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

Core thesis

In Texas’s deregulated electricity market the retail electric provider (REP), the broker, and the energy procurement consultant are three separate entities that often get confused. Each one has a specific function, a distinct compensation model, and a different set of incentives. Knowing who does what lets a finance director or operations leader evaluate risk, avoid hidden costs, and align energy spend with corporate strategy.

The short answer is simple: the REP delivers the electricity and bills you; the broker shops for a contract and earns a commission; the consultant designs and executes a procurement strategy, audits bills, and provides ongoing support for a fee or performance‑based arrangement. Below we break down each role, how they get paid, where conflicts of interest can surface, and the key questions to ask before you sign a Letter of Authority (LOA).

The retail electric provider (REP)

What the REP does

A REP is a licensed retail electric provider (REP) regulated by the Public Utility Commission of Texas (PUCT). Under Senate Bill 7, Texas customers can choose any REP that serves their Transmission and Distribution Service Provider (TDSP) – Oncor, CenterPoint, AEP Texas, or TNMP. The REP purchases wholesale power on the ERCOT market or from long‑term contracts, then sells it to you at a retail rate that includes:

• Energy price (cents/kWh)
• Transmission and distribution (T&D) charges (often called 4CP charges)
• TDSP delivery charges
• Demand charges (cents/kW per month)
• Any applicable ancillary service fees

The REP is the entity that issues the monthly bill you receive and is responsible for customer service, outage notifications, and compliance with the Electricity Facts Label.

How the REP gets paid

The REP’s revenue comes directly from the retail bill. They do not receive a commission from the wholesale market; instead they earn a margin on the difference between the price they pay for electricity and the price they charge you, plus any fixed fees. Because the REP’s profit is tied to the total bill, there is an inherent incentive to keep the bill high, especially on demand‑based tariffs where a small increase in peak kW can significantly boost revenue.

Conflict signals to watch

• Rate structure bias – REPs may steer customers toward flat‑rate or demand‑heavy plans that generate higher revenue for the provider.
• Limited transparency – Some REPs bundle fees in a way that makes it hard to isolate the true energy component.
• Renewal timing – REPs often send renewal notices well before the contract expires, creating a window for upsell.

The broker

What the broker does

A broker is an independent third party that works on behalf of the customer to locate the best available contract among the REP panel. Brokers do not own electricity; they simply negotiate with REPs and pass the contract terms to the client. In Texas, brokers must be registered with the PUCT and disclose any compensation they receive.

How the broker gets paid

Brokers typically earn a commission that is a percentage of the contract value or a flat fee per megawatt‑hour (MWh) of energy secured. The commission is paid by the REP, not the customer, and is disclosed on the contract’s “Commission Disclosure” form. Because the broker’s income is tied to the size of the deal, there can be a bias toward larger contracts, even if a smaller, more flexible arrangement would better suit the client’s load profile.

Conflict signals to watch

• Commission‑driven recommendations – A broker may favor an REP that offers a higher commission rather than the lowest rate.
• Limited post‑sign support – Once the contract is signed, many brokers disengage, leaving the client to manage renewals and bill audits alone.
• Opaque LOA language – Some brokers draft LOAs that grant them broad authority to negotiate on your behalf, which can be exploited if not carefully limited.

The energy procurement consultant

What the consultant does

An energy procurement consultant, such as United Power Group (UPG), provides a full‑service strategy that goes beyond contract shopping. The consultant:

1. Conducts a free Energy Health Check – a detailed review of your most recent bill and a TDSP delivery‑charge audit.
2. Analyzes load shape, demand peaks, and load factor to recommend the optimal mix of fixed‑rate, block, and index contracts.
3. Manages the RFP process, negotiates with the 30+ top‑tier supplier panel, and secures contracts that can reduce spend by up to 27%.
4. Provides ongoing in‑life support – bill audits, demand‑charge mitigation, and contract renewal management.
5. Aligns energy spend with corporate financial goals, leveraging the $3.2 M saved for UPG’s clients each year.

How the consultant gets paid

Consultants typically charge a fixed project fee for the initial strategy and Health Check, plus a performance‑based component tied to actual savings (often a percentage of the first‑year reduction). Because the consultant’s revenue is linked to cost avoidance rather than bill size, the incentive structure aligns with the client’s interest.

Conflict signals to watch

• Transparent fee structure – Reputable consultants disclose both the upfront fee and the performance‑based share.
• Independence from REPs – UPG does not receive commissions from REPs; compensation comes only from the client, eliminating the commission bias seen with brokers.
• Long‑term partnership – Consultants stay engaged throughout the contract life, monitoring demand charges and market shifts to recommend adjustments.

How they get paid – side‑by‑side comparison

Role	Primary Revenue Source	Typical Compensation Model	Incentive Alignment
REP	Retail bill (energy + T&D + demand)	Margin on bill + fixed fees	May favor higher bills
Broker	Commission from REP	% of contract value or flat fee per MWh	May favor higher‑value contracts
Consultant	Client fees (project + performance)	Fixed fee + % of verified savings	Aligned with client cost reduction

The Letter of Authority (LOA)

Why the LOA matters

The LOA is the legal document that authorizes a broker or consultant to act on your behalf in the ERCOT market. It grants the signatory the right to request proposals, negotiate rates, and, in some cases, sign contracts. Because the LOA can be broad, it is a common point of conflict.

Key questions to ask before signing

1. Scope of authority – Does the LOA limit actions to a single contract term or allow renegotiation without my approval?
2. Compensation disclosure – How will the broker or consultant be paid, and is any commission coming from the REP?
3. Termination rights – What notice period is required to end the relationship, and are there exit fees?
4. Data access – Will I retain full access to my billing data, demand‑charge breakdowns, and market reports?
5. Conflict‑of‑interest policy – Does the party have a written policy that prevents them from recommending a provider that pays them a higher commission?

Red flags in LOA language

• Vague wording such as “the agent may negotiate any terms deemed appropriate.”
• Automatic renewal clauses without explicit client consent.
• Authority to sign contracts on your behalf without a final review step.

Practical steps for a Texas finance director

1. Run a free Energy Health Check – UPG’s audit can uncover hidden TDSP delivery‑charge errors that often add 5‑10 cents/kWh to the bill.
2. Map your load profile – Identify peak demand periods; high demand charges (cents/kW) can outweigh energy price savings.
3. Compare offers side‑by‑side – Use the same load data to evaluate REP, broker, and consultant proposals.
4. Validate the supplier panel – Ensure the REP or broker is drawing from a reputable panel; UPG works with 30+ vetted suppliers.
5. Document questions and answers – Keep a record of all LOA negotiations; this protects you in case of disputes.

Bottom line

In Texas’s deregulated market the REP, broker, and energy procurement consultant each serve a distinct purpose. The REP supplies and bills power, the broker finds a contract for a commission, and the consultant builds a strategy, audits bills, and stays engaged to protect savings. Understanding their compensation models and potential conflicts helps you choose the right partner and negotiate contracts that truly reduce spend. A disciplined approach—starting with a free Energy Health Check, asking the right LOA questions, and aligning incentives—can deliver the up‑to‑27 % spend reduction that UPG’s 8,000+ business customers have come to expect.