REP vs broker vs energy consultant in Texas: who does what?

In Texas’s deregulated market the REP, broker, and energy procurement consultant each play a distinct role; understanding who does what, how they are paid, and where conflicts can arise is essential before you sign a Letter of Authority. The short answer: REPs supply and bill electricity, brokers negotiate a contract for a commission, and consultants manage strategy, audits, renewals, and in‑life support for a fee.

The Retail Electric Provider (REP) – Supplier and Biller

Texas law, under Senate Bill 7 and the Public Utility Commission of Texas (PUCT), allows any qualified retail electric provider (REP) to sell electricity to most non‑residential customers. The REP is the entity that physically supplies power, files the transaction with ERCOT, and issues the monthly bill that includes the wholesale price, a margin, transmission and distribution (TDSP) delivery charges, and any applicable demand charges.

How REPs Get Paid

• Wholesale cost + margin – REPs purchase power in the ERCOT market (often at the locational marginal price, LMP) and add a margin that can range from 2‑5 cents/kWh for large industrial customers to 7‑10 cents/kWh for smaller commercial accounts.
• Transmission & distribution (TDSP) charges – These are regulated fees set by the transmission and distribution service provider (Oncor, CenterPoint, AEP Texas, or TNMP) and are passed through unchanged.
• Demand charges – Measured in $/kW, they reflect the peak load you draw from the grid and are a major cost driver for manufacturing and data‑center customers.
• Ancillary services and fees – REPs may add optional services such as capacity reservations or reliability credits.

Conflict Signals to Watch

Because REPs earn a margin on every kilowatt‑hour they sell, they have an incentive to keep you on a higher‑priced contract rather than aggressively seeking a lower‑cost alternative. Look for:

• Limited supplier options (some REPs only trade through a single wholesale partner).
• Contracts that lock you into a fixed‑rate for longer than 12‑24 months without a clear price‑cap justification.
• Absence of a transparent cost breakdown on the bill.

Energy Brokers – Deal‑makers for a Commission

A broker is an independent sales agent who works on behalf of the customer to find the best available contract from the pool of REPs and wholesale suppliers. Brokers do not own the electricity; they simply facilitate the transaction and receive a commission from the winning REP.

How Brokers Get Paid

• Commission on contract value – Typically 1‑3 % of the annual spend, paid by the REP after the contract is signed. For a $1 M annual electricity bill, a 2 % commission equals $20,000.
• Flat‑fee or retainer – Some brokers charge a one‑time fee for the search, especially for large industrial customers with complex load profiles.

Conflict Signals to Watch

Because the broker’s revenue is tied to the REP’s margin, the broker may favor a higher‑margin deal over the absolute lowest price. Red flags include:

• Lack of disclosure of the commission rate.
• Recommendations that include bundled services you do not need.
• Pressure to sign a contract quickly without a full bill audit.

Energy Procurement Consultants – Strategy Partners

An energy procurement consultant, like United Power Group, provides a broader suite of services: an Energy Health Check (free bill review and TDSP delivery‑charge audit), demand‑side analysis, contract negotiation, and ongoing portfolio management. Consultants are paid directly by the client, not by the REP or broker.

How Consultants Get Paid

• Fixed‑fee or retainer – Common for the initial health check and strategy development (e.g., $15,000‑$30,000 for a mid‑size manufacturer).
• Performance‑based fee – A percentage of documented savings, often 10‑15 % of the annual reduction. UPG’s clients have collectively saved $3.2 M per year, demonstrating the impact of a performance model.
• Hybrid model – A modest base fee plus a success fee tied to spend reduction; UPG can achieve up to a 27 % spend reduction using its 30‑plus top‑tier supplier panel.

Conflict Signals to Watch

Because the consultant’s compensation is linked to savings, the relationship is generally aligned with the client’s interests. However, watch for:

• Affiliate relationships with specific REPs that could limit the supplier panel.
• Lack of transparency in the methodology used to calculate projected savings.
• Contracts that lock you into a long‑term advisory retainer without clear exit terms.

Payment Structures and Conflict of Interest Overview

Role	Primary Revenue Source	Typical Rate	Conflict Risk
REP	Margin on wholesale power + regulated TDSP fees	2‑10 cents/kWh margin	Incentive to keep you on a higher‑priced contract
Broker	Commission from REP (1‑3 % of spend) or flat fee	$20,000‑$30,000 on a $1 M bill	May favor higher‑margin REPs
Consultant	Fixed fee, retainer, or performance‑based fee	$15,000‑$30,000 base; 10‑15 % of savings	Generally aligned, but watch affiliate ties

Understanding these structures helps you evaluate whether a proposal is truly cost‑saving or simply shifting profit.

Questions to Ask Before Signing a Letter of Authority (LOA)

1. Scope of Authority – Does the LOA cover only contract negotiation, or also bill audit, demand‑side analysis, and ongoing management?
2. Duration and Termination – How long is the authority valid, and what notice period is required to revoke it?
3. Compensation Disclosure – What is the exact commission or fee structure, and who pays it?
4. Supplier Panel Transparency – How many REPs and wholesale suppliers can the advisor access? UPG, for example, works with a 30‑plus top‑tier panel.
5. Conflict‑of‑Interest Policy – Does the advisor have any financial relationship with the REPs they may recommend?
6. Data Access and Security – Will the advisor have full access to your historic bills, demand data, and load factor metrics?
7. Performance Guarantees – Is there a clause that ties a portion of the fee to documented savings, such as the 27 % spend reduction UPG has achieved for some clients?
8. Regulatory Compliance – Is the advisor registered with the PUCT and does it comply with ERCOT’s market rules?

Answering these questions up front reduces the chance of surprise fees or unwanted contract lock‑ins.

Bottom line

In Texas’s deregulated market the REP supplies and bills electricity, the broker shops contracts for a commission, and the energy procurement consultant provides a strategic, fee‑based partnership that can deliver measurable savings. Pay close attention to how each party is compensated, ask the right questions before signing a Letter of Authority, and consider a consultant‑led approach if you want an independent view that aligns with your bottom line. UPG’s 25 + years of experience, $3.2 M in annual client savings, and a 30‑plus supplier panel give Texas businesses a defensible path to lower spend without hidden conflicts.