Making Places Better...One Building at a Time

The Electric Building | October 4, 2010

When electricity was deregulated in Texas several years ago, it was difficult to find a consensus on whether it would be a good thing or a bad thing.  Enron collapsing after trying to corner the electricity market in California was not reassuring.

In the meantime those of us operating commercial real estate had to decide whether to ignore it all (not really an option), sign a long term contract at a fixed rate, or ride the spot market.  It took several years to understand the differences.

The problem for us is that with more than 30 properties in our portfolio and an average of 2 electric meters at each property, different owners and usages all over the map it has been difficult to get a rope around it all.  Getting a rope around it all is critical to finding a way to leverage  the size of the portfolio.

Finally, though, we decided to buckle down & work our way through the maze.  We found an energy broker willing to work as hard as us,  worked through the myriad contract details, and educated owners about the benefits of banding together to get the best possible price.  And finally, we managed to secure a rate of 5.7 cents per square foot (plus the “wires” charge of about 2 cents), which represented a savings of between 15 and 40% for all our buildings. And managing the process will be simpler next time because we converted multiple expiration dates to a single point in the future, so we can re-bid it all together.

What really feels great is knowing that we truly added value to the properties in our portfolio by getting a handle on their electricity costs.

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