Energy operations for commercial landlords

Commercial landlords occupy a strange position in the energy market: responsible for substantial consumption, but structurally uninterested in it. Common-part and plant energy passes through the service charge, so the cost lands on tenants; tenant supplies are the tenants’ problem; and void costs are treated as a fact of life. The result is a category of buildings where nobody with control has the incentive, and nobody with the incentive has control. That is precisely the arrangement in which overpayment persists for years.

The incentive gap is narrowing from both sides. Tenants scrutinise service charges more aggressively, and energy is one of the largest controllable lines within them. Buildings increasingly carry energy performance obligations that sit with the landlord regardless of who pays the bills. And rooftops, plant rooms and long-hold ownership make landlords natural owners of generation and storage assets that tenants could never justify individually.

The landlord’s actual energy estate

Most landlords cannot state their energy position across a portfolio: which supplies are theirs, what contract each is on, which voids have reverted to them, and what rate each recharge is calculated at. Assembling that inventory is the first act of management, and it routinely surfaces supplies on deemed rates from past tenant changes, contracts that lapsed at buildings sold or refinanced, and recharges built on rates no one has benchmarked.

One multi-let residential block, used as a pilot ahead of a wider portfolio review, showed what that inventory finds. Benchmarking its supply uncovered over £9,000 a year of broker commission built into the tariff, plus more than £6,000 of non-commodity pass-through charges that did not match what the contract actually specified. The meter itself was half-hourly settled, but billed against crude aggregated day and night bands that bore no relation to the real load, so the building captured none of the time-of-use benefit its own metering should have delivered. All of it sat on a supply whose charges flow straight through to tenants, unchecked until someone looked. Sub-metering and a tariff matched to the real load were sized at £15,000 to £20,000 a year in savings.

Recharging done properly

Where the landlord resells energy to tenants, maximum resale price rules cap what can be charged, and the lease governs what the service charge can recover. Within those constraints there is a real choice: recharge as an opaque pass-through of whatever the incumbent supplier charges, or procure the building’s energy properly and recharge transparently. The second position costs tenants less, survives service-charge scrutiny, and is defensible in a way the first is not.

Benchmarking is what turns “transparent” into something a tenant can verify. A recharge rate checked against the wholesale market and the building’s own half-hourly consumption can be shown to a tenant’s surveyor and defended line by line. A rate rolled over from whatever the incumbent supplier last quoted cannot, and a growing number of occupiers ask the question anyway, either directly or through the service-charge auditor engaged to certify the year-end account.

The audit trail is the recharge, not a separate exercise built after the fact. It rests on three records: the contract the landlord procures under, the meter data the recharge is calculated from, and the method used to split common-part and plant consumption across tenants. Assembling this once, when the service charge is set, costs far less than reconstructing it every time an auditor or a tenant’s advisor asks where a figure came from.

The asset opportunity

A landlord with roof space, plant capacity and a long hold period is better placed than almost any occupier to own generation and storage, selling power to the building or improving the service-charge position. The same rule applies as everywhere else: the case is made or broken by the building’s actual half-hourly consumption, not by the sector brochure. Model first, size to the load, and treat export as the residual rather than the rationale.

How the landlord sells that power back into the building is a structural question, not a technical one. A private wire arrangement, selling directly to tenants at a rate below grid import but above what the landlord would get exporting, keeps the value inside the building and needs nothing more than a supply agreement alongside the lease. A power purchase agreement with a third party removes the capital outlay but hands a share of the value away with it. Each route has a different effect on the service charge, a different position on who carries performance risk, and a different set of consents to secure.

The lease has to catch up with the assets. Standard leases were not written with landlord-owned generation in mind, so alterations clauses, service-charge definitions and dilapidation provisions need checking before a system goes on the roof, not after. A generation asset the lease cannot properly account for creates a dispute waiting for the next rent review, however sound the underlying economics.

If you hold a portfolio and cannot state its energy position today, that is the starting point. Request a benchmark at /benchmark or book a review at /book.