When choosing the right billing method for your multifamily community, there are three key factors to consider:
- Do I want to measure individual usage or allocate expenses across the community?
- What is my expense recovery goal?
- What is allowed within city and state regulatory guidelines?
Reducing consumption and expense is something we can all do more of together!
These may seem like simple tasks but all require significant time and effort, as well as a trained eye to know exactly what to look for and when. In addition, dealing directly with utility providers can be challenging if you aren’t accustomed to navigating the processes.
1) Utility rate errors. You may not be charged the correct rate. Check the provider website and compare the posted rate schedule to your bill. If your building is multifamily and you are being billed a commercial rate, it is likely higher than a residential rate. Also, there are some rates based on occupancy. These occupancy numbers on occasion on are reverted to a factor of “1 occupant” if the numbers aren’t updated by the owner. The result is a rate increase. Rates may also be based on meter size. Find out sizes of your meters and compare with your bill to make sure it is reflected correctly. Contact the provider to find out if the meter associated with the account qualifies for a lower rate. If the building does qualify for a lower rate, you may be able to request up to a 5 year credit of the incorrect rate you were charged
2) Utility providers have charged the account taxes. In several states utility taxes aren’t allowed to be charged and yet, the provider charges them anyway. For example, Texas utilities were charging tax on utilities. If you find taxes on your bill, contact your PUC or attorney to find out if the type of tax on your bill is allowed and how far back you can request a refund if applicable. If you’ve been incorrectly charged, you can estimate the taxes you’ve paid and send a request for a refund to the provider going back 5 years or more.
3) Meter read error. If your consumption has increased more than 15% over the previous month and the previous year, same month, you have a problem. First check to see if the previous read is the same as the end read last month. If not, there’s a definite meter read error. Next, assuming no known leak or work requiring water (like filling a pool, power washing, etc.) has been done, look for a leak. Check to see if the meter is running when the building is unoccupied or residents are likely sleeping. Have a qualified maintenance supervisor check the meter after midnight and take a video if the meter is moving. Utilities are quick to say there is no leak without thoroughly investigating. You will need proof either way. If no leak is apparent, request a re-read of the meter. Be sure to have an onsite maintenance team member there when the utility company re-reads the meter to verify their findings.
4) Estimated reads. Estimated reads can have a very negative impact on your budget by hitting you with an expense that is too high or low. Estimating too low may result in an immense true-up expense on a future bill. Stay vigilant about calling the provider and requesting a “true read.” The provider may be having trouble accessing the meter. Schedule an appointment and meet the meter reader to ensure your read gets correctly trued up.
5) Erroneous deposits. If you are charged a deposit, always investigate it before you pay. Even if this is a new property you may not need to pay a deposit if the same owner name has credit in excellent standing with the utility provider. Call the provider and they will look up the credit standing for the legal entity name. If you can’t get the deposit waived, find out how long the deposit hold will be and make a calendar note to reach out for a future refund.
6) Charging late fees during the grace period. If you have a late fee on your bill, check your records to see if you paid by the due date. If you have proof of the payment date, call the provider and request the late fee be removed.
7) Multiple bills for the same account/same period. If you receive two or more bills for the same account in a bill period, call the provider for an explanation. Unless the dates line up perfectly, there’s a duplicate bill issue to be credited.
8) Bill use/cost duplicate. The use or cost amount of the bill is exactly the same as the previous bill. Unless this is a flat rate bill versus a bill based on actual consumption, it may be an estimated bill. Call the provider and ask for an actual consumption based bill.
9) Overlapping bill periods. If the beginning or end dates are the same as the previous bill overlap you may be charged twice for those days. Call the provider and request a credit for the overlapping days.
10) Zero usage on bill. The meter is likely not working or the provider’s process isn’t catching the read and charging you. Don’t let this for more than one billing period or you will eventually receive a large true up bill.
Don’t let your revenue go down the drain or out the window! By not auditing utility bills, many portfolios are paying hundreds or even thousands of dollars in extra fees and incorrect rates. It’s worth your time to get to know your bills or assign a skilled analyst to manage it for you.
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 needed 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.
Shedding the Light on Energy Savings
The EIA says 50-75% of your utility expenses are for electricity and of that, approximately 21% is just lighting. If you spend an average of $100,000 annually on one building that adds up to $21,000 just to keep the lights on! By simply making your lighting 25-50% more efficient, you could save up to $10,500 each year.
It sounds easy and it is. Below are some steps to get you started:
Step 1: Determine how much you are using and spending
It’s critical to know what you are doing now so you can assess opportunities for energy savings later. You will need 12 months of common area bills that include the building’s interior lighting. This should include all account numbers, billing date cycles, number of days in each bill, usage in kWh and demand kW, and expense. At the end of each month, calculate the rate by dividing expense by usage. This will give you a base analysis for where you are now versus when you initiate your lighting cost avoidance program. If possible, include a hyperlink to actual bill images to be referenced later as needed.
Step 2: Complete a building lighting audit
You need to know what type of lighting you have, how often it’s in use and where it’s located. A building diagram with notes is very helpful. It is best to do the audit both during and after business hours. Below are some examples of questions to answer:
- Are lights off in unoccupied spaces? (Stairwells, parking levels, fitness centers, business centers, party rooms, offices, basements). There may be opportunities for reduced or sensor lighting.
- Are lights in the models on sensors or timers to be off when unoccupied?
- What are the model, types, and usages for your lighting fixtures in the main hallways and business areas?
- What are the hours when lighting is used in business areas, hallways, basements, storage, garage, fitness, and business rooms?
- Are you installing energy efficient lighting in vacants when turned?
- Do you have the number of fixtures, number of lamps per fixture, type/number of lamps per ballast, wattage?
- What dates were fixtures installed and what is their condition?
- What is the daylight availability (windows near lighting)?
- Are the tasks performed in the space (critical or secondary)?
Step 3: Low hanging fruit: Consider where you can change lighting hours, add motion sensors, timers, light reducers and use energy saving lamp bulbs.
This is the easiest, least expensive step you can make. You know you can’t rely on people to remember to turn off lights but for a small expense you can make sure lights not used are off or energy reduced during day light hours or evening hours. Sensors, light reducers or timers in models, business centers, fitness facilities, basements and storage areas are key energy savers. Even in the garage and stairways, you can usually install light reducing devices that will use half the energy when not in use without violating any safety requirements. Make sure you rid every lamp of incandescent light bulbs – these not only use more energy to light the space, they put off 2-3 times the heat and last a fraction of the life of an energy efficient bulb.
Step 4: Hallway lighting
Hallway lighting can easily account for a large chunk of your common area electrical bill. By choosing the best lighting for the task you can reduce your usage by 20-50%. If the fixtures are well-maintained, it may be worthwhile to research your options for replacement bulbs that would fit and be more energy efficient. If it’s time for replacement, you may pay for the new fixtures in energy savings within a reasonable time. A simple pay back analysis can help you determine what your best option might be:
To calculate a simple payback on your investment, divide the cost of the new fixtures by the annual cost savings using current rates. You have already determined your annual usage and rates in Step 1. Now, you can apply the energy savings by installing the new equipment to the usage once
you have that number divided by the cost of the investment. Easy Tip: Hallways and ceilings painted in light reflective colors increase the light glow and help reduce energy usage.
Finally, once you’ve completed Steps 1-3, it’s recommended to consult with lighting experts on your findings and determine the most efficient next steps toward energy savings. You and your budget will be glad you shed some light on your energy expense!
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 install tubes and couplings in each unit after he’s already completed the initial work.
Best Practices for a Seamless and Cost Effective Submetering Project
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.
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.
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.
National Director of Multifamily Solutions
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.
Preparing for another winter is not something we want to think about while basking in the last days of summer, but it pays to plan! The Farmer’s Almanac forecast was spot on last winter and it looks like a cold winter is in store for many of us in 2014. Preparing for colder temperatures is essential to avoid budget busting utility bills for your common areas such as hallways, gyms, lobbies and business centers.
- Sealing the building envelope (windows, doors, entrance ways and ceilings) is essential to energy and cost savings. Lack of proper insulation is a significant factor in common area heating and cooling loss. An easy thing to overlook is proper insulation. This can often be done in-house very inexpensively by rolling out new insulation in ceiling spaces. Proper ceiling insulation can save as much as 20% on your heating and cooling bills.
- Maintaining central systems is critical. Because heating and cooling accounts for up to 56% of your building’s energy cost, make sure the HVAC is running at peak form BEFORE winter hits. Even if you need to pay an expert to do a winter checkup, it will be well worth the expense in energy savings and verifying your system can handle the upcoming chill. Tips for HVAC preventative maintenance.
- The Environmental Protection Agency (EPA) estimates that windows account for up to 25% of a building’s energy loss. The proper use of awnings, blinds, insulated curtains, UV window tinting in southern exposures with large expanses of glass, as well as the sealing of air gaps can have a significant impact on energy loss through windows. While windows with an Energy Star rating is ideal and can have a huge impact on your bills, it is often cost prohibitive for properties without proper budgeting.
- The Energy Information Administration (EPI) estimates that 21% of electric bills are related to lighting. Upgrading lighting to energy efficient bulbs is something to consider before the darker days of winter are here. There are many ways to do this inexpensively without resorting to a “capital improvement” level expense. Tips for maximizing lighting efficiency.
- Motion sensors are probably the lowest cost and easiest, instant energy saver in common area spaces. Why leave a light on in the model unit, gym or storage areas if no one is in there? Investing just a few hundred dollars in these devices can give you a rapid return on investment.
- Resealing doors with new weather stripping and capping unused power outlets are another way to stop the cold from sneaking in. Another place to address in common areas is any vent that central fans or unused air conditioning vents that meet the exterior of the building. When closing the vent is not enough, install shutter seals on the inside of the vent and make a note to remove them in spring.
- Phantom power or vampire load refers to energy used by equipment and appliances that are idle. Large appliances, office equipment rarely used and computers left plugged in overnight can account for as much 10% of your electric use. Simply unplug rarely used items. You cannot find an easier, cheaper way to save energy!
- Replace appliances in common areas and offices that are more than 5 years old with Energy Star rated products. That old refrigerator may still work but it is costing you more in electricity annually than a newer, more efficient model. The same holds true for that gargantuan office copier from the 90’s in your leasing office.
- Programmable thermostats are AMAZING! These Wi-Fi thermostats can be easily installed, set up and programmed from anywhere. Program them to turn down the heat or A/C during evening hours. You can save as much as 10% or more in HVAC usage.
- Water conservation/leak detection is a commonly overlooked opportunity to save as much as 25% or more in water waste. For example, after 5 years a toilet that was a 1.6 gallon per flush creeps to a 2+ gallon flush! Have an experienced technician or plumber recalibrate the flush mechanisms. Also, faulty/cheap toilet flappers degrade quickly and leak over time. Replace them at least annually and use a better grade of product. Lastly, replace old faucet washers that cause drips and aerators with low flow devices.
By taking time out this fall to do this energy savings work you may have a different conversation with your owners when it’s time to review the financial statement. Instead of facing the heat of “Why are you over budget in utilities”? You will have the opportunity to explain how you achieved such great savings. And that would be a far cooler conversation by far!