Teachable Moments: More About Switching to Natural Gas or Dual-Fuel
Jan. 23, 2014 — Providing heat is one of the biggest expenses for your cooperative or condominium. In this second Teachable Moments column to look at condo and co-op boards' options for switching from fuel oil, three experienced property managers tell you much of what you need to think about when you're considering such a changeover. And some of it's not the conventional wisdom.
Robert M. Freedman
President, Maxwell-Kates
The condominium did not have substantial reserves, and capital projects were exclusively funded through assessments, since the bylaws prohibited borrowing. Converting the heating system to natural gas was a difficult option because of the upfront expense involved, including bringing gas to the building. In order to comply with the New York City Clean Heat program, the board agreed to burn No. 4 oil. Then we learned that if the building acted quickly, gas would be available from Con Ed at no charge, making the conversion to gas affordable. The issue of financial flexibility and planning was brought to the forefront as the payback from the projected savings from burning gas would be so favorable. Management successfully worked with the board so that Con Ed brought gas service to the building without a charge; negotiated favorable contract terms for the changeover of the equipment; and worked to amend the condominium's bylaws to permit borrowing funds for this and other capital projects in the future, if needed.
Joan Konow
Principal, Key Real Estate Associates
Boards members can be very hands-on and take-charge, without relying on the experience of the managing agent. Such has been the case with the city mandate to convert boilers / burners to lesser-polluting fossil fuels. Many boards have struggled with and have been concerned that, despite the distant compliance deadline, certain incentives would be lost if conversion were not done soon. All things need to be weighed and considered: the present-day and future costs, and the economic loss of such factors as greater BTUs (more heat) generated with oil than gas. Only recently has the historical trend of cost changed in favor of using gas; gas has not gotten any cheaper, but rather oil has become more expensive. The future costs are unpredictable (particularly given the objections over fracking). So what sounds like a good idea today may, in retrospect, become a bad decision. The takeaway is that, as managing agents, we need to listen to board needs, while at the same time guiding boards on issues and experiences that are shared by all of our clients.
Jeffrey Stillman
Vice President, Stillman Management
What do you do when a plan you are in the middle of implementing gets derailed through an unexpected event? In the middle of installing energy-efficient gas boilers in all four sections of this property, there was a major gas leak and a building structural issue. The problem the property faced was how to finance the completion of the boiler project when funds, which were earmarked for the project, had to be diverted to make emergency repairs. The property could not draw down on an existing line of credit, refinance the mortgage, or assess the owners. We were able to assist the board by contacting an energy company that offered a new financing program for boiler installations. The company will advance all the payments to the contractor, install the boilers, and be repaid through the savings obtained by switching from oil to gas.
For more, see our Site Map or join our Archive >>
See also: "Teachable Moments: Saving Money by Switching to Natural Gas or Dual-Fuel"