy should have the information you need.
Your state government also sets the requirements for an energy broker license. Some deregulated states, such as Arizona, don’t require licensing, but many others do. Once you complete the licensing process, you’ll have to contact power or gas suppliers in your community and negotiate a price for power and then start looking for customers.
You don’t have to go it alone. Several companies offer services to energy brokers, such as software to streamline the contract process with suppliers and customers. You can also sign on with an experienced franchise that will set up a lot of the business infrastructure for you.
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The Energy Broker License
Applying for an energy broker license doesn’t always require a fee. Illinois and Michigan have a $0 fee for submitting an application, for instance. However, New Jersey has a $1,000 license fee and a $250 application fee. Fees in other states range from $50 to $1,000.
You also have to complete your state’s application form for the energy broker license. Much of this is the same as any business license application: your name, company name, company address, fingerprinting for a background check, etc. Other questions and requirements in various states are distinct to the industry:
- In which utility districts will you be working?
- Have you negotiated agreements with the relevant power companies?
- Can you afford to take out a surety bond or put down a security deposit with the state? For example, California requires a $25,000 deposit, and New Jersey wants a $10,000 bond.
- Will your customers be residential, commercial, industrial or some combination of the three?
- Is there a limit on the number of customers you can service?
- If your company has provided brokerage services elsewhere, have there been issues, such as losing your license?
- In Illinois, you or someone on your team must have at least a year of experience in the electric power industry. You’ll have to provide a job history to confirm this.