If you own or manage commercial property in Texas, electricity isn't just a utility expense — it's a line item that can quietly erode NOI for years if you don't structure it correctly from the start.
Most commercial landlords in Texas fall into one of two camps. Either they pass electricity costs through to tenants via a NNN lease and assume the problem is solved, or they absorb costs under a gross lease structure and treat electricity as a fixed overhead they can't do much about. Both approaches leave money on the table when they're not backed by a proactive procurement and billing strategy.
This guide breaks down exactly how electricity cost recovery works in Texas commercial real estate, how to structure it correctly depending on your lease type, and the specific steps that property managers and asset owners
are using right now to protect margins as ERCOT rates face upward pressure through 2026 and beyond.
In a triple net (NNN) lease, the tenant pays their proportionate share of operating expenses including utilities, insurance, taxes, and maintenance. On paper, this protects the landlord from electricity cost fluctuations. In practice, it's more complicated than that.
The critical issue in Texas NNN leases is how electricity cost is calculated and allocated. There are three common approaches, each with different implications:
Direct metering. Each tenant space has its own meter and pays their provider directly. This is the cleanest structure and eliminates landlord exposure entirely. It's standard for most retail strip centers, standalone commercial buildings, and newer Class A office construction in markets like Dallas, Frisco, and Houston. The tradeoff is that each tenant negotiates their own rate, which means smaller tenants pay more per kWh than they would under a portfolio arrangement.
Master metering with sub-billing. The landlord holds one master account and bills tenants for their estimated share based on square footage, occupancy, or sub-meters. This is common in multitenant office buildings and some retail centers. The landlord absorbs rate risk and administrative burden but gains the ability to negotiate a better rate on the full building load than any individual tenant could achieve alone.
Direct metering with common area master meter. Individual tenant spaces are directly metered, but common areas — lobbies, parking garages, HVAC for shared corridors, elevators — run on a landlord-held master account. This is the most common structure in Class B office and mixed-use properties across North Texas. The landlord's exposure is limited to common area costs, which are then allocated to tenants as CAM charges.
Under a full gross lease, the landlord pays all operating expenses including electricity and recovers them through a single blended rent payment. Electricity volatility is entirely the landlord's problem. In a rising rate environment — which is exactly what ERCOT is projecting for summer 2026 and beyond — this structure creates direct NOI compression every time supply rates increase.
Modified gross leases sit in the middle. They typically lock in a base year electricity cost and allow the landlord to pass through increases above that base to tenants. This structure provides partial protection but requires careful baseline setting — landlords who set the base year during a low-rate period end up absorbing large portions of subsequent increases.
If your property runs on a master meter — whether for the full building or for common areas — you are likely overpaying for electricity. Here's why.
When a commercial property has a master meter, the account is typically in the landlord's name and billed at whatever rate the current provider charges at contract renewal. Most property managers renew with the same provider out of inertia. In Texas's deregulated commercial electricity market, that inertia is expensive.
Texas has over 100 licensed retail electricity providers competing for commercial accounts through ERCOT. A master meter account for a 200,000-square-foot office building might consume 800,000 to 1.2 million kWh annually. At that volume, running a competitive reverse auction with 25+ providers bidding simultaneously typically produces rates 15–25% below what a passive renewal generates.
The math is straightforward. At 1 million kWh annually, a 1.5¢/kWh improvement from a competitive auction saves $15,000 per year. Over a 24-month contract term, that's $30,000 — directly to NOI. For a property valued at a 6% cap rate, that improvement adds $500,000 in asset value on paper.
For a portfolio perspective on how we approach multi-property procurement, see our guide on commercial real estate energy brokerage in Texas.
Your tenants control their own procurement. But you can still add value — and differentiate your property — by offering to facilitate a portfolio auction that aggregates your tenants' loads alongside your common area account. A portfolio auction on 10 directly-metered tenants plus your master meter creates enough volume to attract aggressive bids that individual tenants couldn't generate on their own.
This is a genuine amenity for smaller commercial tenants — the boutique law firm on the third floor of your Preston Road office park cannot run the same competitive auction that a 500,000-square-foot user can. You can offer that leverage as part of your property management relationship. Tenants who save money on electricity are less likely to relocate at renewal.
Your single most important action is running a competitive procurement on your master meter account rather than accepting a passive renewal. Engage a licensed Texas broker at least 90 days before your current contract expires. Provide 12 months of interval data — not just monthly totals — so bidding providers can accurately price your load profile.
Equally important: structure your CAM reconciliation so electricity costs are passed through at actual cost, not estimated cost. Landlords who estimate CAM electricity charges frequently either over-recover (creating tenant disputes) or under-recover (absorbing costs they intended to pass through). Actual-cost reconciliation with supporting documentation is cleaner, legally more defensible, and increasingly expected by institutional tenants.
Your exposure is direct and procurement is your primary lever. A competitive auction should be a standard part of your annual operating budget review — not a one-time event. Budget the electricity line item at market rates, not last year's actual, and build in a procurement review 90–120 days before each contract expiration.
On modified gross leases, review your base year electricity rates carefully. If your base year was set during a low-rate period (2022–2023 saw historically low wholesale ERCOT prices), your current pass-through threshold may be significantly below current market rates, meaning you're absorbing more of the increase than you intended. This is worth a lease review conversation with your attorney if you have material properties on this structure.
Installing sub-meters in a master-metered building gives you granular consumption data by tenant, which enables more accurate cost allocation, reduces disputes, and can significantly reduce your common area electricity exposure.
The economics of sub-meter installation in Texas generally work out favorably when:
Installation cost for sub-metering a 10-tenant building typically runs $15,000–$40,000 depending on existing electrical infrastructure. In many cases, Oncor and CenterPoint offer rebates for smart metering installations that reduce this cost by 20–30%.
When sub-metering doesn't pencil out: small buildings with homogeneous tenant mix, properties with lease expirations in the near term where capital recovery is unclear, and markets where tenants are resistant to direct metering conversion mid-lease.
Texas commercial electricity pricing is facing meaningful upward pressure in 2026 for reasons that directly affect CRE cost recovery structures.
ERCOT's 2026 capacity outlook shows reserve margins tightening during peak demand periods, particularly during the summer afternoon hours that drive demand charges. Data center load growth across North Texas — driven by AI infrastructure buildout in the Dallas–Fort Worth Metroplex — is consuming available grid capacity faster than new generation can come online. ERCOT's own planning documents project peak demand growth of 9%+ in 2026, the highest in over a decade.
For CRE owners with gross lease exposure, this means electricity costs absorbed at contract renewal this year are likely to be higher than costs absorbed at the prior renewal. For NNN landlords with master meter common area accounts, the same dynamic applies to your CAM electricity line — if you haven't competitively bid that account recently, you are almost certainly overpaying relative to what a reverse auction would produce.
The window to lock in favorable forward rates before summer 2026 peak pricing is compressed. Most commercial contracts with a May or June start date need to be in procurement now to ensure execution before the peak risk window opens.
A PUCT-licensed commercial energy broker adds value to CRE operators in three specific ways that go beyond simply finding a lower rate.
Portfolio procurement. If you manage multiple properties, a broker can aggregate your total load across all accounts — whether master-metered buildings, common area accounts, or a combination — and run a single portfolio auction. Aggregated accounts attract better pricing because they represent more volume and longer-term revenue certainty for bidding providers.
Contract alignment with lease terms. A broker who understands CRE structures can align electricity contract start and end dates with lease rollover schedules, vacancy cycle projections, and refinancing timelines. A 36-month electricity contract that expires six months before a major tenant rollover is a risk management issue, not just an administrative one.
Staggered renewal management. For portfolio owners with multiple contracts at different expiration dates, a broker provides proactive 90-day alerts, market timing advice, and procurement execution — eliminating the risk of a contract lapsing into a holdover rate, which is almost always materially higher than a competitively bid renewal.
At EnergyBrokerTX (PUCT License #BR260054), we work directly with property managers, asset managers, and portfolio owners across Dallas, Fort Worth, Houston, Plano, and Frisco to structure procurement strategies that protect NOI, simplify CAM reconciliation, and eliminate the single most preventable source of operating cost overrun in commercial real estate.
Our service is 100% free to property owners and managers — we are compensated by the winning provider, not by you. Every bid is transparent and presented side by side so you can make an informed decision.
Yes. The master account for common areas, HVAC, elevators, and parking is a commercial account like any other. We run a competitive auction on that account regardless of how tenant spaces are billed. The master account procurement is completely separate from whatever arrangement tenants have with their individual providers.
Commercial electricity contracts in Texas are tied to the account and meter, not to the owner. When a property sells, the contract typically transfers to the new owner as part of the operating agreements. Buyers and sellers should address this in the purchase agreement — an in-term contract at a favorable rate can be a genuine asset, while an above-market contract with a meaningful early termination fee may require adjustment to the transaction economics.
90 days before your current contract expires is the standard recommendation. This gives you enough time to run a competitive auction, evaluate bids, negotiate terms, execute the contract, and complete Oncor or CenterPoint enrollment before your current contract ends. Starting too late risks a gap period on the default provider holdover rate, which is almost always significantly above market.
Yes, and it produces better results. Aggregating three properties with a combined 2 million kWh annual consumption into a single portfolio auction attracts meaningfully better pricing than running three separate auctions. Providers bid more aggressively for larger, multi-site accounts because they represent more revenue certainty and lower per-account acquisition cost.
Whether you manage a single office building on the Dallas North Tollway or a portfolio of mixed-use assets across North Texas, your electricity cost structure directly affects NOI and asset value. A competitive procurement review costs you nothing and takes less than 24 hours to produce results.
Contact EnergyBrokerTX today for a free portfolio electricity audit. We review your current contracts, identify renewal dates, assess your lease structure, and run a competitive auction designed around your specific cost recovery needs. PUCT License #BR260054. Dallas-based, serving all of Texas.
