Concealed consultancy commission is raising energy bills

August 17, 2010

A well timed warning from Supply Management magazine this week regarding the hidden commission being charged by many utility brokers.  Whilst it is probably fairly apparent that increasing unit rates is the way brokers make their income it is also clear that many organisations aren’t querying the actual amount being charged thus leaving themselves open to potentially poor deals.  Clearly there is benefit in bursars using a utility broker to reduce their workload and find the best deals.  However, the cost of this should be considered as it’s quite possible that a much better deal can be had by going direct to the energy company.  In addition it is apparent that there is not only a lack of ‘after sales care’ with many utility brokers (sale is complete and commission received) but also that they are not aware of, for example, VAT rules for independent schools.

In dealing with a contract review for one of my schools last week I came across one such firm, which I won’t name, who were completely uninterested in assisting me with a query I had on the contracts they had already arranged for the school.  The response from the ‘Account Manager’ was “I don’t get involved in this, if we looked at every bill for every customer we’d be here all day”.  I also queried her understanding of VAT on energy for independent schools which was met with a stony silence.

I made further enquiries with two other utility brokers and neither of them understood the rulings around VAT either.  In fact one broker told me that “all independent schools are charities and so they automatically qualify for 5% VAT.  I always get the forms sent out to them to complete for that”.  This statement is not correct and could very well lead to a school paying 5% VAT when they should be paying 17.5%.  The implications are clear; a VAT inspection would lead to a requirement to pay backdated VAT for up to 4 years as well as fines for breaches in the rules.  A costly mistake to make.

There are a number of times when VAT is payable at the lower level of 5% but applying for this should be done after careful consideration that the criteria has been met.  After extensive discussions with HMRC and Baker Tilly VAT specialist Rupert Moyle, Minerva have a full understanding of these criteria and can confidently advise in this area.

I know you are probably wondering why I would be suggesting that it not such a good idea to use a utility broker when I am a consultant myself.  The difference is transparency, expert knowledge and after sales care.  At Minerva we deal direct with the energy companies and do not charge any commission on the unit costs nor do we receive any commission from the energy companies themselves.  As a result you can be confident that you are getting the best deal.  Our fee payment is based on a % of the savings you make against the existing tariff and you will therefore only pay if the school is saving money.  In addition to this Minerva is keen to work in partnership with your school in any area, not just utilities, and this means we take customer care extremely seriously – we look after our clients so we can work with them again.

If you require any further information on this topic please don’t hesitate to get in touch.

Posted by Lorraine | Filed Under Uncategorized | Comments Off 

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