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When considering the idea of utility submetering an operational building, the thought of the steps required can often seem overwhelming and may cause you to continually low prioritize what should be a first consideration.

You may get lost in the questions: “How do I find the right solution? Where do I find a qualified subcontractor? How do I handle the intrusion into residents’ apartments? Leases? Will I lose market rent value? How can I afford to do it?” No wonder many owners and managers pass over the idea as too insurmountable to tackle. However, is leaving an average of 5-6% NOI on the table really an option?

According to the EIA, the average monthly cost for an apartment’s electricity usage is approximately $113 per month or $1,356 annually. For a 250-unit community, that means an annual expense of $339,000. What would happen to your bottom line if you could recoup up to 70% to 85% of this revenue?

Let’s address the common fear of market rents dropping if you introduce charging electricity. Ignoring the fact that the trend of charging electric is extremely common, in addition to landing market rents, how much would the rent increase compare to electric reimbursement revenue?

Let’s do the math:

If your average rent is $1,500 and you get a full 5% increase, rent will go up $75. $75 x 12 = $900 a year. Or, $900-month x 88 units = $79,200 annually. By year two, assuming the market on rents remain strong, you should have another 35% turnover of the $1,575 average rent, gaining another $79 per month, $945 per unit yearly x 88 units = $83,160 annually. Not bad. Keep in mind that a 5% average is being aggressive in many markets.

If you introduce charging for electric for new move-ins only, at a rate of 35% turnover, you should have about 70% penetration in 2 years. Assuming the average monthly electric bill is $113, in year one, you would have an additional 88 units paying for their electricity or about $9,944 in monthly revenue. By month 12, and going into year two, you’d be assured of $119,328 in annual electric reimbursements plus an additional 88 units or 176 residents paying their own electric bills by the end of year two. That means, $238,656 in electric reimbursements going into year three at 70% penetration of residents paying their own electric bill.

How much will it cost? The average retrofit cost will about $550 per unit or $137,500 on a 250-unit property. The average electric submeter job pays off in about 12-18 months. It’s worth looking under the hood, doing the analysis and letting the math tell you what you need to do.

Next steps:

1) Check the law and local regulations. Electric submetering in existing buildings is not legal everywhere, but it is in many states. There’s no sense in requesting bids if you can’t submeter for electric.

2) Get three qualified vendors to survey the site for the appropriate solution. Inevitably, there will be some variances in the vendors’ scopes. After asking questions to clarify the scope and finetuning your project’s needs, refine the scope and ask each vendor to break out their bids accordingly so you can compare apples to apples. For example, installation labor cost, meter cost, miscellaneous supplies cost. Be sure to determine what’s not included in the scope, which could be permits, drywall repair and painting if needed.

3) Complete a basic ROI or ask your qualified vendor to supply you with one. This will require some analysis, but nothing tougher than writing an operating budget. An ROI will help with your decision-making process immeasurably and also with financing, should that need to be a consideration.

4) After you finalize your choice of vendor, the rest is planning and scheduling. Things to consider include updating lease language, marketing in regards to utilities, resident communication, vendor rules of daily conduct (uniforms, ID, key control, work times, etc.), safe storage of supplies during installation, etc. It’s also critical to understand how many units will have no electricity at a time and the duration. Residents with medical devices must be given highest consideration so they can plan for the service interruption during installation.

5) It’s terribly important to have a staff that supports the transition. One disgruntled associate, from the grounds person to the site manager, can tank a new programs success. Take the time you need to educate the staff fully on exactly how the program will work, benefit the property, and themselves.

Ready to jump into the ring and see if this makes sense for your building? More revenue is a site survey away. Go ahead and do the math; it may result in the best decision for your asset in years.


Kate Forsyth serves as the National Sales Executive for WaterWatch Corporation, where she is responsible for shaping and implementing the WaterWatch sales agenda across all company platforms. She has previously served as the Northeastern Representative for Minol USA and as a Utility Asset Manager with AvalonBay Communities.

Feel free to reach out to Kate via email at kforsyth@WaterWatchCorp.com and by phone at 585-448-2420.

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