4 Things Landlords Need to Understand About Energy Regulation and Deregulated Markets

There are countless things landlords have to worry about on any given day, and when several states decided to deregulate their energy markets, it created one more potential concern. In regulated markets there's not much for you to worry about, but if your property is in one of the states that has deregulated energy, a few things might have changed for you. Either way, it's important for all landlords to understand a few things about energy regulation and deregulated markets.

Understanding Regulated Versus Deregulated Energy Markets
The first thing that a landlord needs to understand about energy regulation is the difference between regulated and deregulated markets. Fortunately, this isn't a hard concept to grasp. In a regulated energy market, one company controls just about every aspect of electricity service. They own all of the infrastructure and handle the purchase, sale, and distribution of power.
In a deregulated market, the aforementioned single company, referred to as the utility, still owns the infrastructure and has to distribute power to your properties. There are numerous electricity providers, however, that you can purchase power from. This creates a competitive market, and in the end, you could end up paying a lower price by simply shopping around.

Tenants Don't Need Your Permission
If you live in a deregulated state, it's likely you've shopped around and found the best deal for yourself when it comes to powering your home. But remember that tenants will want to do the same thing. If you leave it to tenants to manage their own electricity, they do not need your permission to select or change to a specific energy supplier.
This doesn't mean that you can't provide tenants a few tips and inform them about state law. Let the renter know, for instance, that electricity suppliers must be licensed to supply energy through your locality's public utility.

Switching Suppliers May Not Fix Things
There are numerous ways that a landlord can reduce their costs. From using online property management software for accepting rental payments, to performing energy audits to save money at your properties, there are many possibilities. This is one reason deregulated energy markets are often very popular with landlords; they give you the chance to save money if you provide electricity for your tenants.
In fact, getting a better price would likely be the only reason for you to change suppliers. It's not the supplier who controls the infrastructure and distribution of power to your properties, it's the utility. This means that if you're upset about bad service, switching suppliers won't change anything. You'd still be dealing directly with the utility.

Never Be Afraid To Switch Providers
In the few states where energy deregulation is law, you may worry about switching energy suppliers. Won't it be a hassle to switch suppliers? Could this result in slower service in case of an outage, and isn't it possible that the lights will be turned off at your rental properties during the switch?
Fortunately, the answer to these questions is no. The utility receives a fee from the energy supplier, so they couldn't care less which supplier you choose to go with. Your properties will receive the same service regardless. Additionally, switching providers won't mean a temporary outage during the switch -- again, the utility is the one providing the electricity to your properties, so there's no need for them to cut off power when you change energy suppliers.
Energy regulation and deregulation may sound complicated, but fortunately, they don't have to be. The main difference is whether you have a choice in who supplies the electricity to your rental properties. Other than that, the big question is whether you could be saving money by switching suppliers, and this is always something worth looking into if you cover electricity costs at your rental properties.

POSTED June 24 2015 10:15 AM

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