The rapid evolution of technological advances in energy and utility metering and billing platforms is constantly surpassing the current regulatory arena causing most companies to turn a blind eye. From new software-based HVAC systems to touchscreen metering devices, in-house legal and compliance departments are encountering difficulties in advising their clients appropriately considering legislation is light years behind.
In looking at the Texas market, many companies are selling smarter technology to multifamily building owners at low costs with enhanced energy efficiency, guaranteed savings and cost-recovery for utility usage. Simultaneously, the Substantive Rules governing electric, water, and HVAC metering of multifamily properties in Texas remain steadfast with requirements to use only watt-hour or volumetric sub-meters or choose to allocate energy and utility charges by subpar standards, such as by square footage or number of occupants.1 Such outdated regulations limit owners from using smarter technology that may provide a more accurate measurement of energy and utility usage.
That being said, every new technology doesn’t necessarily warrant new legislation; however, outdated legislation can create havoc for regulatory and compliance teams. For example, attempting to accurately determine whether use of energy efficient systems that provide Green Building Certifications is within compliance may set up companies for potential risks against future regulatory violations and litigation.
Allocation: Is it Really Fair?
The multifamily industry needs to remain aware of the currently regulatory landscape and its limits in allowing property owners and consumers to potentially benefit from smarter technology.
Specifically, in Texas, tenants may be billed for water and electric usage based solely on the square footage and/or occupancy of their apartment unit. This type of current legislation may cause tenants to pay for energy usage not used solely by the tenant.
You may have one tenant occupying an 800-square foot apartment unit and three
tenants occupying a similar 800-square foot apartment unit while both units are billed for the same amount of energy usage. By adding smarter technology solutions as an option under current regulations, property owners may be able to more accurately measure usage by applying additional factors, such as thermostat set points, valve position and timing, as well as individual unit energy load (demand) for a more accurate assessment of energy usage.
The scenario above is common. In Texas alone, the Public Utility Commission of Texas lists 6,970 submetered and allocated properties. Of that 6,970, only 24% are submetered, with the remaining 75% allocated.
The following provides a high-level overview of some compliance issues with the use of smarter technology for measurement of energy and utility consumption:
Key Focal Points with Technology and the Resulting Issues
Why Regulatory Change is Critical
The primary reason for regulatory change is to meet the demands of property owners who are seeking more energy efficient systems to accurately assess energy charges to their residents. In turn, consumers are seeking more accurate billing methods for energy consumption. Property owners benefit from smarter technology due to the design/installation flexibility, lower installation and maintenance expense, long-term energy cost savings and green building certifications. In addition, consumers also benefit from smarter technology with more accurate measurement devices/software, energy savings due to efficiency, and lower costs allocated as a result of an owner’s savings realized overall.
So where lies the disconnect between regulatory agencies and the industry? Due to the literal meaning of the regulations and lack of regulatory action in the past years, property owners are limited in their use of smarter technology since such use will prevent recovery of energy and utility charges from their residents. In addition, property owners are entrusting the sellers of the smarter technology to provide the due diligence that will allow implementation and use of the technology in this current regulatory arena. Unfortunately; however, property owners are stuck with an enormous project that is of no use after proper review of regulations. Meanwhile, residents continue to be billed charges based on the most inaccurate methodologies of square footage and occupancy or outdated metering systems.
To avoid these issues and take advantage of the smarter technology, consider the following steps to avoid future compliance issues:
Steps to Consider to Help Avoid Compliance Issues
- Prior to purchase of smart technology systems, complete due diligence in (1) regulatory research (i.e., regulatory landscape, intent, need for approvals, etc.), (2) manufacturer studies, specifications, testing, actual use, and (3) review of seller’s references.
- Search for third-party billing providers willing to work with you through the regulatory approval procedures, if necessary.
- Conduct proper training of leasing staff to keep residents well-informed.
- Ensure lease language incorporates new technology/billing methodologies with simple summary notices for ease of reference by residents.
While the current regulatory landscape does not incentivize owners to incorporate smarter technology and more energy efficient products within their properties, there are a few methods available that may allow owners to take advantage of energy savings. Until legislation catches up, owners may have to take the extra, but necessary, steps to ensuring proper implementation of these smarter systems for measurement of energy and utility consumption.
Kimberly Godsey, Esq.
Attorney, Director of Legal Affairs
Kimberly has a wealth of experience in regulatory review and compliance. She led the development of Minol’s internal regulatory database that covers all fifty states and contains third-party utility billing compliance information from the utility provider requirements through state regulations. She has facilitated seminars for multifamily property owners in Texas and Massachusetts discussing utility billing compliance. She is a member of the Utility Management and Conservation Association.
She is a graduate of Texas Wesleyan School of Law (currently Texas A&M University School of Law) and is a licensed attorney in the state of Texas.
(1) See P.U.C. Subst. R. § 25.142, § 25.142, and 30 TAC § 291.121-127.
THE INFORMATION CONTAINED HEREIN IS FOR INFORMATIONAL PURPOSES ONLY. IT SHOULD NOT BE CONSTRUED AS LEGAL ADVICE NOR RELIED ON AS LEGAL AUTHORITY. PLEASE CONSULT LEGAL COUNSEL TO DETERMINE SUITABILITY FOR YOUR SPECIFIC PROPERTY.