What Is A Letter Of Authority (LOA) When Switching Your Business Energy Supplier?

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Discover the purpose and benefits of a Letter of Authority (LOA) for switching business energy suppliers. Learn how it simplifies and streamlines the process.

What Is A Letter Of Authority (LOA) When Switching Your Business Energy Supplier?

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In a world in which fluctuating energy prices can significantly affect business profitability, having the ability to change suppliers isn’t just an attractive option; it may be close to being essential. But with the plethora of options available to you, this can get complex, and it’s often easier to get someone else to take it over on your behalf. 

But this country has fairly rigorous data protection laws, so in the event that you decide to do this, how can you get the other party to be able to discuss your affairs on your behalf? Well, that’s where a Letter of Authority (LOA) comes into play. 

What is a Letter of Authority (LoA)?

A Letter of Authority (or LOA) is a document that is used to reach an agreement between three or more parties. Data protection laws prevent companies from discussing your affairs with any third party, and an LOA is essentially a permission slip signed by you which allows them to speak with other businesses on your behalf within previously agreed limits. 

In the context of business energy management, this document acts as a formal permission slip, authorising an energy broker or consultant to correspond with energy suppliers on your behalf. The LoA stipulates the extent of the broker’s powers, ensuring they can only act within pre-defined boundaries and safeguards your business by formally documenting the broker’s role and responsibilities.

Why is an LoA Important When Switching Business Energy Suppliers?

Comparing energy prices to select the best deal is time-consuming and requires specialist knowledge of the different usage terms and tariffs. On top of this, there is a lot of admin involved in managing suppliers and negotiating with newly selected ones. Not only does using a broker streamline the process of managing business energy contracts, but the LoA serves as a layer of legal protection, defining clear limits to the broker’s authority to prevent them from taking action you have not authorised. 

What Does a LoA Allow an Energy Broker to Do?

One of the key components of a LoA is that it defines what an energy broker can do on your behalf. This would typically contain the following:  

Request Information: Brokers can access both current and historical data from your energy provider, including energy consumption data, supply numbers, pricing history, and contract end dates. This allows the broker to better understand your business and energy habits, which is crucial for accurately assessing your energy needs.

Search for Deals: With detailed insights into your energy consumption and costs, brokers can search the market for the best deal suited to your business and negotiate with multiple suppliers to secure the best rates and contract terms.

Begin the Switching or Renewal Process: Brokers can handle all the necessary paperwork to transition from your current supplier to a new one or to renew contracts with better terms with your existing supplier. This process includes submitting necessary documentation and ensuring compliance with energy regulations.

Manage Your Current Supplier: Your broker will act as the primary contact point for any queries related to services with your current supplier, streamlining communications and resolving issues swiftly.

Manage Billing: Brokers will have access to and manage all billing and invoice documents. This enables them to handle and query any credit notes, direct debits, bank details, discontinuation notices, payment reminders, and energy bill validation concerns.

Organise Maintenance and Services: Brokers can schedule necessary energy-related maintenance or service appointments, such as meter installations or boiler services, ensuring that your energy infrastructure is up-to-date and operating efficiently.

Submit Meter Readings: To ensure accurate billing, brokers can submit meter readings on your behalf, directly influencing your billing based on actual consumption rather than leaving your billing dependent upon potentially inaccurate estimated readings. 

Handle Complaints: If issues arise, brokers can lodge complaints with your energy supplier on your behalf and manage any subsequent negotiations or communications to resolve the situation. 

Common Pitfalls in the LoA Process

The most common pitfall in the LoA process is a lack of accuracy. Both the broker and the energy supplier need to know that the person signing the document giving the authority to discuss all of this and operate on your behalf actually has the authority to do so themselves! 

You can mitigate any issues with this by including your job title (or that of the person with authority to do so), and always make sure to send it on headed paper. Energy brokers will typically send you a template to complete and return, so you shouldn’t have to worry about putting the letter yourself but do make sure to read it first to ensure that you agree to all of their requests. 

How Long is a Letter of Authority Valid for?

A Letter of Authority is normally valid for twelve months. LoAs should always state their validity duration, so if yours is valid for longer or shorter than 12 months, it should say so on the letter itself. Once an LoA is no longer valid, the broker cannot speak to suppliers on your behalf until you sign a new one. 

How to Obtain a Letter of Authority (LoA)

Most brokers will send you a template to sign and return, which will satisfy the legal thresholds for such documents. When you receive the template, make sure that you read it thoroughly before signing and returning it. You have the right to remove any permissions included, although you should be aware that this may prevent the broker from being able to do everything that you don’t want them to do. 

It’s also important to remember that LoAs have limits. Typically, they will allow brokers to gather information, negotiate, and submit a notice of termination on your behalf and other permissions, but they do not contain the right to agree on a contract without your consent. Any contractual agreements have to be agreed by you or your business.  

How to Write a Letter of Authority

Although brokers typically send you an LoA to complete and return should you decide to go with them, you can also produce this letter yourself. Here’s how. 

1. Determine the Purpose and Scope of the Authority

  1. Identify the Purpose: Clearly define why you need the LoA and what specific actions or responsibilities you are authorising.

  2. Scope of Authorisation: Determine the scope of the authorisation. This includes:

    • Specific tasks or actions the authorised person can perform.

    • Duration of the authorisation.

    • Any limitations or restrictions.

2. Identify the Parties Involved

  1. Grantor: The person or entity granting the authorisation - in the case of a business, normally a company director.

  2. Grantee: The person or entity receiving the authorisation.

3. Draft the Letter of Authorisation

  1. Header: Include your name, address, and contact information. If it’s a business letter, use your company’s letterhead.

  2. Date: Include the date when the letter is written.

  3. Recipient’s Information: The name and contact information of the recipient.

  4. Subject Line: A clear and concise subject line (eg, "Letter of Authorisation").

4.  Write the Body of the Letter

  1. Opening Statement: State that you are authorising the recipient to act on your behalf. Mention your full name and, if applicable, your role or title.

  2. Details of Authorisation:

    • Describe the specific tasks or responsibilities being authorised.

    • Mention any limitations or specific instructions.

  3. Duration: Specify the start and end date of the authorisation. If it’s open-ended, make sure that you mention this explicitly.

  4. Contact Information: Provide your contact details for any questions or clarifications.

5. Include Legal or Formal Terms (optional, depending on what you need it for)

  1. Legal Terms: Include any necessary legal language to make the document binding (a solicitor will be able to assist with this).

  2. Witnesses or Notarisation: If required, arrange for witnesses or a notary public (such as a solicitor) to sign the document.

6. Review and Edit

  1. Proofread: Check for any spelling or grammatical errors.

  2. Accuracy: Ensure all details are accurate and clearly stated.

  3. Legal Review: If the authorisation involves significant responsibilities or legal implications, have it reviewed by a legal professional.

7. Sign the Letter

  1. Signature: Sign the document (in the presence of a notary public or witnesses, if required).

  2. Date: Date the document on the day of signing.

8. Distribute the Letter

  1. Copies: Make copies for all parties involved.

  2. Delivery: Deliver the original LoA to the grantee. Retain a copy for your records.

9. Follow-Up

  1. Confirmation: Confirm that the grantee has received the LoA and understands their responsibilities.

  2. Monitoring: Monitor the activities authorised to ensure compliance with the terms of the LoA and that they’re not overstepping any boundaries that you have put in place. 

Who Can Sign a Letter of Authority?

If you’re writing a Letter of Authority on behalf of your company, you should get the signature of the business owner or a company director on the LoA; don’t forget to add their full name and title so that whoever receives it knows that they have this permission. It’s also important to make sure that you use paper with your company's letterhead or logo to save time with background checks. 

Your privacy and the privacy of your business affairs is important. That’s why there are so many safeguards in place to prevent unauthorised access to sensitive data in the first place. But there are workarounds for that, when it’s necessary for a third party to deal with matters on your behalf, and the Letter of Authority is a vital tool in the armoury of both you and your broker to be able to get you the best deal for your business energy.

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