What is a letter of authority (LOA)?

A LoA should be written in simple English and be as easy-to-understand as possible. Naturally, accuracy is essential when constructing any official document and LoAs are no exception. Even the smallest mistakes can prevent a third party from working on your behalf and can also be time-consuming to rectify. As a rule of thumb, your LoA should always:

• be signed and dated within the last 12 months
• state the name of the company’s signatory and their registered business name, along with its registered company address and company number
• clearly set out the specific rights and responsibilities given to the third party
• clearly state who you are delegating your authority to
• be typed on company letterhead paper, where possible.

Although some energy consultants and brokers may supply you with their own LoA template designed to enable you to quickly and easily provide your authorisation, it is vitally important that you read through this document carefully before signing to ensure you understand what you are actually giving authority for. For example, a LoA should never give a third party the right to make any final decisions regarding new energy contracts without the approval and consent of your company. While the account management and negotiation skills of a third party can be helpful, you will want to protect your business against poor decisions by remaining in full control of new contract choices through final sign-offs.

In many scenarios, it may be necessary to insist that you will only supply your authority to a certain third party if they agree to accept a LoA drawn up by yourself. This allows you to stay in control of what responsibilities you are legally allowing the third party to have and can help to avoid any nasty surprises later down the line. Usually, a correctly written LoA will include specific language, phrasing and terminology. This is to ensure that the LoA is as clear as possible and protects the rights of both you as the principal and the third party as the agent. Phrases commonly seen and used include the following:

‘I, the account holder and owner of [insert business name], do hereby give authority for the above named person and/or consultancy to discuss all aspects of my [insert supplier’s name] account with [insert supplier’s name] on my behalf. This includes, but is not limited to, any bills and usage, payments and other account activity past or present.’

or

‘We hereby authorise [insert third party’s name] to act as the utility management company for [insert business’ name] with enquiries regarding any and all relevant data to enable us to do this. We authorise them to manage our account on our behalf and deal with any changes to the portfolio during the life of the currently agreed contract.’

And all letters of authority should contain a sentence similar to the following:

‘For the complete avoidance of any doubt, this letter of authority does not permit or authorise [insert third party’s name] to enter into new supply agreements on our behalf.’

A LoA should always specifically state how long the authority has been granted for. However, a period of either six or 12 months is considered standard. If a LoA does not contain a predetermined period of time in which the letter remains valid, it will usually only be considered legitimate for 12 months from the date it was signed. This means if you want an LoA that is deemed valid for longer or shorter than 12 months, it needs to specify this on the letter itself.

Once the period of time detailed in the letter has expired (or after 12 months if no specific period is provided), a new freshly signed and dated LoA will have to be provided to enable the third party to continue acting on behalf of your business.

Who can sign a letter of authority?

An official LoA that has the power to authorise a third party to correspond directly with energy suppliers on behalf of you or your business must always be signed and dated by the owner of the business, a company director or a specifically designated and authorised signatory from your organisation.

Finally, it’s important to remember that as well as being printed on company letterhead paper where possible, all letters of authority should be manually, or ‘wet’, signed using a pen before being submitted. A photocopy of the document should also be made and kept on record for future reference.