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Jul. 15, 2013

Special Report: Benefits and Legal Issues Associated with Energy Management

By Jessica Fiur, News Editor

New York—Are you aware of the benefits—and legal issues—associated with energy management at your properties? In a recent webinar titled “Legislative and Regulatory Trends in Utility and Energy Management,” Michael Foote, senior regulatory and corporate counsel, NWP, and Mary Nitschke, director of ancillary services, Prometheus Real Estate Group, discussed the trends associated with utility and energy management systems.

One topic discussed was utility benchmarking. According to Foote, utility benchmarking is a legislative trend where jurisdiction requires that multifamily owners report their utility consumption data into the EPA Energy Star tool. This information is then measured and compared to data from other areas nearby and across the country to determine the efficiency of the energy usage. Once the data is analyzed, perspective residents could take this into consideration when deciding where to live.

As well as prospective residents, utility benchmarking can help property managers.

“[Property managers] can discern, when you slice and dice it, which properties [they] need to take a look at in terms of efficiency,” Nitschke said.

Though the speakers agreed that utility benchmarking has several benefits, they do warn that there are some liabilities associated with it.

“You’ll need to worry about meeting disclosure deadlines, and you’ll need to worry about penalties about failing to comply with local statutes and ordinances,” Foote said.

Some of these penalties can be rather high. For example, in Seattle, you can get fined $150 for the first violation if it’s not remedied in the first 15 days after the violation. After that, it’s $150 per day for the next 10 days.

“The key is that [disclosure and compliance] just can’t be ignored,” Foote explained.

However, though there are some issues that could negatively affect a company if the data isn’t reported, or isn’t reported correctly, Foote and Nitschke stressed that the benefits greatly outweigh the negatives when it comes to utility benchmarking.

“The benefit of utility benchmarking is understanding what the system can tell us, what it will tell and direct to prospective residents, leaders and buyers,” Nitschke said. “Because this data is open and it’s out there, we’re going to see a greater progression of our applicants looking at what utility costs are going to be at our communities.”

She continued: “Utility benchmarking also identifies who your problem children are—what sites are having trouble with their consumption. Once you work through the trepidation of the fear of the unknown [about utility benchmarking], it’s enlightening.”

Foote agreed. “It’s natural to fear a new requirement that is imposed on you, but the opportunities are very large,” he said. “[For example], if green buildings are your thing, this might be a determining factor for prospective residents.”

Another topic discussed during the webinar was submetering.

“This is important for multifamily owners because submetering allows them to recoup their utility expenses and it also provides a distinct price signal to residents,” Foote said.

A benefit of submetering is that residents can save between 18 and 36 percent compared to in-rent billing.

“It’s amazing how people will manage things when they have their skin in the game!” Nitschke said.

The big issue involved with submetering, according to Foote, is compliance, because the “rules are different everywhere.” However, this might not be a major problem in the distant future.

“We’re working to get legislation through that works,” Foote said.

The third topic that the speakers mentioned was ratio utility billing service (RUBS), which includes billing residents by using a ratio of the number of occupants, square footage of the property, etc. However, not all properties can be billed this way because of their plumbing.

Once again, issues with RUBS include compliance and disclosure, as well as resident awareness.

“You can’t have conservation without full participation of everyone on the property,” Nitschke said.

According to Foote, “in ‘unregulated’ jurisdictions, plaintiffs use consumer protection remedies to shift the burden to the owner and the biller to prove ‘fairness’ of billing.”

Because of this, the best way for property managers to protect themselves from lawsuits claiming ‘unfair billing’ is spell out the system in the lease agreement.

“With RUBS, lease language is the first line of defense and creates a contract.”

Nitschke agreed.

“Communication is better than silence with residents,” she said.

Overall, utility and energy management systems are far more beneficial than not.

“Take advantage of the opportunities that come with mandates—rebates, marketing, savings and commission,” Foote said.

Access the webinar here.

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