Apartment providers find both financial and conservation benefits from charging utilities to residents.
Scott Wilkerson drew laughs at an NAA Capitol Conference forum on green and energy efficiency issues when he joked that he helped convince an owner to submeter the water at his property by saying he would be “stupid” if he didn’t do it.
“The owner did it without a question,” says Wilkerson, President of Charlotte, N.C.-based BBR Management. “It just makes so much sense.”
It’s a funny story, but the potential savings are nothing to laugh at. Wilkerson says his company has submetered most of its North Carolina-area apartment communities during the past 10 years, and one of the main reasons was the impact of submeters on residents’ water conservation.
“If residents pay for what they use, then they will care how much they use,” Wilkerson explains. In communities where his company has retrofitted apartments with water submeters, consumption has typically dropped by about 20 percent and as much as 50 percent in some unique cases.
“It’s not that residents use that much less water. They waste that much less water,” Wilkerson says. “[If they are paying for their water], they are more willing to accept a low-flow showerhead, and they use water more judiciously. If a faucet or toilet is leaking, they want it fixed right away.”
Shifting the responsibility for water bills to the residents also passes any increase in utility rates to the resident, creating further savings. Wilkerson adds that he’s had very few complaints from residents whenever his communities have submetered the water. “Residents pay their own electricity and they pay their own gas,” he says. “They don’t object to also paying for the water and sewer they use.”
BBR enhances the conservation efforts by installing water-saving amenities such as aerators in the sink, low-flow showerheads and pressure-reducing valves simultaneously with the submeters.
Making the switch is such a no-brainer because of its dramatic impact on value, Wilkerson says. He explains with a simple example: If a community with 100 apartments uses 3,000 gallons per apartment each month for 12 months at a rate of 1 cent per gallon, the total water and sewer bill will be $36,000. Even if the community fully offsets the residents’ higher utility costs with rent reductions, a 20 percent decline in consumption results in savings for the community of $7,200 per year.
“If that’s all I get and it’s valued at an 8 percent cap rate, that’s $90,000 in value,” Wilkerson notes. When the utility provider subsequently increases rates, the savings jump even higher, as the residents are responsible for the increase. The cost of submeter systems, including equipment, installation and permits, will vary depending on the community, but Wilkerson says $300 per unit is a conservative estimate in most cases, for a total cost in this example of $30,000. “This makes a huge amount of financial sense for the owner to invest in,” Wilkerson says.
Legal Incentive
If the potential financial and conservation rewards from a submetering system aren’t enough to convince owners, the legislative efforts in some state or local jurisdictions may make such systems even more enticing. One trend to watch is the impact of state legislation on the recovery of utility billing administrative fees.
A key example comes from a recent announcement from the Texas Commission on Environmental Quality (TCEQ) and new proposed rules regarding the Texas Water Code. Effective this past January, owners and managers of apartment homes and mobile home parks may require a service charge of up to 9 percent of the water and sewer costs related to submetering.
Texas is one of the most heavily regulated states for utilities and, as such, has served as a model for other states to follow. This type of groundbreaking legislation is key to maximizing cost recovery for property owners and it positively impacts conservation efforts.
The City of San Diego, meanwhile, could become the largest city in California to require developers of new apartment buildings with three or more units to install water submeters, according to Alan Pentico, Director of Public Affairs for the San Diego County Apartment Association. Pentico says that since water rates have gone up 50 percent in recent years and are set to rise further due to the region’s water crisis, the legislation could be good for the apartment industry if it is worded properly.
“The industry has had to figure out new ways to pass on those costs to renters, and submetering is a way to do that,” Pentico says.
San Diego’s ordinance could help to alleviate renter-manager disputes by dictating what appears in the renter’s water bill, and it could also allow managers to pass through an administrative fee for a billing program. Pentico worries that requiring submeters in high-rise buildings could raise construction costs to untenable levels for affordable housing, however.
Other drought-ridden states such as Georgia have looked into similar legislation, and other cities in San Diego’s region are closely following the San Diego ordinance, which was set to go to the city council on April 5. “We’re trying to develop an ordinance that other cities in California could use,” Pentico says.
Developing Benchmarks
Improving the resource efficiency of apartment buildings could become more important for apartment managers as efforts to develop practical bechmarks spread around the country. Benchmarks provide a context for assessing performance, and when it comes to utility management, they allow owners to compare their building’s energy consumption to similar properties in terms of size, type and location.
Several influences—notably governmental and consumer—are converging to renew efforts toward the development of practical benchmarks. The cities of New York, Seattle and Austin, Texas, have mandated that apartment communities begin entering energy consumption information into a database for the purpose of tracking and eventually reducing city-wide carbon emissions. Such benchmarking data would also be used to rate properties’ energy efficiency, thereby allowing consumers to use such ratings as a factor in their housing choices.
Whether or not benchmarking is required, utility management providers say that energy or utility audits can help apartment owners and managers analyze their utility bills for accuracy and identify potential savings. Audits of water/sewer, gas, electric and telephone bills can ensure communities are paying the lowest rate for utilities and the utility company refunds overcharges.
Energy audits also can provide detailed information about how electricity is being used in a building and recommend energy efficiency upgrades or retrofits. Armed with such information, owners can calculate the potential payback for investments in upgrades such as insulation or energy-efficient appliances. In-depth audits also can include alternate rate analysis, rebate research, energy awareness programs and building control system applications to remotely monitor and control equipment.
Utility management providers also can offer programs to examine vacant unit utility bills, identify residents who do not have utility accounts in their name, and bill those residents. Such programs also increase focus on hibernating vacant units at all times, reducing energy consumption.
One supplier reported rolling out a program over a 43-community profile with 14,000 apartments. The program reduced the average monthly vacant utility bill from $57 to $36, saving $3,780 annually for every 300 units (at 95 percent occupancy). The program also identified 3,646 vacant unit resident violations, generating annual revenue of $29,800 for every 300 units.
Data Mines
Another way for owners and managers to analyze their utility usage is by mining monthly utility consumption. Software applications that conduct sophisticated data mining and statistical analysis are commonplace in many other industries such as manufacturing and biotechnology, but are rarely used in utility billing.
By using statistical data analysis and mathematical modeling, multifamily industry owners and managers can access useful information that is hidden in utility consumption data that will help identify undetected maintenance issues, such as leaks; inoperable metering equipment; high-energy users; and how communities compare in utility consumption.
As apartment operators collect and analyze more data, different usage profiles and patterns appear. Managers can use these patterns to improve conservation and save money.
Software Integration
Apartment managers can further improve efficiency by ensuring their property management software can integrate with utility submetering software. Establishing an electronic link between the programs improves utility expense recovery and reduces internal administrative costs.
Utility software can facilitate electronic two-way communication to automatically upload resident utility data to a property’s account receivable files and help transmit occupancy records to the utility billing software. Such integration helps eliminate manual data entry of resident utility bills and occupancy update notifications, improves billing data accuracy and helps apartment managers minimize lost billing days.
Solar Gets Serious
The promise of clean, inexpensive energy from solar power generation has seemed just beyond reach for years. But today, a utility management provider says that due to technological improvements, combined with available financial incentives and rebate programs, onsite solar power generation deserves serious consideration as an opportunity to improve a property’s net operating income.
Alternative financial instruments called power purchase agreements (PPA) are designed to allow small- and medium-sized businesses to adopt solar power for no money down and pay less than they previously paid for electricity. PPAs allow businesses to lock in predictable electricity rates to protect themselves from rising energy costs. Some PPAs provide financing for design, installation, monitoring and maintenance.
To learn more about solar rebates available for a specific state and geographic region, visit www.dsireusa.org, which provides a comprehensive source of information on state, local, utility and federal incentives and policies that promote renewable energy and energy efficiency.
American Conservation & Billing Solutions, American Utility Management, Guardian Water & Power, ista North America, Minol USA, National Exemption Service, NWP Services and Sierra Utility Billing Services contributed to this article.
For Information
For a list of National Suppliers Council members who provide submetering and utility management services, see pages 80-85 or visit the NAA Buyers Guide at www.naahq.org.