Benchmarking Grades Are In!

The grades are in. They’re not posted, they are not public, and you might have to do some digging to find yours. But if your building is over 50,000 square feet, it was energy-benchmarked by the city, and it has now been scored.

Over the summer, New York City released the results from the first year of Local Law 84 of 2009. That’s the energy-benchmarking initiative begun as part of Mayor Michael Bloomberg’s plan to reduce greenhouse gases. More than 6,000 multifamily buildings submitted data into an online tool called the Energy Star Portfolio Manager that was developed by the U.S. Environmental Protection Agency. Because most buildings of this size are professionally managed, energy consultants were hired to do the work. Basically, every submission included a building’s square footage and its energy and water usage. While this sounds simple, each number had to take into account many different variables. These included the monumental task of gathering all the data from multiple energy accounts representing what is used in just one building.

How your building fared is between you and whomever you can call to find out your Source Energy Utilization Index (SEUI) score. This year, that is. The city intends to make the scores public in the fall of 2013, and lots of folks will be able to see your grade then. Not only will buyers, sellers, and, really, any interested party be able to see how you stack up, but Fannie Mae, the federal agency that provides a secondary market for underlying financing, will also be studying the energy performance data. One can easily imagine a time, in the not too distant future, when your energy performance will play a significant role in your ability to obtain financing. For co-ops and condos that haven’t paid attention to what they can do about their building’s energy usage, all of this may be just the thing to move their energy dial.

“Some of the worst multifamily buildings are using four-and-a-half times the energy as some of the best buildings,” says Laurie Kerr, deputy director for energy efficiency at the Mayor’s Office of Long-Term Planning and Sustainability. “That’s 440 percent more. It’s crazy.” What’s more, according to Aaron Mehta, director of energy information at FS Energy, the energy management partner of the management firm Cooper Square Realty, buildings that receive low scores and then do nothing are courting trouble. The low-scored buildings in the FS Energy portfolio, he notes, “are using eight percent more energy to heat and cool their building [than] in the prior year. Their energy efficiency decreased, their equipment aged, and their energy performance got worse.”

EUI, huh?

The first year’s benchmarking grades are based on the data set of the city’s 6,000 or so multifamily buildings in its database. The city developed four working grades to use until a national standard is created. Each grade represents a range of energy performance based on the SEUI number (see chart above).

So what does this mean, exactly? First, you have to understand the difference between the two types of energy utilization indexes (EUI). “The big difference between source and site energy is in electricity,” explains Jeffrey Perlman, president of Bright Power. “At site, every kilowatt hour of electricity used has 3,412 BTUs of energy in it. To create that kilowatt of electricity, a power plant has to burn approximately 10,000 BTUs of energy. Every unit of electricity that you use at your building is basically multiplied by three when you start looking at source energy.

“The city is using the source number,” continues Perlman, “because that’s what Portfolio Manager uses. That makes some sense because the price of electricity is higher if you account for the fact that there’s all this waste in the system from the generation of the electricity to the usage of it. Also, carbon impact is based on source energy, not on site energy.”

Big, But Could Be Bigger

Your grade is based on a bunch of numbers, but square footage is the key. If that number is wrong, so are all the calculations that derive from it.

One problem emerged during the first year of benchmarking. Even though the square footage number posted on the Department of Finance (DOF) website was the starting point to find out if a building had to comply with LL84, that number turned out to be misleading. The DOF square footage numbers, for the most part, don’t include basement space unless the area produces income. Which means that if your building’s basement is used for a boiler, storage, or mechanical equipment, it is likely that its square footage wasn’t included in your benchmarking.

It is important to see whether your benchmark provider submitted the right number to Portfolio Manager. Notes Kerr: “You should compare those two numbers [the one on the DOF website and the one in Portfolio Manager], and if they are the same, you should go back to the benchmarking provider and say, ‘Please correct this,’ and make sure that all square footage is being counted.” All the benchmarking calculations are based on square footage, so if your basement floor is left out, your numbers will be off.

Finding the square footage number on the DOF website takes a bit of clicking. Start at http://www.nyc.gov/html/dof/html/home/home.shtml, then click the Bills, Notices, and Assessments link under Online Services; type in your block and lot number, and from the list of Parcel Statements choose one issued every year in January called Notice of Property Value. This notice has two pages, and you’ll want to look on the second page under Factors Used by Finance to Determine Market Value. That’s where you’ll find your building’s square footage number.

What’s Next?

“I think the benchmarking legislation is a great way of getting the conversation started about how we can make our buildings in New York City more energy-efficient,” Perlman says. “That one number is a reasonable way of saying which of the buildings are the most efficient and which are the least efficient. You know, a little bit of a shaming will happen when people say, ‘Oh my God, I have one of the worst buildings. I’d better fix it.’ But at the same time, in order to take this to the next level and really do something actionable – and use this data to find out where the opportunities lie – you need a more sophisticated system that breaks out the data in more robust ways.”

“If a board actually cares about energy, and does something, they are seeing from 20 to 25 percent improvement in efficiency and reduced costs,” says Mehta, who points to two major items that can boost energy efficiency: making sure that building systems are operating properly and the type of fuel used. “Fuel change [such as going from oil to gas] doesn’t in and of itself improve your score, but when projects like that are done, other systems are improved,” he says.

One of the difficulties in improving your benchmarking score is that you don’t have much control over how individual residents use electricity. The score you receive from the city – and that will become public next year – includes resident use. Some consultants have recognized this and provide buildings with several scores. FS Energy, for instance, developed the Building Energy Rating Guide (commonly called the BERG score), which is calculated only on the common areas. Bright Power provides a scorecard with multiple numbers on it, so you can focus on the number that makes sense for your situation. Each benchmarking consultant has his or her own way of providing numbers, but everyone agrees that what you see needs to be actionable.

“I view LL 84 as a real opportunity for the energy-efficiency industry to prove itself. The government has given us a mandate and done a really good job of promoting it, and getting good compliance, and now it’s up to my industry to prove the value of this,” says Perlman. “If there are people who are not doing a good job of gathering high-quality data – so that it just becomes a tax or a burden – then we need to get those people out of the market. Because it’s not valuable for people to just report a bunch of crappy data. It just muddies everything.”