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Understanding Energy Deregulation for Commercial Real Estate

energy-deregulationLet’s explore why commercial real estate property managers need to understand energy deregulation and its impact on their bottom line. Under energy deregulation, each part of energy service is broken down into separate pieces that are provided by different companies. Delivery of electricity as well as all necessary service is still provided by the local utility company, which ensures that the consumer will be provided with safe and reliable electricity. Suppliers of energy, other than the local utility, are licensed and registered with state and federal agencies and are not in competition with the local utility. Since the local utility does not make any money on the energy, only on the delivery and service of electricity, they support consumers who choose to switch suppliers. Smaller suppliers provide deregulated energy to the existing grid and the local utility company still delivers that energy directly to a consumer’s home or business.

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The utility continues to makes a profit on deregulated energy delivery, however consumers are able to enjoy significant savings and other benefits by buying their electricity or gas on the open market from other suppliers. The commercial real estate industry is directly affected by energy costs. Energy represents 30 percent of the typical office building’s costs and is one of the top five operating expenses for most real estate assets. As such, building owners and property managers are always searching for innovative ways to cut costs, control expenses and save money. With electricity and natural gas energy deregulation, building owners and property managers in many states now have the power to choose from a variety of energy suppliers resulting in a drop in energy costs. Having the ability to choose an energy supplier allows a property manager to maximize operational excellence by :

• Reducing energy costs and operating expenses
• Increasing asset value
• Enhancing tenant satisfaction, attraction, and retention
• Increasing occupant productivity and health
• Demonstrating environmental leadership by reducing energy usage

Property managers have a responsibility to provide the best service to their clients and tenants including
becoming educated as to the benefits of being able to choose alternate energy suppliers that will provide safe and reliable energy at a competitive price.

Did you know these energy deregulation facts…

1. 30% of energy in buildings is used inefficiently or unnecessarily- basically wasted, but paid for.
2. Lighting currently accounts for about 20% of U.S. electricity consumption.
3. Only 10% of energy in a light bulb is used to create light. Ninety percent of a light bulb’s energy creates
heat. Compact fluorescent light bulbs (CFLs), on the other hand, use about 80% less electricity than
conventional bulbs and last up to 12 times as long, while LED capabilities exceed even CFLs.

“Are we doing anything to save money on energy costs?” Hopefully, when your boss asks, you are able to provide an affirmative answer. You may even be able to list off some of the actions your company has taken thus far. Now it is time to ask yourself, “Am I doing everything I can to help my company save money?” This may be a little more difficult to answer.

New America Power (NAP), www.newamericapower.com

We are Newtown, Bucks County, based Energy Broker and Consulting company, assists in educating their clients of the ongoing changes and advancements in the energy industry and assist them with making decisions on energy procurement, management and curtailment. We also provide our clients with many products and services to facilitate entry into the renewable energy market. We offer a variety of energy products ranging from Fixed-all-inclusive, Index adder, Block and Index, to Wind, Green, Carbon Neutral and more… We work closely with our clients and take advantage of market behaviors that favor our clients’ energy cost. We have partnerships with a considerable number of energy suppliers to offer future energy purchasing options up to 18 months in advance. This allows businesses currently under contract with another supplier to hedge future purchases and take advantage of the current market’s rates.

As a leading energy consultant, NAP offers a broad array of electricity products and services to fit all of your energy needs:
• Electric and Natural Gas Procurement
• Energy Audits and Benchmarking
• LED/ Lighting Design
• Utility Incentives/Rebates
• Energy Tax Credits
• Demand Response registration, monitoring and management

Changing Energy Suppliers is Easy
• NO switching fees
• NO visit required
• NO interruption in power delivery
• Same reliable delivery service from your local utility company

new-america-power

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What is the Energy Policy Act of 2005

What is the Energy Policy Act of 2005 (EPACT) 179D and How Can It Benefit My Real Estate Portfolio? (PDF)

By Lonnie M. Barish, New Power America 

The Energy Policy Act of 2005 (EPAct) was enacted creating immediate potential tax savings for building owners or architects and engineers based on the use of energy efficient improvements. Section 179D outlines the requirements for a maximum potential tax deduction of up to $1.80 per square foot of affected spaces.

WHAT TYPES OF BUILDINGS QUALIFY?

New construction of a commercial building of any size qualifies for the Energy Policy Act of 2005. New construction of residential rental buildings, such as apartments, qualify if they are four or more stories. Additionally, renovations and retrofits of existing structures are also eligible to receive the deduction. Buildings must be located in the United States.

WHO MAY TAKE THE DEDUCTION?

The deduction is available to the owner of the building at the time it is constructed or when the renovation is made. Generally, the deduction belongs to the entity that is depreciating the energy-efficient property. However, for government-owned buildings, there is a special provision that allows the owner to allocate the deduction to the building’s “designer” (engineer, contractor, architect, environmental consultant, or energy services provider) for the taxable year in which the property is placed in service. This is a very attractive benefit to the building designer because it is essentially “found” money as the government is allocating a tax benefit to parties that provided services and did not incur any building construction costs.

THE BENEFITS OF EPACT 179D

The maximum deduction of $1.80/sq ft. is comprised of three partial deductions: up to $.60/sq ft. for lighting, HVAC, or building envelope each.

Below is a sample of project size and how the Energy Policy Act of 2005 deductions work.

energy-policy-act-of-2005

HOW CAN NEW AMERICA POWER HELP?

New America Power provides a turnkey service to help you secure your Section 179D tax incentive. We provide the independent, third-party reports required by the IRS and we do it in a way that reduces the administrative burden on you so you can focus on your business. We perform a complete Section 179D study in accordance with the IRS guidelines including:

Calculation and documentation of the amount of the deduction. Performance of the energy modeling required to certify the project. Delivery of a certification report and the required IRS documentation. Assistance with obtaining the Allocation Letter from the proper government or public entity official. Coordination with your tax advisor or independent accounting firm to ensure that you receive the maximum benefit under the Section 179D incentive program.

We can also assist you with pre-screening potential projects to ensure they qualify for the Energy Policy Act of 2005 incentive.

About New America Power

New America Power (NAP), www.newamericapower.com, a Newtown, Bucks County, based company assists in educating their clients of the ongoing changes and advancements in the energy industry and assist them with making decisions on energy procurement, management and curtailment.

We also provide our clients with many products and services to facilitate entry into the renewable energy
market. We offer a variety of energy products ranging from Fixed-all-inclusive, Index adder, Block and Index, to Wind, Green, Carbon Neutral and more… We work closely with our clients and take advantage of market behaviors that favor our clients’ energy cost. We have special relationships with our energy suppliers to offer future energy purchasing options up to 18 months in advance. This allows businesses currently under contract with another supplier to hedge future purchases and take advantage of the current market’s rates.

As a leading energy consultant, NAP offers a broad array of electricity products and services to fit all of your energy needs:

• Electric and Natural Gas broker
• Utility Bill Auditing
• Sales and financing from installation through maintenance services
• Grant and funding applications
• Energy management and reporting services
• 179D tax incentive
• LED Lighting

NAP will help you Use Less and Spend Less

lonnie-barish
Lonnie M Barish

41 University Drive
Suite 400
Newtown, Pa 18940
267-968-8651 Cell
267-224-4513 Fax
www.newamericapower.com

 

 

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