Category Archives: Construction Budgets

New Construction Utility Expense Management

Getting Your Asset Off to a Good Start from the Ground Up

What if on Day One of the earth moving on your new community you didn’t have to touch the utility aspect of the site?  And, if you wanted to understand what accounts have been created you only need to go to one place to see everything – from what utilities are set up to your current spend? And, what if you could outsource doing everything from powering up the accounts for the trailer right down to installing the last meter woodneeded at the lowest, possible rate available?

Introducing an Energy Manager to the construction team mix in the planning stages will help establish a strong utility expense management structures that carries throughout the life of the investment.

Finding the right person requires a basic understanding of the scope of work and practical benefits. They must have the knowledge to educate you on technology options, as well as the fine details associated with this complex service.

Anyone involved with new construction has experienced the hazards, frustrations, and hair pulling while trying to understand utility bills.

Benefits of Employing an Energy Manager from Day One: 

  • A controlled set up of utility accounts at the right time with the correct, lowest rate available is obviously the best case scenario. Let’s face it, construction companies have the accounts set up at the last minute, rarely worrying about whether the rate is correct. This is a temporary gig for them. You will manage or own the asset long term. An Energy Manager can handle set up based on the construction schedule, on time, at the right rate. No frantic phone calls and unnecessary delays to the project. And, if an issue arises, the Energy Manager sits on the phone with the utility company – not you.
  • The centralization and accessibility of data in an energy management software system is imperative. Imagine no more digging through piles of paper bills trying to find the one number you need. Also, with data being captured correctly and in detail, the ease of accessing it for monthly variance analysis and annual budgets is a breeze. Reports on usage, rates, expenses and exceptions is possible. And, so is making data-driven decisions.
  • Streamlining of A/P processes and the alleviation of work for the accounting and construction, teams, i.e., the rubber stamping of bills versus skilled, audit reviews before payment. For example, the initial paperwork to create accounts, important continuous service agreements and the creation of a standardized process with one point of contact for construction and management can all be handled by an experienced energy manager.

A central point of contact smooths the transition from construction to management with business rules dictating the allocation of bills to be paid based on certificate of occupancy acceptance:

  • Once operational, the Energy Manager continues to add value by eliminating work load for management and expertly handling all your utility needs:
  • Continuous bill auditing using defined metrics. Utility providers never stop making mistakes and rate errors or leaks left unnoticed will cost you big if undetected. Issue resolution on behalf of management is also a critical component. Early detection of problems, such as leaks, and quick resolution are vital to quality utility bill management.
  • Negotiation of procurement contracts is more than just calling brokers and looking for the lowest price. There are dangerous pitfalls of low kWh/high extra fees. A seasoned Energy Manager is crucial to avoiding costly mistakes. Important steps will include reviewing historical usage patterns for your portfolio, aggregating load to gain maximum deal, determining hedging options, scrutinizing hidden fees, finding reputable brokers to contact, manage and negotiate the proposal process, and ultimately present the best options for your consideration. Once a provider is chosen, the Energy Manager maintains and manages the contracts going forward.
  • Failure to connect management and billing. This shouldn’t be a manual process completed on site. Management teams are busy and will miss opportunities to capture all failures to connect problems. An Energy Manager uses a software program designed to capture all failures to connect based on rent roll data versus bill service periods. These would then become exceptions and billed out with an additional penalty fee where allowable by law.
  • If the data is centralized, a budget should be created at an account level based on historical usage patterns, current rate and researched increases triggered to occur in the month forward when actually taking place. Further, anomalies from the previous year, such as leaks, credits or true ups should be scrubbed so the next year’s budget isn’t skewed. This is not the common practice of last year’s expense plus 3-5% increases. It takes a seasoned energy management veteran’s depth of knowledge in utilities to create a realistic budget.

In conclusion, efficient and effective utility bill management is a reality. An Energy Manager will make sure your management associates never open another utility bill envelope.  They will save you time and money and likely make you even more money. Paying a utility bill can cost you upwards of $15 per bill to process. Considering that utilities comprises 16% of your expenses, finding a good energy management program should be a top initiative and not an afterthought.

Kate ForsythKate Forsyth
Director of Energy Management
410.292.7132   kforsyth@minolusa.com

Kate joined the Minol USA team in August of 2009. She currently oversees the Energy Management Program with a special emphasis on utility provider bill payment, cost avoidance and green initiatives. Prior to joining Minol USA, she was employed by REIT AvalonBay Communities, Inc. for more than 20 years. While with AvalonBay, Kate successfully lobbied for the passing of the submetering law in Massachusetts in 2005.

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Water Submetering Best Practice Series: Part 1 of 3

Preparing for a New Construction Submetering Installation

I travel quite a bit for my job and it’s a rarity when I look out the cab window on my way to a client meeting that I don’t see dirt being moved. The construction market is hot for multifamily, university and affordable housing. While some markets are seeing a slight slowdown, particularly those heavily driven by the energy industry, most are still in boom mode.

Multifamily Executive still projects 2015 new construction to rise 76 percent above the historical average to 211,000 units. This would represent the highest level of new completions in a calendar year since the 1990’s. To put it in perspective, in 2012 new completions totaled just 79,000 units.

With so many projects and tight deadlines, submetering is often overlooked in the initial planning process – even in states that require submetering on new construction such as Texas, Georgia and California. Planning early not only saves time and money but headaches for your Project Management team.

If you are a contractor, your goal is to complete the project on time and on budget. If you are an owner or management company, your goal is to recover utility expenses that otherwise hit your bottom line. With rising water costs and shortages nationwide, water meters are becoming a standard fixture in new construction. One of the biggest pitfalls for not planning that impacts both parties is the costs involved when the plumber has to go back and installSubmetering Benefits tubes and couplings in each unit after he’s already completed the initial work.

Best Practices for a Seamless and Cost Effective Submetering Project

Plan Early
Don’t wait until the building is framed. The best case scenario is to include the request for submeters in the architectural plans. Also, make sure to identify which contract the submetering installation will be under – General Contractor, Mechanical Engineer or Plumber contract. You will then want to work closely with them to select the best meters for your project.

Choose Wisely
When selecting meters, make sure they are designed for horizontal installation. Work with your project team to insure sufficient room has been provided for the meter so read accuracy is not effected.  Another critical component is the AMR system. Always choose a non-proprietary AMR system to avoid technical and financial challenges as your system ages.

Central Boiler Systems
Are you installing a central boiler system? If yes, each unit must have a single entry point for both cold water and hot water with shut off valves. If you are not installing a central system, you will only need a single meter for each unit. Make sure the meter is easily accessible. Typically, next to or above the hot water tank is the best location for optimal performance.

If you are using gas to heat the boiler, make sure you meter everything so the owner can recapture gas costs associated with the water systems.

Valve Location
Valves must be in an accessible area. Preferably, valves are located outside the wall in an accessible area so the system can be maintained. If they are in the wall, access panels must be able to open. Otherwise, if valves are completely inaccessible, the building must be shut down to perform maintenance.

Tubes and Couplings
Don’t forget tubes and couplings need to be installed by a plumber during rough plumbing. These are sent by your submetering provider to the plumber or GC. It is their responsibility to install during rough in.

Timing is Everything
Do not put in a meter right before the plumber flushes out the lines. Lines get flushed when they are ready for their certificate of occupancy.

Hold the Phone
Make sure you have an Ethernet connection. Analog phone lines are being phased out and you don’t want to find yourself with an outdated connection.

Start Planning for Submetering Early in the Project
The sooner you plan, the better chances for a seamless installation. There is no financial benefit to having your plumber install a submeter versus your submetering provider. It is best to have your submetering provider manage the installation since they will need to install the transmitter and calibrate each meter to the appropriate transmitter. Properly commissioning the system to insure the transmitter is connected to the assigned unit is imperative to make sure the owner is billing the correct unit.

Be prepared to bring in reliable partners to help you select the highest quality and most cost effective submetering solution. They will also determine the best configuration for your building type. The payoff is well worth the effort – greatly increasing revenue and property value while also encouraging conservation.

                                                                                                                                                                       

Phil NePhil-Neeveseves
National Director of Multifamily Solutions
719.304.4111   pneeves@minolusa.com

Phil Neeves, a 20-year veteran of the submetering industry, is regarded as one of the leading industry experts in heating and cooling cost allocation systems.

Prior to joining Minol, Neeves served as Vice President of Central Region for ista North America. His experience includes 16 years in the submetering industry and 14 years as an owner/partner of a full-service real estate company specializing in syndicating multifamily apartment communities nationwide. Neeves extensive expertise in submetering and energy allocation has allowed him to successfully guide clients through utility metering conversions for both conventional financed and HUD insured properties. He served three years on the Board of Directors for the National Submetering and Utility Allocation Association (NSUAA) and is a Lifetime Member of the America’s Registry of Outstanding Professionals.

Practical Tips for Writing a New Construction Budget

Let’s face it, writing a utility budget for the first time can seem like throwing darts in a dark room hoping you hit the target. You may get close to the bull’s eye but chances are you’ll miss.  Writing a utility budget for a multifamily community is complex but starting with the essentials is a step toward success.

Below is key information you need to begin building an accurate utility budget:

  • Property fundamentals:  Number of units, floor plan mix, common area features such as pool, clubhouse and other significant water features.
  • A current rate schedule from the water provider (which is typically available online). Call and ask the provider what rate would apply to your size community. This will vary by provider so don’t assume and make sure you verify. You will also be noting any fixed charges not based on consumption such as monthly maintenance fees, sewer capacity charges and meter size charges that may apply. Note the frequency of fixed charges which may vary from the provider consumption based charges and adjust formulas accordingly.
  • Find out if there are sewer taxes in addition to your sewer charges on the provider bill.  Check both state and county tax bills. Look for hidden sewer charges, storm water, bay fees, etc.  Again, address frequency as these may hit on a different schedule than other charges.

Click here for the complete article which includes a sample budget template.

By Kate Forsyth, Director of Energy Management for Minol