What Is a Business Energy Letter of Authority?

A Letter of Authority (LoA) is a written document through which a business grants a named third party — such as an energy consultant or broker — permission to act on its behalf in relation to its energy supply. The scope of that permission is defined by the wording of the document itself, and it is important to understand that different Letters of Authority can grant very different levels of access and authority.

In the context of commercial energy procurement, an LoA is commonly used to allow a consultant to request account information from a current supplier, obtain consumption data, or approach the market on the business's behalf. The document typically identifies the business by name, specifies the supply points or account references to which it applies, and sets out what the named party is and is not permitted to do.

A Letter of Authority is not a contract for the supply of energy and does not, by itself, commit the business to any particular supplier or tariff. Whether it permits the consultant to enter into a contract on the business's behalf depends entirely on the wording of the specific document. Businesses should read any LoA carefully before signing.

Energy consultants and brokers request Letters of Authority for a number of practical reasons. Suppliers will generally not release account information, consumption data or contract details to a third party without written confirmation that the business has authorised them to do so. An LoA provides that confirmation and allows the consultant to gather the information needed to run a meaningful market comparison.

In a competitive tender process, suppliers may also require sight of an LoA before they will engage with a consultant on a business's behalf or provide indicative pricing. Without it, the consultant may be unable to obtain the data needed to present accurate comparisons or to submit the business's requirements to the market.

From the business's perspective, providing an LoA to a reputable consultant can streamline the procurement process considerably. Rather than contacting suppliers directly, the business can allow the consultant to handle the information-gathering and market-approach stages, while retaining full control over whether to proceed with any particular offer.

Before signing any Letter of Authority, the business should read the document carefully and satisfy itself that the scope of authority granted is appropriate for the task in hand. Key questions include: which supply points or account references are covered; what specific actions the named party is permitted to take; and whether the document permits contract execution or is limited to information-gathering and market approach.

The scope should be proportionate to the service being provided. An LoA for a straightforward market comparison exercise does not need to grant authority to sign contracts. If the document presented appears broader than the service described, the business should ask for clarification before signing.

Free Energy Help recommends that businesses retain a copy of any Letter of Authority they sign and make a note of the supply points and activities it covers. If there is any uncertainty about the legal effect of a particular document, the business should seek independent advice before signing.

A well-drafted Letter of Authority should specify the date from which it takes effect and the date on which it expires. A defined expiry date limits the period during which the named consultant can act under the authority and provides the business with a natural point at which to review whether the arrangement remains appropriate.

Where an LoA does not include an expiry date, the business should consider whether this is appropriate. An open-ended authority may remain in effect indefinitely unless formally withdrawn, which could create complications if the business's circumstances change or if it wishes to appoint a different consultant in the future.

The duration of the authority should be proportionate to the procurement exercise it is intended to support. For a single contract renewal, a period of three to six months is typically sufficient. For an ongoing managed service arrangement, a longer period may be appropriate, provided the business is comfortable with the scope and the consultant's obligations.

A business may generally withdraw a Letter of Authority at any time by notifying the consultant in writing. It is good practice to send written notice to both the consultant and, where relevant, to any suppliers that have been notified of the authority, so that they are aware it is no longer in force.

Withdrawal of authority does not automatically cancel any contracts that have already been entered into under the authority, if the LoA permitted contract execution and a contract was signed before the withdrawal notice was given. The business should take advice if it believes a contract was entered into without its specific instruction or outside the scope of the authority granted.

Free Energy Help will always acknowledge a withdrawal request promptly and will cease acting under any authority from the date of receipt of written notice. We will also confirm in writing that the authority has been withdrawn and that we have notified any relevant suppliers.

Suppliers receiving a Letter of Authority from a consultant will typically verify its authenticity before acting on it. This may involve contacting the business directly to confirm that the authority is genuine, checking that the document covers the supply points in question, and satisfying themselves that the scope of the authority is consistent with the actions being requested.

If a supplier contacts the business to verify an LoA, the business should respond promptly and confirm whether the authority is genuine and current. If the business has not authorised the consultant named in the document, it should inform the supplier immediately and consider whether to notify the consultant that the authority is disputed.

Businesses should be alert to any situation where a consultant claims to have authority that the business has not granted, or where the scope of authority described to the supplier appears broader than the document the business signed. If in doubt, the business should request a copy of the document the consultant has presented to the supplier and compare it with the version it signed.

Letters of Authority are increasingly executed by electronic signature rather than wet ink. In the UK, electronic signatures are generally recognised as legally valid for documents of this type, provided the signatory intended to authenticate the document and the method used is reliable. However, the legal position can depend on the specific circumstances, and businesses should satisfy themselves that the method used meets any requirements set out in the LoA itself.

Businesses should be cautious about signing any document electronically without reading it in full. The ease of electronic execution can sometimes lead to documents being signed without sufficient consideration of their content. The same care should be applied to an electronically presented LoA as to any other document.

Free Energy Help does not provide legal advice on the validity of electronic signatures in any particular context. If the business has any uncertainty about the legal effect of an electronically executed Letter of Authority, it should seek independent legal advice.

Businesses with multiple sites or supply points may be asked to sign a single Letter of Authority covering all of their accounts, rather than a separate document for each supply point. This can be administratively convenient, but the business should check that the document accurately lists all of the supply points it is intended to cover and does not inadvertently include accounts that are not part of the current exercise.

For large portfolios, a multi-site LoA can be an efficient way to authorise a consultant to manage the entire procurement process. However, the business should ensure that the scope of authority granted is appropriate for each supply point and that the document does not grant broader authority than is needed for the specific exercise.

Where a business has supply points under different legal entities — for example, where different sites are held by different group companies — separate Letters of Authority may be required for each entity. The consultant should be able to advise on the appropriate structure for the business's particular circumstances.

Free Energy Help will always explain clearly what a Letter of Authority is, why we are requesting it and what we intend to do with it before asking a business to sign. We will provide a copy of the document for review before execution and will answer any questions the business has about its scope and effect.

Our standard Letter of Authority covers the activities necessary to obtain account information, gather consumption data and approach our panel of suppliers for pricing. It does not grant us authority to enter into a contract on the business's behalf. Any contract offer we obtain will be presented to the business for its own decision, and we will only proceed to contract on explicit instruction from an authorised representative of the business.

We are remunerated by the supplier on contracts placed and will always disclose the basis of our remuneration on request. We do not charge the business customer a fee for our procurement service. If you have any questions about how we use authority or how we are remunerated, please contact us before signing any document.