by Gabriel Canal, Senior Energy Consultant
This information on multifamily electricity procurement is general in nature. If you’re a property management company, landlord, or building owner and need specific answers or solutions, please call 903-705-7769.
There are two different types of multifamily properties with regards to how the electricity meters are set up.
Master Metered Property
These properties have one commercial meter that powers the entire property. Typically, these are smaller properties that offer “all bills paid” to their tenants.
Individually metered units
These properties have two different types of meters.
1. Commercial meters cover all common areas (CAA) such as hall lights, office, gym pool, etc.
2. Residential meters provide power to all units (CSA). There is a meter for each unit
If you have just purchased a multifamily property, the old owner will either require you to assume their electricity contract or procure your own on the day that the sale closes. You typically want to start this process at least a week in advance.
If the previous owner required you, in the sale of the property, to assume their electricity agreement you will want to request a copy of the contract for your records and so that you can know what to expect – i.e. contract end date, rate, terms, net pay, sale clause etc.
This process is best navigated with a qualified energy broker by your side such as Eisenbach Consulting. You will only be able to assume the contract for the common area meters (CAA). A new continuous service agreement (CSA) that provides power to the vacant units will need to be put in place. These agreements cannot be transferred between owners. You will need to provide the current electricity provider with a W-9 which gives a registered entity name, tax id number and registered address. They will run a commercial credit check to determine if you can assume the agreement with or without a deposit or if additional financials will be required.
Many property owners create a new entity name for each property they purchase which can cause delays or roadblocks in the credit approval process and the agreement assumption process. This process is typically started before the sale closes so that you are prepared on the day of closing.
If you have the option to enter into your own electricity agreement, you will first want to determine if that is the best option for you. You will want to ask for the details of the old property owners electricity contract. This is typically done before the sale closes so that you are prepared on the day of closing. Once you have the details of the current electricity agreement, you will want to seek new competitive offers.
Once again, this process is best navigated with a qualified energy broker by your side such as Eisenbach Consulting. You will want to know an estimated closing date for the property, the property address, a W-9, and a meter list (CSA and CAA). If you are working with a broker, they will approach qualified electricity providers that provide multifamily services and request pricing for both the CAA and CSA meters. This can be difficult to do on your own because you need to have a thorough understanding of the available options of CAA/CSA agreements, the energy market and which providers to contact.
Ancillary Income – New Revenue Stream
On top of that, you would have to reach out to each provider individually. This can be a very time consuming process. Eisenbach Consulting has streamlined this process for you, allowing you to focus on other aspects of the property acquisition. We will also request the details of the providers marketing agreement. Many electricity providers will offer an incentive for the property owner or property management company when a tenant signs up with them. These payouts to the property typically range from $50-$80.
For example, if your CAA/CSA electricity agreements are with XZY Power, when a new tenant moves in and signs up with XZY Power, they will send the property a check for the agreed upon referral amount. These marketing agreements are a great way for the property to create an extra source of income. The electricity provider will handle all the on site marketing and training for the on site personnel.
Now that you have your top options for a new electricity agreement, you want to compare that to the current electricity agreement.
Key Components of Energy Agreements
These offers need to be compared with several things in mind:
Rate – Can the current market bring a lower offer than the old agreement? This applies to both the CAA and the CSA agreement rate.
Contract end date – When does the old agreement expire? Should I assume the old agreement and simultaneously sign a new agreement to take place once it expires? Does the future market look better than the present market?
Marketing Agreement – Is there one? What does it pay?
Provider – Who is it? Are they reliable? Do they offer a good support system that includes a user friendly portal?
Bona Fide Sale Clause – Are you able to exit the agreement if you sell the property? If not, you could be responsible for an early termination fee.
Net pay – 16, 20 or 30 days? Can your accounting team meet the deadline without late fees?
Meter fee – Is there a meter fee for the vacant units?
These are all things that Eisenbach Consulting will negotiate and compare on your behalf with providers to ensure you enter a contract that meets your needs as well as protects you.
Once you determine whether you want to assume the current electricity agreement or enter into a new agreement, you follow the same basic steps. At this point, Eisenbach Consulting will have your W-9 and property information and will already have informed you if the entity is credit approved or if additional information is needed. You want to have all this completed a day or 2 before the scheduled date of the close of the sale. The morning of closing day, pricing will be refreshed, ideally with very little market movement up or down.
Both the CAA and CSA contracts will be requested and reviewed for accuracy. Included in the contract request should be a tax exemption sheet. It is important to know that you will qualify to be tax exempt.
You qualify under the following exemption:
“Residential use by an apartment owner/manager of electricity used less than 100%, but more than 50%, in a multi-dwelling unit.”
Once the agreements have been reviewed, signed, submitted and accepted by the provider, the CAA meters will typically be enrolled within the same business day. The CSA meters can manually be enrolled by phone or email within 24 hours, but it will typically take 5-7 days for the provider to build your online portal with full access to see and pay invoices, turn off power in vacant units, etc.
This completes the enrollment process for the property.
Eisenbach Consulting specializes in Multifamily investment clients that have as few as one single property up to 50+ properties. The process and the results can be drastically improved by having a strategic partner that understands your company’s goals and has your best interest in mind.
This content was created by Gabriel Canal, Senior Energy Consultant at Eisenbach Consulting, LLC, the parent company of ElectricChoice.com. He can be reached at gabriel.canal@eisenbachconsulting.com or 903-705-7769.
