Impact of electricity hike on commercial property

Rennie Property MD, Steve Rennie

While it is still unclear to what extent commercial property electrical bills will increase by on 1 July 2009, it seems likely that commercial property will be hit with more than a 31.3% increase. This because, according to Nersa, the price hike excludes Special Pricing Agreements and poorer customers will only be see a 15% price hike.

According to a recent South African Property Owner's Association (SAPOA) report released prior to this increase, electricity is already the largest operating expense for commercial property and accounted for 22.6% of opex in December 2008. Of course property owners will simply pass on any price increases to their tenants and recoup the costs.

Steve Rennie, managing director of Rennie Property, says that this electricity price increase, as well as the possibility of further rises down the line, will force property owners, their tenants and managing agents to look more carefully at the power consumption profile of their buildings. All parties will have to ramp up activities to reduce energy consumption.

There are a number of steps that can be taken to devise an energy management plan for buildings:

1. Carry out a power analysis of the building: How old is the infrastructure? If it's old, put in place a plan to replace or eliminate the system. If it's new infrastructure, is it being used most efficiently? Remember to consider future power requirements.

2. Analyse the specific electricity consumption patterns of the building and adjust utilities accordingly. For instance you could reduce lighting levels or change the automated timers on air cons.

3. Tenants are already accountable for their energy consumption, and must be properly informed about any energy conservation plans. At the end of the day it is up to the tenants whether the plans succeed or fail.
   

And if you are looking for property, to buy or rent, it would be in your interests to favour buildings with more efficient energy infrastructure. Buildings that have been built using energy efficient principles are likely to be in higher demand as they will use less power and be more sustainable.

“There is no denying that this price hike will make energy efficiency a priority on the agenda. As property managers we can assist both property owners and tenants to achieve maximum savings within their individual requirements,” said Steve Rennie.

South Africa's power utility, Eskom, requested the price hike in order to fund a R385-billion capital expansion plan over the next five years.