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Mid-year from an energy perspective.

As a company concerned with metering and with assisting owners and agents in maximizing income through various administrative programs, we at Utility Programs & Metering, Inc. have seen a number of trends developing over the first six months of this year.

In April of this year, the Public Service Commission granted ConEdison a rate increase, the first electric rate increase since 1987. Although not staggering compared to the escalation we have seen in other costs, this increase did amount to approximately 5 percent to 8 percent for electricity users in New York City. At about the same time, New York City announced a sewer rate increase of approximately 15 percent. The electricity increase guarantees automatic July 1, 1992 increases. And, historically, there is an automatic water increase.

Although the impact of these rate increases has been predicted but not yet felt, we are already seeing a number of reactions to these two actions. There has been an accelerated interest among building owners, and building tenants, in evaluating energy costs, taking advantage of utility sponsored rebates and, more importantly, evaluating savings.

In addition, we have noticed this year, as opposed to prior years, that people have started their 1993 budgeting plans earlier. Typically such planning would begin in September for the following year. This year, however, many people have come to us already to start that planning process. Their intent is to determine what their projected utility costs will be based on this year's consumption to date so they can budget improvements to reduce those energy expenditures next year.

We have seen a drastic increase in the number of large owners that have installed submetering in the past year. Organizations such as Rockefeller Center, Winthrop, Citicorp have budgeted funds for installation of submetering in their properties for effective energy management as well as for monitoring income and expense.

We have also seen an increased awareness and demand for the measuring of overtime services, overtime air conditioning in-particular. With the proliferation of computer equipment and the need for above-standard building air conditioning equipment, it has become increasingly important to bill tenants for overtime usage of the buildings supplemental HVAC system and its condenser water. Thus, Btu metering has become standard with several large owners despite the generally large expense incurred in this type of metering.

Over the next six months I believe awareness of the need to monitor energy costs and usage will increase. As more people are selling energy related products, a significant number are selling the products on shared savings, that is, the improvement is paid for out of the energy cost saving promised. However, it is becoming a necessity to validate these savings through objective measurement. We feel that there will be as much submetering being purchased for the monitoring of energy conservation measures as there will be for the billing of electric service within tenant spaces.

We also see that with the soft real estate market and the proliferation of submetering throughout the market, virtually every tenant is requiring submetering in their lease. Buildings that offer submetering tend to be more successful in attracting larger tenants. Several deals have been offered in buildings that charged utilities on a rent inclusion basis and when the tenant required submetering, that individual tenant was submetered because the landlord faced the risk of losing that tenant to another property.

Submetering is becoming a selling as well as a management tool which benefits both owner and tenant. The owner now can make sure he's not losing any revenue from the redistribution of utility and the tenant is assured of not overpaying for electric service.

Overall, energy awareness is definitely increasing. People are recognizing utility costs as a cost of doing business but they are also addressing utility costs as a significant and controllable expense and as something that can and should be controllable.
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Title Annotation:Review and Forecast, Section IV; managing costs of utilities' usage
Author:Raphaelson, Jay
Publication:Real Estate Weekly
Date:Jun 24, 1992
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