What it takes to become a licensed energy broker.
What is an energy broker license?
Energy broker licenses allow companies or individuals in deregulated states to negotiate the purchase of electricity or natural gas between a customer and a supplier. Often energy brokers earn revenue by adding margin or brokerage fees to the supplier's rate. Most states require a broker to be licensed to conduct transactions in this manner.
Bonds and financial requirements
Energy broker licenses also protect the consumer. In most states, energy brokers must post a letter of credit or bond with the state. The monetary commitment gives consumers the right to recover damages that the broker may cause. Like an insurance policy, customers can sue brokers for wrongdoing and seek the value of the bonds or letter of credit.
Brokers are also required to demonstrate certain financial strength to obtain a license. Most state utility commissions don't just want everyone to have a broker's license. Companies must prove that they are established and capable of serving customers.
Experience in the energy industry
In most brokerage applications, the broker's executives and management team must demonstrate and prove their energy expertise. Again, utility boards do not want to give licenses to businesses and individuals who cannot meet the needs of their customers and serve them properly. All brokers must demonstrate their acumen and ability to provide quality solutions to their potential clients.
Do energy consultants need licenses?
Unlike energy brokers, energy consultants and energy consulting companies often operate differently. Most energy consultants charge fees directly to their clients or customers in exchange for advice, guidance and other services. Because energy consultants do not add margin to energy delivery rates, most states do not require them to hold a brokerage license. If a consultant wishes to partner with an energy supplier and receive compensation from the supplier, they may need to apply for an energy intermediary licence.
Challenges
There are many challenges when it comes to applying for and maintaining a license. In many cases, newer energy brokers benefit more from partnering with a larger brokerage that can help them with their operations. Here are some reasons not to seek an energy broker license:
Maintaining licenses is a challenge: Because each state has different reporting requirements, it can be difficult to maintain and keep your energy broker license active. In fact, larger brokers even have regulatory staff to ensure that their brokerage licenses remain in good standing.
Supplier Relationships: Since larger suppliers will not work with every licensed broker, it can be challenging to secure relationships with all energy suppliers. For this reason alone, many newer brokers choose to work under a larger brokerage organization rather than getting their own license and working directly with vendors.
Payroll: Another challenging aspect of running your own energy brokerage is meeting the payroll requirements of your salespeople and sales agents. Many affiliates are looking for quick payment and as a new broker most vendors will only offer residual commissions until you are more established.
If you are considering applying for your own energy broker license, there are many things to keep in mind. First, you need to decide if getting a license is right for you and your business. Since many energy providers will only work with more established brokers who have a certain volume of sales, it may be worth considering working as a sub-broker for a larger nationally licensed broker. Let's first explore the challenges of obtaining a license.
How to get an energy broker license
If these reasons haven't stopped you from pursuing your dream of becoming a licensed energy broker, then here are the steps you need to take to get your energy broker license:
Learn about the licensing process in the European country where your trading company is registered:
Whether you want to apply for a license in one country or in general for a European Energy Broker, you first need to understand the application process. Some countries have simple applications with no financial commitments, while others have very in-depth application processes. It is best to first outline all the steps you need to take before applying for your license. These requirements can be found on most government websites.
Organize your documents:
Next, it is important to gather all the information needed for your application. Some important things you will need are your organizational contract, your operating agreement, profiles of each executive, your business plan, your marketing plan, and more. Each state will require different types of documentation, so make sure you have everything in order before you start your application.
Mandatory take an accelerated Energy Broker course and receive a certificate of course completion!
Consider hiring a Smart Startup UK lawyer to do it all for you
Our lawyers know in detail all the steps and obstacles in licensing for an Energy Broker in the European Economic Area.
It will be extremely difficult for you to get an Energy Broker license on your own!
Since most energy broker applications are cumbersome, many energy brokers choose to hire legal counsel like us to help them complete their applications, submit the correct documents, and prove their professionalism to the licensing board. There are many law firms that specialize in PUC law and helping energy companies with licensing. This can cost you between 5,000 and 25,000 Euros depending on legal fees. It can be even more expensive if you plan to apply in multiple countries.
Whether you are a brand new energy brokerage company looking to obtain a license or an experienced organization expanding into a new country, the energy licensing process is important to the industry. Licensing ensures that only qualified companies and individuals can offer energy services to customers in their states. If you need guidance on applying for an energy broker license or want to learn more about our broker affiliate program, contact us to set up an appointment. We offer brokers looking to expand nationally a turnkey opportunity that does not require a cumbersome licensing process.
