Leveraging Data to Pay Less on Multifamily Utilities
As discussed in RealWorld 2018 sessions
Energy prices rarely stand still, but lately, utility costs have been far more unpredictable. And, if it continues, that could be a concerning trend for multifamily energy management.
Is your multifamily business prepared for the hit it might take on utilities? Some organizations are taking proactive precautions. Some are demanding greater visibility into their energy data so they can monitor and manage usage. Others are using new energy efficient technologies, which are more readily available than ever before, to leverage green lending opportunities and lure in more environmentally conscious renters.
The essentials of energy management for multifamily companies
At RealWorld 2018, a session was held by energy management experts Dimitris Kapsis and Linda Alperin to tackle this subject, discussing how to leverage utility data to use less energy and pay less for what multifamily properties use. They also talked about some of the common challenges that can derail a well-intended energy management program, as well as solutions to this challenge, like taking advantage of competitive energy rates in deregulated markets, energy conservation projects, utility tax exemptions and benchmarking compliance.
Some of the tough questions they asked, included:
- Do you know which of your properties have the greatest savings opportunities?
- Are you taking advantage of competitive energy rates in de-regulated markets? Do you have an energy partner that you trust that understands the multifamily market?
- Are you in compliance with the latest energy benchmarking mandates?
- What conservation projects do you have in place? Are you measuring the results?
- Are you paying the correct tariff rates for your utility services? Are you paying taxes that you shouldn’t be?
Responses were varied and attendees wanted to discuss solutions in greater detail.
In response, presenters started by discussing the true power of having real access to a property’s utility data, from capturing and validating the data to reporting, and then ultimately, energy management. RealPage’s solution to this is a four-pronged approach, including energy procurement, benchmarking compliance, energy and water conservation, and rate and tax assurance.
Responding to changes in energy regulation
Energy Procurement was put into motion when energy deregulation began in the 1990’s. The goal of legislators was to bring down natural gas supply prices by allowing competition in state and local energy prices. Electric deregulation followed shortly thereafter. Today, several states have deregulated natural gas markets and others have re-regulated both natural gas and electricity. Others have taken a more cautious approach, waiting to see how these markets fare.
In those early adopting markets, prices are controlled by the market and dynamics like weather, generation, storage and supply, and transmission constraints, as well as state and local regulations and other political factors.
Energy procurement can help mitigate these elements, putting control of your utilities back into your hands. RealPage procurement experts help customers shop rates and even go so far as to negotiate better contracts with energy providers to lock down better pricing. They also help develop continuous service agreements (CSAs) and manage interruptible natural gas agreements to the customer’s benefit.
One way to assist customers in getting competitive energy rates, while decreasing risk, is to monitor the entire process, from asking for procurement bids to tracking of contracts, rates and renewals. Based on all of the information collected, a risk and commodity strategy can be created. The Presenters shared a case study where a 12-month contract allowed energy and capacity charges to float with the market while monitoring market pricing for possible spikes and securing pricing during peak periods. The rate savings for this development in New York was $140,000 annually.
As for energy benchmarking, properties do it for different reasons. Some are forced to by state and local mandates. Currently, 18 cities already have multifamily benchmarking ordinances. Green lending is another reason, as organizations like Fannie Mae, Freddie Mac and HUD make loans more attractive to companies who significantly reduce energy or water usage. Others simply have corporate sustainability or cost reduction objectives.
Where compliance is concerned, the key to being compliant with benchmarking mandates is to accurately collect, review and verify data—then, to upload it into Energy Star Portfolio manager. But not all mandates—or markets—are alike. Some municipalities measure properties by individual buildings and others by the whole property or tax parcel. Some require periodic on-site audits as well as usage reporting. So obviously, it’s important to understand the details behind the mandate and the responsibilities of each property. The penalties can be painful.
But benchmarking is only a part of the financial cure. Energy and water conservation efforts also play a vital role. RealPage’s experts start with an assessment of the property. They’ll conduct an on-site audit, identify available opportunities and follow through with those recommendations by presenting a project proposal, even implementing and managing the projects through outside partners. An example in the arena of water conservation was a property that used RealPage and their partners to install high efficiency plumbing fixtures, which generated an 84% ROI on the expense.
Finally, rate and tax audits can be extremely valuable as utility providers often assign rates and taxes in error. Sometimes state sales taxes are misapplied and commercial and residential rates aren’t correctly established. Effective rate and tax audits saved a Midwest property $7,000 annually, with a refund of over $20,000 as just one example of the many properties taking advantage of these exemptions.
Combined, these tools can save a substantial amount of money, on both the property level and enterprise level.