Regulated energy, which comes attached with fears of price-gouging from monopolies, may be the more cost-effective option for property owners.
According to case studies from energy data auditor Utilisave, regulated energy can yield millions in energy savings for commercial buildings.
Michael Steifman, the firm’s founder and CEO, said that the alternative, fixed price deregulated energy, which is generated by electricity aggregators that compete against public utilities like Con Edison, remains popular due to two reasons: it gives owners a fixed number to include in their budgets and nullifies the risk of unexpected price hikes. However, that shield against fluctuations in utility costs comes with a price.
In its report, the firm, which has clients such as SL Green, Silverstein Properties, RFR Realty and the LeFrak Organization, conducted a four-year analysis of the energy use of a large hospital building in the city. The firm found that the hospital paid more $455,000 per year for fixed price deregulated energy. This amounts to about $1.82 million over the four year duration of the survey.
The company also tracked the energy consumption of an eleven-building residential portfolio in the city. The survey, which tracked energy costs for the properties from October 2013 to February 2017, found that every building in the package generated a higher bill with fixed rate deregulated electricity. In total, the portfolio’s energy cost was $601,000 higher than the alternative.
The study’s findings rail against the belief of some experts. “The most cost-efficient would be the deregulated energy model, whether for natural gas or electricity, as energy aggregators compete solely on price, ensuring that the consumer pays the lowest available price for a particular commodity,” said Ron Spurga, an Energy Advisor with United Metro Energy Corporation and an adjunct professor at Fordham Real Estate Institute at Lincoln Center.
However, both sides agree that there is a lack of knowledge among property owners when it comes to their energy consumption. “The fact remains that many commercial real estate energy users are either not aware of, don’t bother to check, or are not properly informed of the factors that can determine their best energy options when it comes to deciding whether to buy regulated or deregulated energy,” Steifman said.
“Property owners are generally not that knowledgeable about their energy use as other line items in their operating budget, like mortgage debt servicing and real estate taxes, (which) represent much larger expenditures than energy costs and require more of their attention,” Spurga added.
Nonetheless, Steifman pointed to history to buoy his firm’s findings. He said that similar studies conducted over his company’s 26-year history provided similar results “a vast majority” of the time.