Friday, July 10, 2009

Why is Submetering Attractive to Apartment Owners?

Resale of electricity to residential tenants is generally prohibited unless specifically allowed by an order of the PSC. PSC-approved and NYSERDA-subsidized submetering projects, which enable landlords to bill tenants separately for electricity in buildings where electricity had been included in the rent, have had calamitous results for low-income tenants when new charges for electricity are added to their rent and are not offset by rent reductions or additional Section 8 housing assistance payments.

The rationale for submetering advanced by landlords, the submetering industry and consultants, and uncritically accepted by the PSC and NYSERDA, is that submetering will significantly reduce electric usage by changing tenant behavior. There is little good research on the reduction of usage attributable to behavior changes. What is known to happen with submetering, and what probably makes it attractive to landlords and what makes submetered properties better candidates for acquisition by real estate investment trusts (REITs), is that the risks of rising and volatile electric prices, and the energy burdens of inefficient landlord owned or controlled structures, fixtures, appliances and controls, are all shifted from the owner to the tenants. The revenue stream is less affected by rising energy prices or energy price spikes, such as occurred in 2008.

According to the ads of a seller of submetering equipment, the value of a property to the owner will go up $5,000 per unit with submetering:
Utility submetering dramatically increases property value - more than any other ancillary service or comparable capital investment
See also,
Obviously, tenants do not own the inefficient structure, fixtures, major appliances and controls and so they lack the ability and the substantial funds to make them efficient. The "payback" to landlords for submetering and just getting rid of responsibility for energy bills, in terms of increased property value and shifted costs is probably much more attractive than investment in physical energy efficiency measures. Recently, the PSC slowed the flow of funds for submetering projects. See PULP Network, June 25, 2009, PSC Signals Shift in Landlord Subsidies to Implement Submetering.

For further infomation visit PULP's web page on submetering.

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