Understanding what a Letter of Authority is
Any business requires a reliable electricity supply to conduct its daily functions.
Because of the pressure of work and meetings, oftentimes business owners find it time-consuming to liaise with their energy suppliers and manage their own accounts.
That is why many business owners turn over their energy contracts to energy brokers or energy consultants.
The purpose of an energy broker is to help a business compare energy suppliers and switch suppliers if necessary. Your broker will handle all negotiations for you.
Before a business energy broker can help, your business will have to draft a Letter of Authority. This is a legal document that provides third-party access to your broker to negotiate with an energy supplier on behalf of your business.
What is a Letter of Authority?
A Letter of Authority (LoA) is a letter with legal standing that authorizes a third party – your preferred business energy broker – to consult with the energy industry on the behalf of your business.
The broker is referred to as the “agent”, and the business is the “principal”. For any advice on brokers or switching suppliers, contact Utility Bidder.
An LoA specifically details the tasks that the agent must-do for the principal. Many UK industries use an LoA.
These legal documents are required before a broker can make any contact with an energy supplier.
The LoA must be signed and submitted to both the broker or your personal account manager, as well as the energy company.
The letter must be on official company letterhead and must be dated. The letter must also indicate for how long it is valid, however, 12 months is the norm.
If the validity period expires, your business will have to submit another LoA.
An LoA enables brokers to do the following:
- Collect data on your business, such as where it is located and the electricity meter portfolio.
- Correspond with your energy supplier and handle any administrative or account issues.
- Request all current and historical account information, including previous electricity bills, agreed payment terms, and any outstanding debts.
- Historical data includes consumption history, previous contract dates, any energy supply numbers.
- Negotiate for a cheaper energy tariff.
- Submit all Value Added Tax forms and Climate Change Levy exemption forms.
- Handle any required installations of new smart meters, and arrange site visits as needed.
- Renew your contract with your current suppliers, or terminate the contract and start looking for new suppliers.
- Negotiate your new energy supplier contracts.
- Communicate with the utility management company to set up supply agreements and determine contract end dates.
A letter of Authority does not grant your consultant or broker the power to sign any contract – you will have to do all the signing yourself.
Consultants must also make sure that they read the LoA carefully to ensure they are happy with the terms and responsibilities.
FAQs
Is a letter of authority legally binding?
A Letter of Authority is a legally binding document once it is signed by the principal and agent.
What should be included in a letter of authority?
A Letter of Authority must include the specific tasks expected of the broker or consultant. It must also include the validity period of the agreement and must be signed by the principal and agent. It must clearly indicate the business name and that of the third party.
How long is a Letter of Authority valid for?
The business owner can determine the validity period, however, it is mostly between six and twelve months.
Final Thoughts
With little time available to them, it can be stressful for a business owner to have to look into different business energy deals and handle any admin related to these deals.
That is why a lot of business owners sign over this responsibility to third-party energy brokers.
The broker or energy consultant will liaise with your current energy supplier and those in the energy sector and help you find the best prices and cut down on your business energy bills.
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