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This is the second in a series of short utility budget hack articles. Having completed your rate
increase research*, now you’re ready to scrub out any potential anomalies from the past year
that might skew your utility budget.

Utilities can easily overwhelm the most hardened budget writer. Here’s a straightforward, stepby-step
method that to help you deliver a thoughtful, well-written utility budget.

Get the Data Organized

If you’ve captured your energy expenses and usage in an energy management software
program or other tracking method you’ll have an easier time. In this case, it’s optimum to run
2-3 three years (if operational that long) of both usage and actual expense by commodity and
account. This amount of history will give enough seasonal and yearly data to compare month
over month, year over year.

If you don’t have energy management software, it’s worth the time to build a monthly tracking
system from copies of actual bills. Don’t let this task daunt you; you don’t have to have a super
sophisticated system. If you develop a comprehensive spreadsheet, and track by account the
bill cycle, expense, usage, and various fees, you’ll be able to analyze the utility history.
Be sure to break out the fees in specific categories so you can see when they change in amount
or when a new fee is ‘added’ by the utility provider. By simply tracking expense and use you
can begin to identify trends and dig in deeper where needed.

Review Monthly and Year Over Year Variances

A good rule of thumb is to look for a variance of >5% in a particular month compared to the
previous year(s). A variance in month over month, year over year is most often due to either
usage increasing/decreasing or expense varying. You should investigate anything with a swing
of >5%.

Look for an item that stands out and won’t necessarily repeat itself. Was there an erroneous
charge that month that won’t reoccur? Was there a leak? Was there a substantial late fee?
Any billing errors? Was there a big swing in occupancy that is now stabilized? Back out any
expense you determine won’t repeat in the new budget year. There’s no benefit to padding a
budget for a one-time event.

Usage

First, compare usage. In the months where expense is higher, is it a usage increase? If so,
highlight and dig into why. Is this normal, seasonal usage? Was the use spike an occurrence
that’s not likely to happen in the next budget year?

For example, did you empty the pool completely to seal the tile in May and have to refill it?
This expense wouldn’t likely repeat in the budget year. Did you install energy saving devices for
lighting that will result in lower usage trends in the new budget year? If so, back out the excess
usage and expense.

Note: Spending time digging into repair invoices that occurred around variance months and
conferring with your maintenance team is critical to understanding usage variances.

Fees and Operational Issues

If usage is within the normal range, but your expense peaks or dips in a month >5%, look for
credits on the utility bills or shorter bill cycles that might create false savings expectations.
Conversely to backing out excess usage, you may need to add back in expense if the credit was
unusual and not likely to occur in the budget year. You don’t want to budget low for a one-time
credit.

Next, look at expense variances and consider any varying fees. Are there any unusual fees in
the outlier month you should dig into and possibly back out of your budget? Sometimes it’s a
large late fee (don’t budget paying bills late) or an error by the billing company resulting in a
one-time refund. Always check with the provider before backing out a fee to be sure it won’t
reoccur in the coming year.

Remember, it’s important to look at actual numbers from the utility bills for both expense and
usage vs. reviewing financials based on accrual accounting methods. By looking at the actual
utility expenses and usage you can see the true picture of what was used and spent and build a
clean budget. You can also spot trends that will be hidden in financials containing accruals.

Adding In Rate Increases

Once you’ve scrubbed, add the rate increases to the month where the rate increase begins. For
example, if the provider will increase the rates in July, don’t add a flat % over the entire budget.If you have a procurement contract in place for electric or gas, no rate increases are needed
unless the contract ends during the new year. Then, you need to check with your broker on
what increase to project and when.

Sanity Check

Line up your new budget by commodity and compare it to the previous history month over
month, year over year. You should be able to clearly and thoroughly explain any variance of 5%
or greater in the new budget compared to the previous year. Be prepared to defend your
increases or decreases with a rate sheet increase from the provider, proof of a billing error, or
usage variance explanation.

If you’ve done your homework, you should able to comfortably present your budget to your
reviewers and explain why and how you budgeted your expenses. Good luck and get
scrubbing!


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.

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

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