If you’re experiencing problems with your current utility billing services provider or receive daily and recurring calls from angry tenants, you’re not alone. The following are actual complaints from multifamily owners and property managers regarding their utility companies:

• The billing company added a service fee to the last month’s bill without our notification. In two days, we received 55 calls from residents complaining
• A tenant renting a one bedroom studio brought in her current water/sewer bill. The amount due was $1,000
• Their customer service is really poor. They can’t answer simple questions, they don’t have any authority to fix problems, and they don’t really seem to care
• Several tenants called our office wondering why their electric bills are so late. They were being billed for consumption three months ago
• We call our billing company four or five times a week and all we ever get is voice mail
• My e-mails are never returned
• I don’t think the readings from the submeters are correct and the bill amounts are all over the place
• We skipped a month of utility billing to apologize to our residents for all the billing problems they’ve experienced.

Why Haven’t You Switched?

When the service and response is so abysmal, it begs the question, why don’t owners and property managers switch providers? In some ways, it’s completely understandable. Even after multifamily managers have suffered from continual problems, there’s a real concern that changing companies will involve a tremendous amount of work and time.

Property managers are swamped with the daily operational requirements of running an apartment complex. Freeing up time to spend coordinating with a new provider, gathering the information they need, and potentially having to change existing processes is daunting.

If you switch providers, you might have to involve other departments, like accounting. They may be resistant to invest their time and attention on anything other than their day-to-day tasks.

There’s also a reasonable concern that residents will respond negatively. Many property managers question whether a change is the right move. There’s a lot of momentum to just keeping suffering on. Besides, at times don’t we all operate as if: “better the devil you know than the devil you don’t?”

Will Changing Billing Companies Fix the Problems?

It’s very natural to question whether changing providers will really solve the problems. The last thing any property manager or owner wants to do is spend time finding and contracting with a different billing company only to discover that they don’t do the job any better than the current provider.

At the same time, continually dealing with billing problems is painful. Tenants make sure of that. Working with companies who just don’t do a professional job, is wearing. Fifteen minutes spent listening to a resident vent, a half hour spent calling the billing company to find out why bills went out late, and pretty soon, you’ve lost countless hours fixing problems that should have just been handled by your vendor.

While you may cringe when thinking about the effort required to switch to a new billing service, it’s important not to ignore the impact your billing company is having on tenant satisfaction. Their performance can influence how residents view your residential complex, how likely they are to renew their leases, and how motivated they are to refer their friends. Disgruntled residents can quickly air your utility billing problems via social media and reach a large audience.

Changing Providers is Easier than you Think

Switching providers doesn’t have to take a lot of time and if you pick the right one, will allow you to recover those hours you’ve been spending dealing with billing issues. A competent company makes the billing process effortless for property management companies and minimizes their time investment. Changing companies also demonstrates to your residents that you’re responsive to their concerns and can prevent damage to your apartment complex’s reputation.

The Secret to a Successful Billing Provider Change

If there’s a secret to ensuring that the time you invest in selecting a new billing company is rewarded, it can be described as “qualify and plan.” If your billing problems have finally frustrated you to the point that you’re 100% motivated to change, here are a few suggestions.

Qualify Prospective Service Providers

While there are numerous service providers in the multifamily utility billing industry, the quality of their work product varies greatly. As you interview different vendors, pay close attention to the level of responsiveness you receive during the qualification process. How quickly do they answer your questions? Call their support line and see if you get someone on the phone. Do they offer performance guarantees?

This article includes a variety of questions you can pose: “How to Select an Effective Multi-family Utility Billing Services Provider.”

Develop a Billing Transition Project Plan

Writing a project plan is key to successfully transitioning from one billing company to another. It can be simple and brief and it doesn’t require a professional project manager. Include the following:

• ­ Task descriptions
• ­ Responsible parties
• ­ Due dates.

The better utility billing companies will write the project plan for you. Your plan should also address how these tasks will be managed:

1. Sending an updated rent roll
2. Determining the appropriate billing method
3. Providing historical master-meter utility bills (12 mos. is preferable)
4. Obtaining monthly master-meter utility bills
5. Sending a letter of introduction to residents
6. Accessing the submetering system (if the property is using submeters)
7. Scheduling the first meter readings
8. Conducting staff member training for the new billing system
9. Explaining management reporting
10. Providing updated accounts receivable data (if the service provider will manage resident payments)
11. Scheduling the first billing date
12. Delivering billing data for upload into a property management or accounting system.

Make sure you have a single point of contact at the billing company to work with and that the lines of communication are open and defined.

Suffer no More

Transitioning from one utility billing company to another can be a seamless, stress-free, and quick process. Armed with the right questions to ask, you can spend a minimal amount of time finding a billing provider who will deliver the service and responsiveness you’re looking for. There’s no need to settle for low-performing, tenant-frustrating billing vendors.

After you make your selection, craft a simple billing transition project plan. It will save you a lot of time and ensure that the cutover process is efficient. Your residents will certainly appreciate that you responded to their complaints, and you’ll remove a big source of frustration.

Don’t be Afraid to Switch Utility Billing Providers (PDF)

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Many apartment owners and property managers are curious about how Ratio Utility Billing Systems (RUBS) are used to calculate resident water and sewer bills. This article includes two videos that explain how to calculate a RUBS water/sewer bill for up to ten (10) apartment units. It also includes a complimentary spreadsheet you can use to make the calculations.

Instructions for using the spreadsheet are written below. Please note that AmCoBi assumes no liability for your utility billing operations or the calculations made with the RUBS Billing Worksheet. Contact us if you have any questions.

Video – How to Calculate a RUBS Water/Sewer Bill – Part 1

Video – How to Calculate a RUBS Water/Sewer Bill – Part 2

Download a FREE Copy of the RUBS Billing Worksheet

We include an Excel spreadsheet (RUBS Water Billing Worksheet) that will make the billing calculations for you. Click the button below and subscribe. In the future if we make changes to the Worksheet, we’ll notify you.

How to Use the RUBS Water Billing Worksheet

This worksheet is configured for a 2-10 unit apartment complex. Enter information about your residents and your master-meter water/sewer charges, and the spreadsheet will calculate the bills. The RUBS water/sewer calculations are based on occupancy so make sure these figures are accurate.

Before you Start Billing Residents, Some Things You Need to Know

The first video covers these topics but it’s important to know that different states, counties, and cities have specific regulations for utility billing and submetering. You, as an owner, are responsible to know the rules before you bill your residents.

In Texas as an example, the Texas Commission on Environmental Quality (TCEQ) has defined regulations for how tenants can be billed, what deductions an owner must take, what billing fee can be assessed, and more. In contrast, Colorado allows RUBS billing with very few limitations.

To learn the rules, contact one of the following:

1. Your State’s Public Utility Commission
2. Local National Apartment Association (NAA) Affiliate – http://www.naahq.org/about/join/Pages/AffiliateDirectory.aspx
3. A third party utility billing services provider.

Make Sure you Have a Signed Lease in Place

You’ll need a lease signed by your residents authorizing utility billing. If your current lease doesn’t address billing, draft a lease addendum and encourage tenants to sign it. You may have to implement the lease as tenants renew and/or when new residents join your community.

You can download a sample lease addendum here:

http://amcobi.com/wpmf/2011/multifamily-owners-including-utilities-may-be-killing-your-profits/

Assuming you have met the criteria for billing residents, let’s discuss how to use the RUBS Water Billing Worksheet.

Step #1 – Account Information Tab

1. Click on the Account Information tab. Note that you can only modify cells in yellow. The cells with white or gray backgrounds cannot be edited.
2. Enter information about your residents including:
• Account ID (if you use one)
• Resident Name
• Address
• City
• State
• Zip Code
• # of Occupants
• Utility – what you’re billing residents for
• Bill Mailed – the date you are going to mail these bills
• Due Date – the date bills are due to be paid.

Step #2 – RUBS Calculator Tab

1. Click the RUBS Calculator tab.
2. Enter the amounts from your master-meter water and sewer bills at the top.
3. If you want to include a Common Area Deduction (CAD), enter a percentage in these cells.
4. The Amount to Allocate figures will calculate automatically.
5. Enter a Bill Start Date and Bill End Date. Use the same dates listed on your master-meter bills.
6. If you want to include a fee on each resident’s invoice, enter that value in the Billing Fee column.
• The billing fee is an administrative charge assessed by owners or billing companies for costs associated with calculating, printing, and mailing bills. It also helps defer the expense of processing payments and accounting for all financial transactions
7. The Totals will calculate automatically.

An Explanation of the Calculations

• The Total Bill Days column is calculated by counting the number of days between the Bill Start and Bill End Dates
• The Occupied Days column is calculated by multiplying the number of occupants by the number of Total Bill Days for each account. This is how occupancy is factored into the RUBS billing equation

Printing and Mailing Resident Utility Bills

If you are familiar with the merge capabilities of Microsoft Word, you can create an invoice and use the RUBS Water Billing Worksheet as source data (Select Recipients) to individually populate bills for each of your residents.

If you use Quicken, QuickBooks or some other accounting package, there are ways to import the billing amounts we calculated into your customer accounts, and print invoices from there.

After you’ve sent bills to residents, you’ll want to log who you’ve billed and for what amounts. Highlight the billing information on the RUBS Calculator tab, copy the data, and use the Paste Values command on the Billing Record tab to save your data.

Important Items to Remember

Calculating RUBS charges is really the first step when billing residents. You still need to print and mail the bills, process payments, and record all financial transactions. You also need to be available to answer your customers’ questions when they call about billing issues.

For smaller multifamily complexes, this process can be straightforward and easy. As the number of bills you’re sending each month increases, billing companies like AmCoBi, can manage the process on your behalf saving you considerable time, effort, and money. Moreover, third party multifamily billing providers offer enhanced services that your residents are sure to want such as: electronic billing, online payments, and Web-based access to their account information.

Quick Recap

Implementing a resident utility billing program is one of the fastest, most affordable ways for multifamily owners to increase revenues without increasing rents. Make sure your property is master-metered and that you’re paying the utility costs. Find out if RUBS billing is legal where your apartment complex is located. Have all your residents sign a lease authorizing utility billing.

Best of luck with the process. It’s sure to have a positive financial impact on your multifamily property!

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When utilities are included in an apartment complex’s rent, some tenants are naturally going to consume more than others. High utility users, even if they represent a small group of tenants, can substantially increase costs. Since these cost increases are effectively hidden in the rent, those residents who use utilities responsibly subsidize those who don’t.

A question to consider then is how much are high users increasing utility expenses? Does it make financial sense for an owner to include utilities or bill tenants directly? If an owner does decide to transition away from the utilities included model, what options are available?

The Challenge of a Master-Metered Multifamily Complex

An owner is most likely to include utilities in the rent when his multifamily complex is master-metered for water, gas, or electricity. The drawback of a master-metered community is that there’s no way to tell how much of a given utility each resident is using.

If I’m one of those residents who runs the heat continually, lets a broken toilet flapper leak without reporting it, or keeps the air conditioning on even when I’m not home, it’s my neighbors who pick up most of the tab. The usual feedback loop that links the amount I pay, to the amount I consume, is missing. Without this feedback loop, I’m more likely to consume carelessly.

As we’re about to see, careless or abusive consumption can raise multifamily utility expenses as much as 70%!

The RUBS Example

Assume you own a 150 unit complex, each apartment has two bedrooms, and the property is master-metered for natural gas. The complex uses 7,500 ccfs of gas during the heating months and the rate is $1.00/ccf. If you were to use a Ratio Utility Billing System or RUBS method to determine each resident’s approximate usage, it would be 50 ccfs.

Assuming the monthly rent is $750, $50 would be allotted to gas expense. (See Example 1 in the Supplemental Information section at the end of this article.)

Moderately High Users and Their Influence on Utility Expenses

Let’s consider a different case where 10% of tenants (15 households) use 200% more gas than the average. Total gas usage for the property is still 7,500 ccfs.

Average gas users (135 households) consume 41.7 ccfs each and moderately high users consume 125 ccfs each. The gas portion of the rent should have been $41.70 but residents effectively paid $50. High users created an increase in the rent of $8.33, a 20% increase in the portion allocated for gas expense. (See Example 2.)

High Users may be Increasing Utility Expenses by 70%!

Now let’s look at the case where 10% of residents are truly high users and they consume 700% more gas than the average. (While this may seem like an excessive estimate, many experts believe that high utility users will consume at this level or higher when they don’t pay for utilities directly.) This elevated usage can be a result of: running the heat continually, leaving windows open when the heat is on, or undetected maintenance issues.

In this scenario, average gas users consume 29.4 ccfs each and high users consume 235.3 ccfs each. The gas portion of the rent should have been $29.40 but residents effectively paid $50. High users increased the rent by $20.59, a 70% increase in the portion allocated to gas expense. (See Example 3.)

High users didn’t actually double the overall gas expense but they came pretty close. Our group was relatively small too–only 10% of residents. Imagine the effect if a greater percentage of tenants were high users.

“Utilities Included” is not so Appealing to Renters

Had the owner in our example billed utilities separately, he could charge $700 for rent and the gas bill would be $29 – $50. Lower rent is clearly more attractive to renters. Separating utilities would also encourage the community to use gas more responsibly thereby lowering everyone’s total housing costs.

Transitioning Away from “Utilities Included” by Submetering

There are two very effective ways to separate utilities from the rental fee and bill tenants directly. The first, utility submetering, offers the most benefit for tenants and owners. When the water lines, electric disconnect panels, gas lines, or central heating system in your multifamily residence support it, you can install a wireless submetering system. Submeters measure individual consumption for each resident and the data are used for billing.

Submetering Serves Owners and Tenants

Submetering helps owners by increasing net operating income (NOI) and property values. It insulates them from paying for excessive resident usage or losing money when utility prices spike unexpectedly. Metering provides useful data that can be analyzed to detect maintenance issues, leaks, and other problems, ultimately saving the owner and tenants money. This data can also demonstrate how energy efficient your property is compared to others.

Submetering is the best and fairest way to bill tenants for their utility usage. It’s been shown repeatedly to reduce utility consumption by 15-35%–dubbed the “conservation effect.” Not only do tenants benefit financially when they conserve, they’re no longer accountable for the consumption habits of their neighbors.

The “Conservation Effect” in Action

Let’s say you decide to submeter your property and the conservation effect causes consumption to drop by 35%. In our example, usage for the property would decrease from 7,500 to 4,875 ccfs. This would lower the average resident’s gas bill from $50 to $32.50, generating a notable savings of $17.50 per month. (See Example 4.)

Submetering Pays for Itself Quickly

A wireless heat metering system for a 150 unit complex with central baseboard radiation heating can run $30,000. Even though submetering systems generate a return on investment (ROI) in less than 12-18 months, the upfront expense is a concern to many owners.

To minimize out-of-pocket expenses, some owners finance equipment through a leasing company. In other cases, a nominal fee for the metering system is included on each resident’s monthly bill. Since submetering is a benefit to tenants and owners, it follows that both should share in the expense.

In an ideal world, federal and state agencies would recognize the powerful effect submetering has on conserving scarce resources and would offer rebates and affordable financing vehicles to owners. This strategy would accelerate the implementation of submetering systems in the millions of existing multifamily residences massively reducing utility consumption.

“Rubbing” Your Way to Higher NOI

The second approach to separating utilities from the rent is to bill tenants using a RUBS method. Depending on the apartment size, number of occupants, or some other factor, owners divide up utility costs amongst all residents. When “rubbing” gas, apartment square footage is the metric most commonly used.

Implementing a RUBS system has also been shown to generate a conservation effect. One research study conducted by the National Apartment Association (NAA) and the National Multi Housing Council (NHMC) reviewed 32 properties in three states and found that RUBS generated a reduction in water consumption of 6-22%. Although it’s a smaller conservation effect, it’s still an improvement over the situation caused when utilities are included with the rent.

The benefit of RUBS to tenants is that by conserving, reporting maintenance issues quickly, and minimizing waste, they can decrease their utility expenses. Owners benefit because RUBS doesn’t require a cash investment. In addition, RUBS makes it so owners are not financially responsible for the utility consumption behaviors of their tenants.

The primary disadvantage of RUBS is that high utility users still don’t pay the full price of their excessive usage. Compared with “utilities included,” however, it’s a marked improvement and one of the smartest, fastest ways for an owner to improve the bottom line.

Summary

Multifamily residences that include utilities can enable a small group of high users to raise utility expenses and rents considerably. To prevent this, owners can separate utilities from the rent by installing a utility submetering system or using RUBS to bill residents directly. Resident billing creates a financial incentive for residents to use utilities wisely, it increases owner profits, and all parties save money.

 A Small Group of Tenants may be Doubling Your Multifamily Utility Costs (PDF)

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About American Conservation & Billing Solutions, Inc.

AmCoBi offers affordable, quality-focused utility billing services for the multifamily industry. We also design, install, and maintain heat, gas, electric, and water submetering systems. AmCoBi helps multifamily owners and managers improve profitability, reduce utility expenses, and save money.

Supplemental Information

Example 1

• Total monthly gas usage for the property = 7,500 ccfs
• Gas rate = $1.00/ccf
• Total gas cost = 7,500 ccfs. x $1.00 = $7,500
• Average resident bill = $7,500 / 150 units = $50

Example 2

• Average users consumption = 41.67 ccfs per household
• High users consumption = 125 ccfs per household
• Average users’ gas bill should have been = $41.67; residents effectively paid $50
• Average users paid a “penalty” of = ($50 – $41.67) / $41.67 = 20% increase.

Example 3

• Average users consumption = 29.4 ccfs per household
• High users consumption = 235.3 ccfs per household
• Average users’ gas bill should have been = $29.41; they paid $50
• Average users paid a penalty of = ($50 – $29.41) / $29.41 = 70% increase.

Example 4

• Total monthly gas usage for the property = 7,500 ccfs
• Adjusted usage (35% reduction after submetering) = 7,500 – (7,500 * .35) = 4,875 ccfs
• Average resident bill = $4,875 / 150 = $32.50

If your multifamily complex includes utilities in the rental fee, brace yourself. Utility cost increases are coming your way that may erode your hard-earned profits. Even more concerning is that you’re responsible for a sizable expense that you have little or no control over. The “utilities included” model puts you squarely at the financial mercy of tenants, their usage tendencies, and utility companies. “Utilities included” also means that you have to be an accurate budget forecaster to ensure that your rental rates cover the annual utility expenses. Miss the mark and it’s you who’ll pay.

The exciting news is that you can quickly and easily change this situation by separating utilities from the rent fee and billing tenants directly–at no cost to you. By doing this, you’ll make a positive and immediate impact on your net operating income (NOI) and the value of your property. From a price perspective, your complex will be more appealing to prospective tenants and you’ll have effectively removed yourself from the utility equation altogether. Billing residents means no more worrying about the effects of runaway tenant usage and it leads to higher profits.

The sooner you get started the better, especially given the trajectory of utility rates. They seem only to move in one direction…up! Water rates for multifamily owners in Houston have increased by 30% this year alone. In New York City, water rates are up nearly 13% and in Milwaukee, they’re projected to rise 27%. In Jacksonville, utility rates will increase 9%. Owners who can’t adjust rents fast enough to cover the increased costs take a direct hit to their revenues.

Tenant utility abuse is another reason why apartment owners and property managers should look closely at resident utility billing. You’ve probably leased to the tenant who kicks his thermostat up to “high” during the winter and then opens a window so that he can have fresh air. Or you’ve rented to the tenant who leaves the air conditioning up all day long so that she can come home to a cool house in the evening.

Clearly, these are examples of costly and wasteful ways to use heating and cooling. The tenant, however, does not bear the cost of this elevated consumption. What’s also problematic is that tenants figure they can use utilities in any way they deem acceptable because “utilities are included.” In their minds, they’re already paying for these expenses.

Another intrinsic flaw of the “utilities included” model is that it offers no financial incentive for tenants to notify property management when maintenance problems occur. Water leaks are a perfect example. A broken toilet flapper can waste hundreds of gallons of water in a short amount of time. The owner relies on the tenant to inform the maintenance team when an issue like this arises. Tenants, however, aren’t paying directly for the water bill so there’s less incentive for them to respond quickly…if at all.

Are you an Expert Budget-er?

If you include utilities at your multifamily complex, you’re already familiar with the never-ending budgeting game. To ensure that you cover utility costs, you’ll have to accurately answer questions like:

• What percentage will utility rates increase this year?
• Where should I set my rents to make sure I don’t lose money?
• How much water, gas, and electricity will residents use?
• How can I cover utility expenses and still keep my rents competitive?

Some owners choose to set their rents high enough so that, no matter what, utility costs get paid. This can have a negative effect on your occupancy rate, however, by putting your complex at the upper end of the price curve and making it less attractive to prospective renters. The flip side is that if you set your rents too low, you risk losing money.

Nervous About Changing?

Some property managers and owners have initial concerns about separating utilities from the rent and billing tenants directly. They worry that renters will leave or that it will make their apartments less appealing than their competitors who do include utilities. It’s worthwhile then to consider how a prospective tenant might evaluate two different apartments–one with utilities included and one with a resident utility billing program.

Assume you offer a two bedroom apartment for $750 per month (resident-paid utilities) and another complex down the road offers a two bedroom unit for $800 per month (utilities included). Your complex will naturally be more appealing from a rental price perspective, and everything else being equal, will see more traffic. But your property is also more advantageous from a total housing cost perspective too. Here’s why.

When residents are billed for utilities directly, whether through a Ratio Utility Billing System (RUBS) or via utility submeters, they can influence their own monthly housing costs. If they conserve utilities, their bills will be lower. And if residents quickly report maintenance issues and minimize wasteful usage, everyone’s utility bills will decrease.

The Financial Impact of Converting to Tenant-Paid Utilities

An analysis of the financial benefits of billing tenants for utilities is worthwhile. Assume you have a 150 unit complex and the monthly water bill is $6,300. If you can transition 80% of this bill back to tenants, you will realize:

Monthly savings: 80% x $6,300 = $5,040

Yearly savings: 12 mos. x $5,040 = $60,480

What do you have to invest to achieve these savings? Nothing more than your time. And if you use a third party utility billing provider, the time requirement is next to nothing.

It’s Easier Than you Think

The exciting news for owners is that you can quickly and easily separate utilities from the rent and bill tenants directly for water, gas, and/or electricity. You can even include trash, cable, Internet, rent or other recurring fees on the bill to make paying simpler for tenants.

The two most widely used methods for multifamily utility billing are:

1. RUBS billings
2. Submetered billings

RUBS or “Ratio Utility Billing System” is a method of allocating utility costs to tenants based on number of occupants, size of the apartment, or some other factor. Submetered billings require that a utility metering system be installed to directly measure tenant usage. This usage data is used to calculate resident bills.

RUBS is a Great Way to Start

The fastest, least expensive way to transition utility expenses back to residents is to implement a RUBS. Here are the steps:

#1 – Research utility billing regulations in your state, county, and city

While most states approach resident utility billing in a similar way, a few states have unique rules. For example, in Colorado, as long as an owner has a signed lease in place stating that residents can be billed for utilities, the entire amount of the master-metered bill can be allocated back. The owner does not have to take a common area deduction of any kind.

In Texas, however, not only do you need a lease agreement signed by the tenant permitting utility billing, the Texas Commission on Environmental Quality (TCEQ) specifies the way bills are to be calculated and the deductions owners must take.

Either research the regulatory laws where your complex is located, or rely on your third party billing provider to perform this task. If you conduct your own research, your local or state apartment association is a helpful place to start.

#2 – Have residents sign a new lease or lease addendum

Each resident must sign a lease agreeing that the owner/property manager can bill for utilities. At a minimum, the lease addendum should include: how bills will be calculated, when payments are due, any common area deductions (CADs). A sample lease addendum from the TCEQ is listed at the end of this article.

#3 – Setup the billing process

To initiate resident billing for water, for example, you’ll need mailing information, occupancy figures for each household, and copies of the master-meter water bills. Each month you will review updated move-in/move-out data to ensure that you are billing the proper tenants.

Use the information (above) to calculate tenant bills. Establish a billing schedule. For example:

• Billing period – 5th to the 5th. You want these dates to coincide with the master-meter billing period.
• Delivery date – Bills will be mailed on the 10th
• Due date – Bills are due on the 25th
• Past due notification date – Late letters will be sent on the 30th

#4 – Notify tenants

We recommend notifying tenants in advance of sending the first bill and clearly describing how the process will be administered. Be sure to include accurate contact information and describe how the bills will be calculated. Some property managers host community Q&A sessions to provide a forum for residents to ask questions and encourage a smooth transition.

#5 – Send the first utility bills

When you send the first bills, make sure resident support is available. We recommend offering different payment options so that tenants can pay by mail, telephone, or online via the Internet. Clearly define who payments should be made out to and where those payments should be delivered.

#6 – Process payments and manage past due accounts

Processing payments, keeping up with collections, and generating management reports is a labor and time intensive process. An accounting system or utility billing application will be useful to track your financial transactions. Be vigilant about notifying tenants when they are past due as this will improve collections.

Conclusion

There’s a real opportunity for multifamily owners and property managers, who currently include utilities in their rental fees, to improve their profits. By separating utility costs and billing tenants directly, owners can increase the value of their properties, insulate themselves from rising utility prices, and benefit tenants. Third party billing providers can help you get started quickly, competently manage the process on your behalf, and enable your staff members to focus on other important duties.

  Multifamily Owners: Including Utilities May Be Killing Your Profits (PDF)

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About American Conservation & Billing Solutions, Inc.

AmCoBi offers the most affordable, highest quality utility billing services available in the multifamily industry. We also design, install, and maintain heat, gas, electric, and water submetering systems. AmCoBi helps multifamily owners and managers improve profitability, reduce utility expenses, and save money.

Attachment #1 – TCEQ Sample Lease Addendum for Allocating Water/Wastewater Costs

1. Addendum. This is an addendum to the TAA Lease Contract for Apt. No. ___________________ in the _____________________________________ Apartments in _________________________________, Texas.

2. Reason for allocation. When water and wastewater bills are paid 100 percent by the property owner, residents have no incentive to conserve water. This results in a waste of our state’s natural resources and adds to the overhead of the property—and that usually means higher rents. Allocation of water bills saves money for residents because it encourages them to conserve water and wastewater. We as owners also have incentive to conserve because we are required by law to pay a portion of the total water bill(s) for the entire apartment community.

3. Your payment due date. Payment of your allocated water/wastewater bill is due 16 days after the date it is postmarked or hand delivered to your apartment. You agree to mail or deliver payment to the place indicated on your bill so that payment is received no later than the due date. You will pay a late charge of 5 percent of your water/wastewater bill if we don’t receive timely payment. If you are late in paying the water bill, we may not cut off your water; but we may immediately exercise all other lawful remedies, including eviction—just like late payment of rent.

4. Allocation procedures. Your monthly rent under the TAA Lease Contract does not include a charge for water and wastewater. We may include this item as a separate and distinct charge as part of a multi-item bill. Instead, you will be receiving a separate bill from us each month for such utilities. We will allocate the monthly mastermeter water/wastewater bill(s) for the apartment community, based on an allocation method approved by the Texas Commission on Environmental Quality (TCEQ) and described below. The allocation method that we will use in calculating your bill is noted below and described in the following subdivision of Section 291.124(e)(2)(A) of the TCEQ rules (check only one):

• subdivision (i) actual occupancy;
• subdivision (ii) ratio occupancy (TCEQ average for number of occupants in unit);
• subdivision (iii) average occupancy (TCEQ ave. for no. of bedrooms in unit);
• subdivision (iv) combination of occupancy and square feet of the apartment; or
• subdivision (v) submetered hot/cold water, ratio to total.

The normal date on which the utility company sends its monthly bill to us for the water/wastewater mastermeter is about the ______ day of the month. Within 10 days thereafter, we will try to allocate that mastermeter bill among our residents by allocated billings.

5. Common area deduction. We will calculate your allocated share of the mastermetered water/wastewater bill according to TCEQ rules. Before calculating your portion of the bill, we will deduct for irrigation of landscaping and all other common area uses, as required by TCEQ rules. We will also deduct for any utility company base charges and customer service charges so that you won’t be paying any part of such charges for vacant units. No administrative or other fees will be added to the total mastermeter water/wastewater bill(s) to be allocated unless expressly allowed by TCEQ rules. No other amounts will be included in the bill except your unpaid balances and any late fees you incur. If we fail to pay our mastermeter bill to the utility company on time and incur penalties or interest, no portion of such amounts will be included in your bill.

6. Change of allocation formula. The above allocation formula for determining your share of the mastermetered water/wastewater bill cannot be changed except as follows:

(1) the new formula is one approved by the TCEQ;

(2) you receive notice of the new formula at least 35 days before it takes effect; and

(3) you agree to the change in a signed lease renewal or signed mutual agreement.

7. Previous average. As required under TCEQ rules, you are notified that the average monthly bill for all dwelling units in the previous calendar year was $_______ per unit, varying from $_______ to $_______ for the lowest to highest month’s bills for any unit in the apartment community for this period, if such information is available. The above amounts do not reflect future changes in utility company water rates, weather variations, total water consumption, residents’ water consumption habits, etc.

8. Right to examine records. During regular weekday office hours, you may examine:

(1) our water/wastewater bills from the utility company;

(2) our calculations of your monthly allocations; and

(3) any other information available to you under TCEQ rules. Please give us reasonable advance notice to gather the data. Any disputes relating to the computation of your bill will be between you and us.

9. TCEQ. Water allocation billing is regulated by the TCEQ, which has published a summary of the rules (called a tenant guide). A copy of this summary or a copy of the rules is attached. This addendum complies with those rules.

10. Conservation efforts. We agree to use our best efforts to repair any water leaks inside or outside your apartment no later than 7 days after learning of them. You agree to use your best efforts to conserve water and notify us of leaks.

The heating season is here and gas bills will spike sharply for owners whose properties use central heating systems, furnaces, and domestic hot water heaters. These heating systems can, however, be metered and residents billed for their portion of the gas bill. Owners and property managers who don’t know about this option will pay significantly more money for heating than they need to.

If a multi-tenant complex is individually metered for heat, and residents billed for their own usage, gas consumption tends to be lower…sometimes by as much as 35%! Lower gas consumption results in lower costs for the owner, more competitive rents, and a perception by potential renters that the community is less expensive. Even when an owner bills residents for gas using a RUBS (Ratio Utility Billing System) method, if consumption is higher, the owner’s portion of the utility expense, or the common area deduction (CAD), is higher too.

Turn Gas Expense Into Revenue

Many owners and managers are not aware that these heating systems–baseboard radiators, fan coils, furnaces, domestic hot water heaters, and steam radiators–can be affordably metered for individual tenant usage. Combine heat metering with resident gas billing and you have a profitable combination that will boost net operating income, insulate your balance sheet from rising utility prices, and increase the value of your property.

A Better Approach to Resident Utility Billing

Heat metering, also referred to as “heat allocation” or “energy cost allocation,” is beneficial for property owners and residents. It is the fairest way to bill tenants for their portion of the gas expense because:

• They only pay for the gas they use
• They benefit financially when they conserve
• The gas rate is discounted because master-metered properties are usually charged at a commercial rate.

Property owners who install a heat metering system and transition from owner-paid to resident-paid utilities, can expect to see total gas consumption at their properties fall measurably. The data collected from direct metering can be used to monitor potential maintenance issues, improve energy efficiency, and save money at the property. What’s even more notable, some multifamily owners who have metered heat, have experienced a decrease in the consumption of other utilities, even though those utilities were not metered!

If you own and operate a low-income housing tax credit property, heat metering is a very compelling option. The reason is that the U.S. Department of Housing & Urban Development (HUD) doesn’t allow tenants to be billed for utilities using a RUBS method. Heat metering enables you to equitably recoup the residents’ share of the gas expense and encourage responsible energy use.

Any multifamily complex using a central heating system should strongly consider implementing a wireless heat metering system.

Heat Metering Installation Costs

Heat metering is very affordable in comparison to electric, gas or water submetering systems because the equipment is inexpensive and the installation doesn’t require the services of a licensed plumber or electrician. For a multifamily complex using furnaces, baseboard radiation, or fan coil units, expect to spend $195 – $250 per unit for a complete wireless heat metering system that is ready for billing. In multifamily complexes that use individual furnaces and domestic hot water heaters, the price increases to $390 – $500 per unit because you need two meters per apartment.

The Heat Metering Installation Process

A heat metering system can be installed quickly. A trained technician will spend about 30 minutes installing a heat meter on a baseboard radiator or furnace. Two technicians working on a 100 unit complex will spend less than one week to have a complete heat metering system up and running, and ready for billing.

An Overview of Central Heating Systems

There are a variety of central heating systems in use at multifamily complexes throughout the U.S. but generally, they fall into two categories:

• Furnaces: Gas is supplied from a master-metered central line that is connected to furnaces in multiple apartments/townhomes
• Central hydronic systems: central boiler connected to baseboard radiation and fan coil units in apartments.

Forced Hot Air Furnace (FHA)

Baseboard Radiation (BBR)

Fan Coil Unit

The low cost and efficiency of central heating systems make them a popular choice in the multifamily industry.

Furnaces

Furnaces are by far the easiest systems to meter because the equipment operates in a simple way. Furnaces burn gas to heat air that is then circulated throughout an apartment unit. Each furnace has an input BTU rating. This rating and the amount of time the furnace runs are used to calculate the amount of gas used by the tenant. Multiply the consumption amount by the gas rate and you can compute each resident’s bill.

Central Hydronic Heating Systems

A central hydronic heating system generally consists of the following:

• A central boiler (heated by gas or oil)
• A water pump to circulate heated water
• Baseboard radiators or fan coils (in the apartments)
• Thermostats
• A loop of piping for the water to run from the boiler to the apartment and back.

How Baseboard Radiation Works

A gas, oil, or steam-fired boiler, usually located in the basement or ground floor of an apartment complex, heats water to a preset temperature. When a thermostat in a resident’s unit calls for heat, the hot water is pumped through a loop of pipe to the baseboard radiator in the apartment. When hot water passes through fin tubing in the baseboard radiator, it heats the air causing a convection current. The rising hot air draws cold air from below the device that is then heated. When the desired temperature is reached, the thermostat turns off the flow of hot water, interrupting the heating process.

As hot water passes through the fin tubing in the apartment’s baseboard radiator, it cools. The cooler water is then pumped back through the copper pipe loop (the return system) to the boiler. The cooler water is heated again by the boiler and this process continues as long as residents require apartment heating. (See diagram below).

The Basics of Central Hydronic System Heat Metering

To allocate how much gas a resident is using, a small electronic device (heat meter) installed on the baseboard radiator or fan coil in the apartment tracks:

• When the thermostat calls for heat
• How long the heat is running
• The temperature of the water running through the pipe and the fan speed (fan coils).

Inside the heat meter is a wireless transmitter that sends recorded data and any error information to a centrally located computer called a “data collector.” Error information can include the status of the zone valves, tamper alerts and more.

 Heat Meter for Central Heating Systems

The data collector connects to a telephone line or the Internet. The owner, property manager, or billing company can download the consumption and error data remotely, and use it for resident billing, data analysis, and/or monitoring.

Calculating a Resident’s Heat Bill

The calculations used for billing hydronic heat are complex. They incorporate run-time data from the resident’s heat meter and other standard factors–baseboard length, BTU rating, etc.–to determine an allocated amount of gas used (in Therms, BTUs, or CCFs). This consumption amount is then multiplied by the master-meter gas rate ($/CCF) to compute a resident’s bill.

Because these calculations are very involved, resident heating bills are often computed incorrectly. This leads to underpayment by residents or overbilling by the owner. Overbilling is a serious situation that can land the owner a front row seat in the public utility commission’s (PUC) “doghouse.” Overbilling should be avoided at all costs.

Free Heat Billing Audit

To confirm that your complex is billing heat properly, AmCoBi offers a free billing audit to multifamily owners and property managers. Contact us and we’ll explain the process.

Is Heat Metering Legal?

Heat metering is legal in almost every state. It’s important, however, to confirm with the state, county, and city regulators where your property is located, that you can bill residents for heat using an allocation method. Also, your lease language must include a provision, signed by the tenant, agreeing that the owner can bill for utilities.

There is a substantial body of science and engineering behind heat metering that makes it a legal and reliable method of billing heating fuel. The American Society of Heating, Refrigerating, and Air-Conditioning Engineers, Inc. (ASHRAE) has published a comprehensive engineering document that describes all facets of heat metering and cost allocation titled: “ASHRAE Guideline 8-1994: Energy Cost Allocation for Multi-Occupancy Residential Buildings“. The document can be purchased at: http://www.ashrae.org.

Conclusion

Now is a perfect time to leverage the benefits that metering the central heating system at your multifamily complex can provide. You’ll substantially reduce your utility expenses, make your property more competitive, and protect yourself from gas rate hikes. It’s simple, affordable, and the metering process can be completed quickly.

Is the Gas Bill Too High at Your Multifamily Property? (PDF)

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About American Conservation & Billing Solutions, Inc.

AmCoBi offers affordable, quality-focused utility billing services to the multifamily industry. We also design, install, and maintain heat, gas, electric, and water submetering systems. AmCoBi helps multifamily owners and managers improve profitability, reduce utility expenses, and save money.

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