Letter of Authority: What is it and Why is it Needed?

What is a Letter of Authority, and why do we need them? Learn all about LOAs and their uses in our simple guide.
Jayme Hudspith
July 3, 2024
-
4 min read
A legal document with a pen, representing the concept of a Letter of Authority and its importance in business operations.

What is a Letter of Authority?

Obtaining the best energy deal for your business is vital and can save you thousands. However, many business owners don't have time to search for suppliers or manage the administration side of things.

This is where working with a broker or energy consultant can be beneficial. They will do the leg work while you get on with more important things. But, to do this, they need a letter of authority.

A LOA is a legal document that gives a third party permission to liaise with energy suppliers on your behalf. Without a signed and dated LOA, the consultant can't legally do the following:

  • Liaise with your current supplier about any services or billing queries
  • Organise maintenance or upgrade appointments
  • Submit meter readings or collect energy data
  • Renew or switch supplier, energy contract, or improve your current energy deal

What Does a Letter of Authority Include?

While this is a legal document, it does not need to be overcomplicated and should be written in simple and easy-to-understand language.

A LOA should include the following information:

  • Signature
  • Date should be dated within the last 12 months to be valid
  • Company signatory
  • Registered business name, address, and number
  • Clearly outline the rights and responsibilities given to third-party
  • State to whom you are delegating authority, including their company address and contact details

Any mistakes can prevent the agent from being able to work and act on your behalf, so be sure you have included all the information. It is useful to have the letter printed on company letterhead and pen signed by the signatory.

As a business owner, you remain in control and should always have the final say on any deals and decisions. This permission should never be given to a third party.

LOAs are designed to simplify the energy procurement process, so some consultancies may provide you with a template.

Types of Letters of Authority:

There are two different types of LOA, these are:

Level 1

This typically includes access to energy suppliers' information, including your current energy consumption data, your contract, and meter readings.

Level 2

This allows access to all of your business's energy supply data, and allows third parties to correspond fully on your behalf.

Most LOAs will only require level 1 access, but depending on your energy needs, level 2 may be required.

Why is a Letter of Authority needed?

An LOA is required if you are looking to change energy suppliers or procure a new energy deal through an energy consultancy or energy broker.

This document grants legal permission for the third party to access the necessary information and speak on your behalf to suppliers.

How Long is a Letter of Authority Valid?

The typical period is either six or 12 months as standard. A LOA should specify the period of validity, however, if it does not it will be deemed valid for 12 months from the date it was signed.

If you wish for your LOA to be valid for longer than 12 months this will need to be specified within the document.

Who Can Sign a Letter of Authority?

An official LOA must be signed and dated by the owner of the business, a company director, or a specifically designated and authorised signatory.

FAQ's

How does the process differ when revoking a Letter of Authority compared to issuing one?

Revoking a Letter of Authority involves notifying both the third party and any other relevant entities in writing to formally withdraw the permissions previously granted. This can be a more sensitive process than issuing one because it may affect ongoing negotiations or operations.

What are some common mistakes businesses make when drafting a Letter of Authority?

Common mistakes businesses make when drafting an LOA include not specifying the scope of authority clearly, which can lead to misinterpretations and unauthorised actions.

Are there legal implications if a Letter of Authority is misused by the third party it empowers?

Misuse of an LOA by a third party can lead to legal consequences for both parties, depending on the breach's nature and the damages caused. It's crucial to clearly define the terms and monitor the third party's activities to prevent such issues.

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What is a Letter of Authority, and why do we need them? Learn all about LOAs and their uses in our simple guide.

What is a Letter of Authority?

Obtaining the best energy deal for your business is vital and can save you thousands. However, many business owners don't have time to search for suppliers or manage the administration side of things.

This is where working with a broker or energy consultant can be beneficial. They will do the leg work while you get on with more important things. But, to do this, they need a letter of authority.

A LOA is a legal document that gives a third party permission to liaise with energy suppliers on your behalf. Without a signed and dated LOA, the consultant can't legally do the following:

  • Liaise with your current supplier about any services or billing queries
  • Organise maintenance or upgrade appointments
  • Submit meter readings or collect energy data
  • Renew or switch supplier, energy contract, or improve your current energy deal

What Does a Letter of Authority Include?

While this is a legal document, it does not need to be overcomplicated and should be written in simple and easy-to-understand language.

A LOA should include the following information:

  • Signature
  • Date should be dated within the last 12 months to be valid
  • Company signatory
  • Registered business name, address, and number
  • Clearly outline the rights and responsibilities given to third-party
  • State to whom you are delegating authority, including their company address and contact details

Any mistakes can prevent the agent from being able to work and act on your behalf, so be sure you have included all the information. It is useful to have the letter printed on company letterhead and pen signed by the signatory.

As a business owner, you remain in control and should always have the final say on any deals and decisions. This permission should never be given to a third party.

LOAs are designed to simplify the energy procurement process, so some consultancies may provide you with a template.

Types of Letters of Authority:

There are two different types of LOA, these are:

Level 1

This typically includes access to energy suppliers' information, including your current energy consumption data, your contract, and meter readings.

Level 2

This allows access to all of your business's energy supply data, and allows third parties to correspond fully on your behalf.

Most LOAs will only require level 1 access, but depending on your energy needs, level 2 may be required.

Why is a Letter of Authority needed?

An LOA is required if you are looking to change energy suppliers or procure a new energy deal through an energy consultancy or energy broker.

This document grants legal permission for the third party to access the necessary information and speak on your behalf to suppliers.

How Long is a Letter of Authority Valid?

The typical period is either six or 12 months as standard. A LOA should specify the period of validity, however, if it does not it will be deemed valid for 12 months from the date it was signed.

If you wish for your LOA to be valid for longer than 12 months this will need to be specified within the document.

Who Can Sign a Letter of Authority?

An official LOA must be signed and dated by the owner of the business, a company director, or a specifically designated and authorised signatory.

FAQ's

How does the process differ when revoking a Letter of Authority compared to issuing one?

Revoking a Letter of Authority involves notifying both the third party and any other relevant entities in writing to formally withdraw the permissions previously granted. This can be a more sensitive process than issuing one because it may affect ongoing negotiations or operations.

What are some common mistakes businesses make when drafting a Letter of Authority?

Common mistakes businesses make when drafting an LOA include not specifying the scope of authority clearly, which can lead to misinterpretations and unauthorised actions.

Are there legal implications if a Letter of Authority is misused by the third party it empowers?

Misuse of an LOA by a third party can lead to legal consequences for both parties, depending on the breach's nature and the damages caused. It's crucial to clearly define the terms and monitor the third party's activities to prevent such issues.

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