Building owners and managers today are overburdened with the complexity of purchasing electric power and properly billing tenants for power use. As tenants' power requirements increase and the regulatory and rate structures become increasingly complex, it is necessary for owners and managers to fully understand how to charge each tenant.

The essential need to first reconcile utility bills and then calculate charges for each tenant is often stymied by an avalanche of confusing rules, rates, and end user surcharges. To make matters worse, many buildings have obsolete or unreliable metering systems to track data.

So, how can an owner begin to take control of this key cost area? To ensure that revenue is maximized and tenants are equitably treated, it is imperative that two areas are expertly managed—the physical layers, which deliver and measure power (the electric distribution and metering system) and the business layers, which provide the rules for allocating costs (lease and regulatory language). Using an integrated approach that addresses both of these areas ensures that accurate consumption data captured by the meters will be used to bill tenants in compliance with their lease language.

A strategic business view of these issues, coupled with a clear understanding of the regulatory environment and energy pricing models, will help maximize a building's value. To the extent that energy costs are accurately allocated to tenants, owners and managers can significantly reduce their operating expenses and improve the financial performance of their buildings. Keep in mind that a dollar increase in revenue or decrease in expenses can equal a $10 increase in asset value.

Attracting and Keeping the Best Tenants
Building owners and managers naturally want to retain and attract quality tenants. To do this, you must be able to show that you can pass through any expense reduction, and that all power expenses are being equitably distributed to all tenants. A reliable and sophisticated metering system is essential. Less sophisticated systems that do not consider a more strategic view result in lost revenue or having to back bill tenants.

Your physical system must be properly connected to the data layer of your metering system. If everything is not configured correctly, you could easily be overcharged by the utility company, or inaccurately charging your tenants. In either case, the revenue drain can be substantial.

A Metering System Is Not Enough
Additionally, simply having a metering system does not guarantee that it is collecting the right data. It is important that you apply a disciplined approach to the implementation and management of your metering systems. At a utility, the meter is analogous to a "cash register." The meter is the point-of-sale. If proper planning and care is not taken in the implementation, then the "cash register" may be leaking value from the business.

Metering "leakage" can be a major problem, costing 5–10% (or much more in some exceptional cases) of your annual power bill. For example, in one downtown office building, the metering system was so poorly configured it showed power flowing in the wrong direction and over-counting the consumption, resulting in a total lack of confidence in the data. Without the data to justify tenant bills, the owner was left with the choice of estimating consumption (guessing) or even worse "eating the cost." If configuration problems such as this are left unfixed or if your meters need to be reset, you could not only lose valuable historic data but also the confidence of your tenants.

Verifying that your system is properly logging energy usage and that the configuration is accurately measuring your usage is the first step in uncovering the hidden value within your building.

Many Steps Contribute to Bottom Line
A strategic view of energy consumption can result in peak shaving, or a reduction in your peak period electrical load, through energy conservation measures. A careful evaluation can also show that load shifting, or shifting your power consumption to the least expensive periods, can save you substantial energy dollars.

Understanding the intricacies of energy consumption in your building is only one component of the strategic equation. It is also important to be knowledgeable about the regulatory environment in your area and the specific rate structure of your utility company. Working with the power company to negotiate a more favorable deal and to identify savings opportunities is recommended.

As with any negotiation, a good relationship with the power company can be very helpful. With careful analysis and negotiation, you can save up to 10% on power procurement and save on peak usage charges. Initial buy opportunity analysis, and ongoing market tracking and commodity procurement, can ensure that you are getting the best possible deal from your utility company.

In addition, bill verification, cash flow tracking, and capacity management will positively affect the bottom line. But, keeping up with everything can be difficult. Seeking outside help on the engineering opportunities and the financial know-how mentioned above may be the fastest path to bottom line savings.

Once there is a full understanding of how power is being utilized in your building and the best deal has been reached with the utility company, you can look at your current tenant leases. With verified data and analysis, it is a lot easier to justify lease changes, time usage data changes, and back billing, if necessary.

If specific analysis shows you have been improperly billing your current tenants, a thorough analysis provides the back up necessary to justify any back billing. Having a third party to negotiate with your tenants gives the process a more objective dialogue and relates a sense of openness to tenants affected by billing changes.

When you add up all the potential savings from the various stages of an engineering and a strategic business analysis, the benefits—in enhanced revenue and decreased costs—increase the value of your asset enough to justify the investment in setting up a quality tracking and billing system.