What You Use Is What You Pay

In the summer, you are very frugal. You put your air conditioner on the “Energy-Saver” setting and use it only during non-peak hours. Your neighbor, however, is an energy hog, keeping the AC at subzero temperatures during the summer months and leaving the lights on in his apartment every night, all night long. Why should he care? “Energy is cheap,” he says when you confront him. At least, it is to him. You both live in a master-metered building in which all of the building’s electricity use passes through one meter. Then the co-op, which usually buys electricity at a cheaper bulk rate, bills each of the residents under the monthly maintenance/common charges either by the room or another formula. (Many times surcharges are added for energy-gulping appliances.)

The upshot? “The people who use too much energy are being subsidized by the rest of the building,” says Luke Falk, project manager with the New York State Energy Research and Development Authority (NYSERDA) residential energy affordability program. You may be frugal, but you are still paying more because of Mr. Energy Hog.

That’s why submetering seems so attractive to many boards that are looking to reduce energy bills. The decades-old technology clearly illustrates the old axiom: you get what you pay for. Power is still tracked through a master meter, but each unit also has its own meter (these submeters can either be placed physically in each apartment or housed in an electrical closet or in the basement). That way, each resident only pays for what he or she uses. (Buildings often contract out to a meter-reading company, and management includes the results in maintenance/common charges.) NYSERDA estimates that residents use between 15 and 30 percent less electricity after submetering. When people have to pay for what they use, they use less.

The system is similar to those that exist in directly metered buildings in which each unit has its own meter and each resident gets his or her own bill from Con Edison, paying only for what is used. The difference is that residents don’t get the break of buying electricity in bulk. With submetering, that option is available to the building.

Submetering has been around for years, but only recently have co-ops and condos started taking advantage of the technology, energy experts say. But what does it cost? What incentives are available from NYSERDA? And why is it something that your board might want to consider?

Different boards at Deepdale Gardens in Little Neck, Queens, have talked about submetering, but it was only when a new board was seated in May that all the members were unanimously for the idea and the ball really started rolling, recalls Shaun Carr, first vice president. “The cost of electricity has been skyrocketing,” he notes. “With that and with the NYSERDA [incentive] programs, we thought that now was the time to push ahead,” says Carr, who has lived in the 1,396-unit cooperative for his whole life.

The co-op is in the early stages of installing submeters. Carr says the project, if approved by the shareholders, will lower everyone’s electricity costs and could lead to more energy and money-saving measures. Deepdale, as with other buildings, could see a payback on its investment in about four to six years, says Tom Sahagian, manager of the energy division at the energy-consulting firm, Power Concepts.

Energy experts say that as technology has evolved, even greater benefits from submetering have emerged. First off, there is what is known as time-sensitive pricing. Energy costs more at certain times of the day. But with certain submeters, buildings can participate in programs that allow them to buy power at cheaper rates because the meters can track when power is used during low-cost times. Some submeters assist by displaying lights that indicate when power is cheap.

Then there is curtailment. In this program, buildings agree to cut back on power usage during high-demand times and are paid for their efforts. Finally, in some cases, submeters can be used to regulate heat. (For more information on these programs, see “Green Report: Curtailment Is Now,” Habitat, October 2007.)

What does it cost to submeter? Experts say that equipment and installation costs range between about $400 and $600 per apartment. There is an additional meter-reading fee that usually ranges from about $1.90 to $3.50 per unit monthly.

NYSERDA offers submetering incentives under its recently launched Multi-Family Performance Program. Buildings sign on with a NYSERDA-certified partner, which will evaluate the building, create a plan to reach a goal of reducing energy consumption by 20 percent, and then make the necessary changes.

Submetering is one way to reach that goal, and so NYSERDA will pay up to $150 per unit for market-rate buildings to submeter. But note: NYSERDA will not include an incentive for submetering unless all other measures with a better payback are implemented. (For more information on the Multi-Family Performance Program, see “Green Report: NYSERDA Primes the Pump,” Habitat, June 2007.)

Sahagian says there are cases when submetering might not be cost-effective. Sometimes, buildings are too small to benefit, although he adds that he has worked with some that have as few as 30 units. In very rare cases, notes energy consultant Herbert E. Hirschfeld, buildings will have wiring situations that are so complex that submetering does not make fiscal sense.

Everyone involved in submetering agrees that it is not a simple process. “There is no such thing as a one-year project, even if it’s a small building,” says Hirschfeld. One element that can seriously complicate submetering is if there are rental units in the building, Hirschfeld says. The New York State Public Service Commission (PSC) requires boards to submit detailed information about the submetering plan.

Also, if only one tenant opposes the switch the PSC will not approve, and the building can’t go forward. However, you can install meters and just not enroll the renters in the program. The PSC requires that a majority of voting shareholders have to want it. That means if there are 1,000 units and just 20 vote, only 11 have to agree.

Hirschfeld is at work on a massive project that includes submetering at Georgetown Mews, a 37-building, 930-unit complex in Queens. He says he expects all the submeters to be installed by the end of the year.

Essentially, Georgetown Mews is going to be used as a showcase by which NYSERDA can illustrate what submetering can do, explains Peter Douglas, program manager for buildings research and development at NYSERDA. The complex will eventually participate in curtailment and time-sensitive pricing, it will probably have air conditioners that can be turned off or down remotely (residents can override that), and it will have a heating system that senses the temperature in the room before turning on the boiler to avoid wasting energy. “You get the highest return when you mix everything together,” observes Douglas.

At Georgetown Mews, about 90 percent of the units are occupied by shareholders. The board satisfied the PSC requirements on renters by simply allowing tenants to continue to pay monthly maintenance charges, even though they will have a meter in their unit. But that doesn’t mean that the board took resident support for granted. In addition to educational seminars for shareholders, Hirschfeld organized meetings with local politicians to obtain their blessings as well.

“Submetering is the most controversial and most difficult measure to get through in residential buildings,” he says. “Basically, the people who get involved in the process are those who are opposed.”

This past August, Deepdale Gardens was moving forward, too. The board held four informational meetings, and Carr says ballots are expected to be counted at the end of November. Submeters would be installed in the basement, in part to minimize intrusion, he says. (While the idea of being able to regulate heating was attractive, Carr says it would not have worked because the meters would have to be placed in the kitchens, where the heat would have thrown off the sensors.)

The estimate on the potential savings from submetering ranges from about $40 to $60 per month for each resident, via the reduction of carrying charges and the elimination of energy surcharges. On top of that would be savings from the dropping of appliance surcharges. Residents who ramp down their power usage would save even more.

If the project is approved, Carr says the board will work hard to educate residents about how to save energy and money. “We’re not just going to say, ‘Thanks for the vote, goodbye.’ We’re going to help them prepare for this new idea.”

The submetering project will include upgrading the complex’s master meters; bids so far range from $695,000 to $1.1 million. NYSERDA’s incentives are projected to cover about $295,000. Whatever is not covered will come out of the co-op’s reserve fund.

If submetering is adopted, Carr says the board will consider adopting measures like curtailment and time-sensitive pricing. One of the biggest backers is a group of older residents who spend much of the winter in Florida. Under submetering, their winter bills would plummet.

Carr says there has been “push back” from some skeptical residents, but that others have been enthusiastic. “I grew up in this development and no one has ever told me to turn off a light,” Carr notes. “It’s this false impression that we don’t pay for electricity – that’s the mentality of co-ops.”