Electricity Procurement, Hedging and Bill Audits
The deregulation of electricity in Texas and approximately two dozen other states provides power users the opportunity to competitively bid the cost of their electricity via Power Purchase Agreements or PPA’s.
PACE Houston offers assistance with both the analysis and procurement of power. With PACE there is an additional opportunity to reduce the amount of power consumed by financing 100% of energy reduction measures such as new HVAC, Lighting, Controls, Roof, Windows, etc.
Reduce Power Use + Fix Cost of Power = Lower Cost and Risk
Our Unified Energy Analysis and Procurement Team represents your interests in first understanding how you use electricity then competitively bidding for your business. Through contracts with virtually all credit worthy suppliers in the country we are in the market all day every day. Complex rate structures and self-interests of power providers can hide fees and costs making it difficult to see bids in an apples to apples basis. If you desire to utilize renewable energy in your operation, we can also help you with a solar or wind power purchase agreement.
We are your ally, working for the optimum power purchase agreement that best suits both your unique power profile and organizational goals. Power Purchase Agreements, as well as guidance on ways of using energy in a more cost effective manner are what we do and we want the opportunity of earning your business every day.
We can help you reduce the amount of electricity you use and provide budget certainty with a customized Power Purchase Agreement. With some major drivers of electricity prices near recent lows, now may be the time to consider the current market opportunity to address your risk profile.
Energy and Capital Costs near Record Lows
Energy prices and interest rates are each near 10 year lows. Now may be an opportune time to do an energy savings project.
PACE can help property owners monetize this opportunity and lower their risk profile with fixed rate capital and, through a Power Purchase Agreement, securing fixed price energy contracts.
Owners have risks that affect their profitability and the stability of their cash flow. These risks not only include the economic environment that affects lease rates, operating expenses and financing costs.
An energy efficiency or renewable energy project done with PACE Houston can address these risks - the amount of energy consumed, the unit cost of that energy and the cost of capital required to fund a project.
Cost of Funds: PACE lenders provide long term fixed rate financing for 100% of the project cost. This enables a property owner to preserve their equity, use their existing lines of credit for other purposes, and improve their cash flow as the energy reductions are realized from Day 1. As you can see from the above chart, fixed rate interest costs are near their 10 year lows. As a proxy for a PACE loan which can vary in tenor and credit standing, we used a blend of a 30 year mortgage rate, a 10 year fixed pay interest rate swap and a BAA bond rate, each as reported by the Federal Reserve.
Cost of Energy: The purpose of PACE is to enable property owners to make energy improvement modifications to reduce energy consumption. When the Owner couples a Power Purchase Agreement with a PACE project, the owner is not only lowering the amount of energy consumed - but also fixing the cost of that energy. Natural gas pricing is the primary driver of electricity cost volatility. (Other drivers that are not as volatile are coal and nuclear energy cost inputs.) With natural gas prices near 10 year lows, locking in the cost of your electricity is worthy of consideration.
Taken in combination, the sum of the current interest rate environment and natural gas prices are at a level only seen less than 10% of the time since 2004.