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Controlling Utility Costs: Landlords search for new methods to pass water, energy expenses back to tenants
In the first half of 2001, apartment owners were breaking into a sweat over the prospect of rapid increases in energy costs. By the end of the year, that threat had faded, but owners were still looking for ways to control their costs for energy. Meanwhile, the quest to manage costs for water continue unabated as prices for that essential commodity continued to rise. For thousands of owners of older apartment buildings with central heating and cooling, the reduction in fuel and electric costs in the last half of 2001 did not eliminate the need to conserve or to find ways to pass back energy costs to tenants. Demand for help from owners with natural gas-fired boilers increased dramatically in 2001, said Phil Neeves, vice president of Energy Billing Systems, Inc., in Colorado Springs, Colo. The demand for “energy cost recovery” methods also rose for National Water & Power, which has previously mostly focused on water submetering, said Bill Griffin, vice president and general counsel of the Santa Ana, Calif., firm. Submetering of water and sewage usage has been adopted by a large number of apartment owners in recent years, but, until 2001, there had been little demand for ways to pass back central heating and cooling costs to tenants. Now, Energy Billing Systems and National Water & Power are hustling to respond to the demand. There is “enormous interest” in doing something to recover heating and cooling costs, said Griffin. The first landlords to try to implement such measures are generally the same ones that have pioneered water metering for individual units, he added. Of the 25 million apartments in America, he estimated that one-third could make use of some energy cost recovery system. How to pass back the costs There are only two ways to pass back those costs. The first is to estimate each tenant’s usage and share of costs based on the square footage of the apartment or number of occupants. This is sometimes called the Ratio Utility Billing System or RUBS. This has one major drawback: With costs going up as fast as they were, tenants generally did not like being asked to pay substantially more money based on nothing more than an estimate of how much energy they actually consumed. The other method is to measure actual usage. In the case of water or in-unit gas-fired heaters, landlords can install meters to measure the actual flow of water or gas. But where there is a central boiler and chiller, it’s necessary to use “check metering,” Neeves said. Instead of measuring actual utility use, this method relies on measurements that can be used to closely approximate actual usage. The advantage is that it’s far more accurate and easier to get tenants to accept. The downside is that it involves significant upfront equipment installation costs. For its clients, Energy Billing System measures the time that the fan runs in each apartment and the temperature of the water in the heating or cooling unit. It then uses this data to estimate actual usage of gas for heating and electricity for central cooling. Neeves said the resulting calculations are generally within plus or minus 6% to 8% of actual consumption. He estimated the cost of installing such a system at $180 to $250 per apartment, plus monthly service charges for meter reading and billing of $2.60 to $3 per unit per month. He said the payback period could be as little as six months, depending on how an owner’s leases are structured and how quickly they can be revised to require tenants to pay these costs.
When meter readers had to enter tenants’ apartments. Reports from apartment owners who have tried submetering have been “fantastic. Griffin noted that in Texas. . This eliminates any uncertainty about the regulatory situation that could deter owners from installing submetering or check metering equipment. according to the National Multi Housing Council. Already. 2000-2001 president of the NSUAA. with the advent of radio transmitter-based meter-reading systems. he said. the National Submetering and Utility Allocation Association (NSUAA) in Highland Park. The system measures “fan run time” and relay data by radio. regularly timed readings to a digital signal. The NSUAA has even created a new membership category for apartment owners and managers. But in some older buildings.” says Barbara Vassallo. says Griffin. this doesn’t present a problem. although that includes condominiums and mobile homes in parks. Texas and Florida. about two million units are sub-metered.” Submetering is installing individual water meters in each unit so that tenants may be billed for their consumption. Adapting buildings smaller than 50 units may be impractical. The industry also includes more than 20 smaller players. Treitler says. Va.) Submetering is coming on particularly strong in three large.. although the installation may be more expensive and complicated than new construction. director for state and local policy at the National Apartment Association. Md. situated around a large complex. (Those meters can usually be hidden in closets. fast-growing states with significant water supply problems: California. Most of National Water & Power’s customers use RUBS as a way to pass back water charges to tenants. retrofitting may be prohibitively expensive. call (847) 681-8475 or write to NSUAA. “Soon. For more information. Ill.” predicts Marc Treitler. Automatic submetering works like this: a Pulse Meter Transmitter is attached to the face of each unit water meter. IL 60035-2545. Highland Park. almost all new (large apartment building) construction will be sub-metered for water. All that changed in the late 1990s. as well as conventional apartments. landlords using the system could face regulatory obstacles.) The transmitter converts the data from frequent. (Viterra and NW&P are the two largest nationwide providers of water submetering and ratio-analysis bill systems. Even many apartment buildings constructed with no thought of metering individual units can be profitably retrofitted. Technology spurs submetering trend The fast-growing trend toward water submetering in large apartment complexes owes its expansion to new technology.National Water & Power installed a system for measuring heating and cooling use for a major national developer at a luxury high-rise project in Bethesda. where they generate monthly tenant water bills. were in buildings of at least 50 units. In most states. Repeaters. as of 1996. state law explicitly gives landlords the right to pass back costs through RUBS or metering. Arlington.4 million units. the concept never caught on. This new technology makes members of the submetering trade association. “Automatic meter reading is the technology that made this business possible for apartments. and general counsel of Viterra Energy Services. 1866 Sheridan Road. National Water & Power will use the data to calculate each tenant’s share of costs and send bills. but. optimistic. The receiver converts the signals to data and relays them to a computer. receive those signals from the transmitters and amplify them for transmission to a central receiver. but in some states. about 46% of America’s apartments. Suite 210. especially ones in which several different pipes may feed a single unit. or 9. San Diego. because of privacy and liability concerns.
Allowing $19. RUBS – Ratio. the economics of submetering can be compelling. Treitler says. The industry acknowledges that submetering can be a tough sell to tenants in markets with a good supply of unmetered competitors. submetering systems were installed on three new apartment complexes. . RUBS. and metering. and some cities and the state of North Carolina outlaw them. Griffin projects that submetering can actually recoup about $60. Georgia. The state takes the position that submetering makes an apartment owner a public utility. Utility Billing Systems – may work out instead. But it’s the owner. as even the industry itself acknowledges. and Oregon have established submetering laws that are acceptable to the industry. not the submetering company. not measurements.” How to deal with resistance from tenants If you are considering submetering. collecting. such as Oklahoma. Miss.” Treitler says. and Colorado Springs. and/or the number and nature of plumbing fixtures in each unit. Ratio analysis has long been used to allocate utility charges in shopping malls.000 annually. Lately Arizona. you may encounter tenant resistance to paying water bills. that has to absorb uncollectables. Texas. which the landlord will continue to pay. (Some jurisdictions.. and he pays $3 a month per unit for billing.. But submetering has had some embarrassing setbacks. The public service commission became involved because one of its employees was a tenant in one of the buildings.) Instead.000 of that. often offered by the same companies that provide submetering billing. “This business is relatively unregulated nationwide. Treitler says the collection rates for apartment sub-meter water bills are more than 90%. or Resident. Nevertheless. In Ridgeland. But as water service costs rise rapidly across the country. bar apartment owners from passing along monthly administrative charges in water bills. landlords can include provisions in their leases entitling them to withhold security deposit refunds for tenants who haven’t paid their bills. (Some jurisdictions prohibit that anyway. “We have no problem with reasonable regulation. Meanwhile. The industry warns landlords not to turn tenants’ water off for failing to pay their bills. Colo. to make sure it stays that way.000 annually. Educating tenants about watersaving measures also can help. more and more landlords take the plunge. Griffin postulates a “typical” 285-unit complex.000 for common-area water. cost apartment owners about $4 per month per unit. some apartment owners shy away from them. water expense is $92.” Lobbying is a high priority for the NSUAA. and “as it becomes more and more acceptable. When submetering is impractical. Oklahoma. submetering can save up to $73. tenants may use 1 to 6 million gallons less annually. Minnesota. In this example. Griffin says experience shows that the tenant-by-tenant charges resulting from RUBS closely track those from submetering. For apartment owners. then it’s not a deterrent to tenants. for example. plus $2 to $4 per month meter reading. subject to regulation.4 months. Because the cost allocations are estimates. some vendors finance installation of the meters for their apartment customers. when the state public services commission nixed the owners’ authority to issue individual water bills. with average per-unit water charge of $27 a month for 130-160 gallons per day.Vendors’ charges to apartment owners range from $100 to $200 per installed meter for new construction to about $300 per meter for retrofits. the number of occupants. after a $10 per unit setup fee. Without sub-meters. billing and collection charge. Griffin says such problems are rare. RUBS bills tenants for water use based on formulas that may take into account relative square footage.) To sweeten the sale. he’ll recoup his investment in about 14. if the landlord’s initial investment is $210 per unit for water meters and account set-up.
. “A big sewage-treatment plant can run $100 million. tenants paid only for telephones. is one such case. They “want to be out of the utility business. Water submetering may be one of the last steps in the trend toward growing tenant responsibility for utility payments. gas. tenants pay an average of 85% of their utility costs: electricity. “Owners like the idea of making residents responsible for something they can control.” Griffin says. Md. owners average only about $30 per month per unit for garbage and water/sewer service. Nowadays. Besides stimulating tenants to use less water. cable and telephone.By promoting water conservation. “Fifty years ago. submetering can have important social benefits that transcend an apartment complex owner’s profit-and-loss statement. some municipalities have had to impose building moratoriums because of insufficient sewage treatment capacity. Montgomery County. And. submetering can help detect wasteful leaks.” Griffin says.” Griffin says. east of the Mississippi River.” . even where water is generally plentiful.
Submetering is the measurement and billing of utility use in individual dwellings in a mastermetered environment.RUBS: (Ratio Utility Billing System): A Ratio Utility Billing System allocates the property’s actual utility bill to the residents based on an occupant factor. square footage factor. Energy Billing Systems. or a combination of both. the . based on their individual usage. Available software systems enable automated billing procedures. The owner continues to be responsible for the remaining portion of the utility bill that covers the building's common areas. Submetering permits the measurement of utility use in individual units via a building-owned meter that is installed for each unit. The property continues to purchase its utility on the less expensive commercial or bulk residential rate basis. Current submetering technology facilitates reading of the submeters without apartment entry. submetering in master-metered buildings is unlike virtually any other energy conservation measure that can be undertaken by a building owner. The submeters are owned by the building and not the utility. based on actual consumption. ABOUT EBS .). but now the owner is able to bill a utility to individual units. Inc.WHAT IS SUBMETERING? Measuring individual usage. which is then billed out to the individual units. The relationship between the property and the utility remains exactly the same as before. etc. When a building undergoes a typical energy conservation measure (installation of a new boiler. The property continues to receive one bill from the utility company.
58 x 1.0 (1 person pays 100% of 1) people = 1.8) A sample breakdown of a resident’s utility bill utilizing RUBS may be as follows: Water: Sewer: Garbage: $8. square footage or a combination of both.58 x 1) ($8. multiplied by the apartment’s individual designated occupant factor. the financial savings flowing from the reduced consumption directly benefit the residents who conserve. The advantage of implementing a RUBS program is that it requires no initial capital investment and it will avoid intrusion upon entering each resident’s apartment to install a meter.6 (2 people pay 60% more than people = 1. as an energy conservation measure. to the extent that individual residents decide to reduce consumption.6) ($8.9) ($8. is qualitatively different in two respects. Submetering. sewer. The allocation starts with a copy of the property’s utility bill using the dollar amount of the consumption period that is to be billed.8 (6 people pay 30% more than 1) 2) 3) 4) 5) Your Property’s Utility Bill = $1. Second. RUBS is a utility billing method that allocates 100% of your property’s utility bill to the residents based on an occupant factor.9 (3 people pay 30% more than people = 2.3 = $8. and the square footage occupant factor combination for gas and electricity. Below is an example of RUBS.350 / 157.58 x 2.02 ($8.52 $10. A predetermined common area allowance percentage (determined by you.3 The allocation is figured: $1.58 $18.58 x 1.owner reaps the benefit of lower energy costs.30 people will pay $18. This is a fair and legal (in most states) system when submetering is not feasible. Accurate Utility Management is able to utilize the RUBS utility billing method when submeters are not present.45 people will pay $24.58 x 2. First..350. RUBS – How It Works: It is not always possible to install a submetering system at a property due to plumbing and electrical configurations as well as the initial cost of the capital investment.2) ($8. Faced with these restraints. This example may be used to allocate any utility such as water. Each apartment is designated with an occupant factor. it will result in lower utility consumption.58 x 2. less a predetermined percentage (determined by you. How Accurate Utility Management will process a resident bill utilizing RUBS.5) ($8.00) Total amount to allocate = $1.. We typically use the occupant factor allocation method exclusively for water and sewer.58 people will pay $13.00 Property’s factored occupant total = 157. Designated Occupant Factors: 1 2 3 4 5 6 person = 1.88 people will pay $21. apartment owners may use the RUBS utility billing method to recover utility costs from their residents.58 1 2 3 4 5 6 person will pay $8. the owner) is deducted to give us the billable figure to allocate.500. Experience shows that the change from master-metering to submetering typically reduces the consumption of a utility in apartments by 15-35%.2 (4 people pay 30% more than people = 2. the owner) of a common area allowance.5 (5 people pay 30% more than people = 2.60 . gas or garbage.73 people will pay $16. This amount is divided by the grand total of each apartment’s designated occupant factor.00 10% deduction for common area = $(150.
65 .Bill Fee: TOTAL: $3.95 $41.
Billing for utilities allows the property owner to cover the escalating costs of water. This is usually the monthly billing charge. In many cases the usage from a water sub-meter may also be used to measure the amount of sewer usage to be charged. • Increases property value. The allocation is the charge for the un-metered usage of hot or cold water based on the percentage of metered usage as compared to the overall metered usage. would also be 2000 gallons. 2) Transactional Flat Fee . The initial cost of setting up a Sub-metered system on a property is quickly recovered once billing begins and residents begin paying for their utility usage.LEGEND OF TYPES OF FEES AND CHARGES: 1) Recurring Fixed Charge . bounced check fees and on-line payments fees. Some FAQs on submetering as PDF attachment below: QandAsheet for sub m etering. there is minimal costs associated with maintaining the system.A metered utility is one which is based upon the usage reading from a submeter .pdf . it frees up cash that would be spent on typically on utilities for property enhancements and capital improvements. Additionally. 4) Allocation Charge . Once the initial cost of Submetering has been recovered. the property owner is able to recover the majority of the properties utility expenses while simultaneously giving the residents a measure of control regarding their personal utility usage and costs.A recurring fixed charge is a flat rate charge that is charged on a regular periodic basis which is not subject to proration. A sub-meter measures various utility usages such as gas. then the usage for the subordinate utility. Effectively.An allocation charge is needed when a meter is used for metering either the hot or cold water. This fee is also not prorated at move-in or move-out. in this case sewer usage. Example: If the individual sub-metered usage for a unit was 2000 gallons. • The cost of Sub-metering will be recovered faster than most capital expenditures and revenue continues long after the cost has been recaptured. • Protects your rents from utility cost increases. multiplied by the actual rate charged by the municipal billing agency.A transactional flat fee is a fee charged for a specific situation on a per transaction basis. These charges may include but are not limited to late fees. Benefits of Utility Billing: • When residents are financially responsible for the cost of utilities they become more conscientious and conserve more. 3) Metered Utility . sewer and trash without the hassle of raising rents. electricity or water for an individual residential or commercial unit. Collection of utility payments increases the Net Operating Income of the property thus increasing it’s overall value.
These include: Assigning an ‘annual allocation’ to a customer based on customizable criteria and moving subsequent consumption into different rate levels. winter water average or usage last year same month.A Water Billing Software Solution does the following: A selection of specialized water billing and sewer billing functions are listed below: • • • • • Compound meters Deduct Meters Automatic conversions using CuFt / Gallons / 10’s. # of ‘Equivalent Units’ and/or other factors. Allocations of Distribution. Water Running – If the utility requests that water be billed based on some known value because they require the customer to keep their water running. • • • • • • • Budget Billing / Level Pay SIC Codes and other marketing information Outsourced Bill printing / mailing Electronic Bill Presentment and Payment Remittance Processing Block Consumption and Consumption Analysis reporting Meter Testing history Specialized utility functions are listed below: ELECTRIC UTILITIES: • • • • • • • • • • • • • • • • • • • • • • • • • • Usage (kWh) and Demand (kW) billing Complex Rate Structures are the norm – there are built-in places for ‘SQL Code Snippets to handle all kinds of highly specialized requirements. Time of Use. 100’s. SnowBirds – Seasonal customers whose account may be inactivated and re-activated upon request. On-Peak. square feet. Off-Peak Pay-As-You-Go billing Track LIEAP or other Energy Assistance credits Round-Up Charges Green Energy Credits Demand Time and Facilities charges Meter Testing and Mass Inventory maintenance KVAR/Efficiency Debits/Credits Street/Area lighting – can allow only one ‘test’ meter to automatically bill all similar lights Complex Tax calculations Partially taxable customers / charges Many different AMR/Electronic interfaces Budget Billing/Level Pay Power Factor Adjustments Compare multiple years of consumption on Bill graphs SIC Codes Customer Service Levels Outsourced Bill printing/mailing Other Marketing information maintained Electronic Bill Presentment and Payment Remittance Processing Block Consumption and Consumption Analysis reporting . bathrooms. 1000’s Irrigation charges based on acre feet or other allocations or shares Complex Rate Structures to handle mandated conservation measures. etc. Mid-Peak. Transmission and Generation to different vendors Detailed portrayal of charge calculations on bills. Calculations based on the number of fixtures. Most commonly. Basing sewer usage on some calculated average based on some combination of prior billing periods’ usage.
• Meter Testing History .
GAS UTILITIES: A selection of specialized gas features is listed below: • • • • • • • • • • • • • • • • • • • • Adjustment by various STP. Detailed portrayal of charge calculations on Bills Fuel Adjustment calculations Track LIEAP or other Energy Assistance credits Partially taxable customers / charges Delivery & charge of Propane any number of times a month. all using different rates. Many different AMR / Electronic interfaces Budget Billing / Level Pay Compare multiple years of consumption on Bill graphs SIC Codes Customer Service Levels Outsourced Bill printing / mailing Other Marketing information maintained Electronic Bill Presentment and Payment Remittance Processing Block Consumption and Consumption Analysis reporting Meter Testing History . BTU and ATMP factors Additional adjustment factors by meter Complex Tax calculations Allocations of charges among different vendors in a deregulated environment.