Every commercial energy buyer has heard some version of this pitch: "Our service is free to you. We get paid by the supplier." Sounds great. Who doesn't like free? The catch is that "free" doesn't exist in energy procurement. It never has. The question is whether you understand how your broker is actually getting paid — because that payment is coming out of the rate you're paying, whether anyone tells you or not.

This isn't a hit piece on brokers. Good brokers (yes, we are one) add real value. This is a field guide to how broker compensation actually works so you can evaluate whether your current arrangement is serving you.

How Broker Commissions Actually Work

In a typical commercial energy deal, the supplier bakes a broker commission into the rate and pays the broker out of the spread. The commission is quoted in mils — thousandths of a dollar per kWh (or per therm for natural gas). A 5 mil commission means the broker is getting paid $0.005 per kWh of usage.

On a million-kWh-per-year commercial account, that's $5,000 in annual commission. On a 10-million-kWh account, it's $50,000. Over a three-year contract, $150,000. That money came from somewhere — specifically, from the rate you're paying.

Most commercial brokers we see quote commissions in the 3-8 mil range. Some push significantly higher. We've seen contracts with 15+ mil commissions — meaning the customer is paying an extra 15% above the underlying supplier cost, and the broker is pocketing it.

The Conflict of Interest Nobody Talks About

Here's where it gets uncomfortable. Broker compensation structures create a direct conflict of interest between what's good for the broker and what's good for the customer. Let me walk through a few examples.

Supplier selection bias. Different suppliers pay different commission rates. A broker looking at two offers at $0.08/kWh from Supplier A and $0.081/kWh from Supplier B might be getting 5 mils from A and 8 mils from B. Guess which supplier looks more attractive to the broker? The one paying more — even though Supplier B is actually the more expensive option for the customer.

Term length manipulation. Commissions scale with contract volume. A three-year contract pays triple the commission of a one-year contract. Brokers steering customers toward longer terms is often about maximizing commission, not market conditions.

Margin maximization. In some supplier agreements, brokers can "dial up" the commission — meaning they can choose to earn more by raising the customer's rate. The supplier doesn't care; they're getting their target margin either way. The customer doesn't know. The broker has unilateral discretion to overcharge the customer and pocket the difference.

Limited supplier panels. Some brokers only work with three or four suppliers because those suppliers pay them the best commissions. When those brokers "shop the market" for you, they're shopping a market of four. The other 20 suppliers bidding in your state never get a look.

How to Figure Out What You're Actually Paying

The simple version: ask. A legitimate broker should disclose their compensation in writing, on every contract, before you sign. Not after. Not "we don't usually share that." In writing, on the signature page.

Specifically, ask for:

• The commission amount in mils per kWh (or per therm for gas). Not a percentage. Not a dollar figure. The actual mil rate.
• Total commission dollars over the life of the contract. Mils × expected usage × contract term. Seeing the total dollar number focuses the conversation.
• Whether the commission is fixed or adjustable by the broker. If the broker has discretion to raise it, that's a problem.
• The underlying supplier cost before commission. What's the supplier's actual offer rate with zero commission layered in? This is the true market price.

If your broker balks at any of this, you've answered your own question about whether they're working for you.

Alternative Broker Compensation Models

Commission-based brokerage isn't the only model, and for larger commercial buyers, it's often not the best model. The alternatives:

• Fee-for-service. The broker charges a flat professional fee for running the procurement — typically $5K-$50K depending on complexity — and strips the commission out of the supplier rate. The customer gets the rate-minus-commission price. For larger accounts, this almost always comes out ahead.
• Performance-based fees. The broker is paid a percentage of documented savings versus a benchmark. Aligns incentives with the customer's outcome. Requires a clearly defined baseline.
• Transparent mil-with-disclosure. The broker still takes commission but discloses it in writing on every contract. This is fine if the commission is fair and disclosed up front — just treat the mil as a negotiable line item, not a hidden cost.
• Hybrid. Flat retainer plus small commission, or flat fee plus performance bonus. Common at the upper end of the commercial market.

For a business spending $500K+ annually on energy, it's almost always cheaper to pay a broker a professional fee than to embed a commission in the rate. The math is simple: a $20K professional fee beats a $60K embedded commission every time.

What This Means for PE Firms and Multi-Site Buyers

If you're running procurement across a portfolio — PE firm with multiple portcos, multi-site retailer, franchise network — the commission math compounds quickly. Twenty portcos each paying a $30K commission is $600K a year of broker compensation being routed through supplier rates. A single portfolio-level engagement on a fee-for-service or performance basis might cost $100-200K and eliminate the commissions across every contract.

We see this change conversation routinely with PE operating partners. Once they understand that "free" brokers at each portco are costing them seven figures annually in aggregate, the decision to consolidate becomes obvious.

The Broker Still Earns Their Keep

None of this is an argument against using a broker. A good broker runs a real competitive process, normalizes contract terms, negotiates pass-throughs, audits bills, monitors markets, and flags renewal windows 12 months out. That work is genuinely valuable. Trying to do it in-house costs more than hiring a specialist — for most commercial buyers, the return on good advisory dramatically exceeds the cost.

The argument is for transparency. Know what you're paying. Know how your broker is compensated. Compare the model against alternatives. Choose the structure that makes sense for your spend level and your tolerance for embedded costs. If your broker makes that hard, find a different broker.

Our Recommendation

Two questions to ask your current broker this week:

1. What mil commission are you earning on my current contracts?
2. Will you disclose that on every future contract in writing, on the signature page?

If the answers are specific numbers and "yes," you're probably fine — check that the mil rate is reasonable (3-5 mils is typical for well-run commercial accounts) and move on. If the answers are vague, evasive, or hostile, that's all the information you need.