Making Places Better...One Building at a Time

The new game of electricity buying | July 26, 2010

After several years of electricity deregulation in Texas, we’re still dubious whether it’s effect is beneficial, neutral, or if we’re worse off than before.

Degregulation is the rule though, and the way forward, at least for companies like us,  seems mostly through brokers.  Being brokers ourselves, that’s not a problem for us.  It’s just that even knowing the right broker doesn’t take away the necessity for understanding the electricity market and adjusting to it.

Being in the business of property operations, securing electricity contracts is an important task for us.  Recently we took the time to review electricity for all our properties.  We found that we had some contracts, and some month to month commitments, some decent rates, some not, and contract expiration dates all over the map.

We decided to take a stab at getting a handle on it all, so with the help of a good broker, we bid it all, produced a lot of history and approvals, and we’re about to secure contracts for the entire portfolio at a rate of around 5.5 cents per KwH (plus 2 cents for the infrastructure cost) for three years.

For the properties without a contract, the new agreement will take effect now.  For the properties with contracts in place already, the new agreement will be effective as soon as the old one expires.  All will expire in three years, so that we can begin to negotiate and leverage the size of the portfolio for the benefit of all the properties.

One issue to overcome was whether we should sign on behalf of our clients.  This has consequences for the owners if they want to sell their properties.   If we asked all the owners to sign their own contracts, the process would break down.  The turn around time is so tight that by the time you explain it all to an owner, it’s too late to get the pricing, and you have to start all over again.

So we decided to sign for them, and will do our best to make sure the electricity contract is transferred in the event of a sale.

---