Heat metering may be the answer
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.
The low cost and efficiency of central heating systems make them a popular choice in the multifamily industry.
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)
- 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.
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.
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.
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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.