October 20, 2014

CT property owners slow to submeter

HBJ Photos | Brad Kane
HBJ Photos | Brad Kane
Philadelphia landlord PMC Property Group is asking for state regulatory approval to legally submeter its 915 Main St. building in Hartford.
PMC wants to submeter its 55 on the Park apartments in Hartford.

Connecticut multi-unit property owners haven't been in a rush to charge commercial and residential tenants for their individual energy use since the state approved the practice — known as submetering — in mid-July.

However, that could change quickly as the Public Utilities Regulatory Authority finalizes the state's submetering regulations before the end of this year, and third-party providers begin to enter the market to encourage landlords to make the switch.

"There are a couple of big [third-party vendors] that just specialize in [submetered] billing," said Paul McCary, a partner at Murtha Cullina's Hartford law office, who is representing Philadelphia landlord PMC Property Group in its efforts to submeter two of its downtown Hartford properties. "There are companies that do that, and I think they would be the ones that have the biggest incentive to seek out landlords, and say, 'Hey, Mr. Landlord — we see that you've got a building that's mastermetered right now. You can improve the energy profile of the building and lower the aggregate cost of occupancy by going down the submetering road, now that it's been paved.'"

Submetering allows landlords of multi-unit buildings to charge tenants for their individual energy use, as opposed to mastermetered buildings that charge all tenants the same flat rate, regardless of how much energy they use.

Most submetering was illegal in Connecticut until 2013 when the state legislature approved the practice for commercial, industrial, and multi-family residential buildings to give tenants an incentive to conserve energy. A 2012 study by consulting firm Navigant found that average electricity use dropped as much as 34 percent in submetered buildings.

In mid-July, PURA issued regulations allowing property owners to install submeters for simple energy conservation. Since then, two landlords filed permits to legally adopt the practice: PMC Property Group for its 915 Main St. retail-office-apartment building and 55 on the Park apartment complex, both located in downtown Hartford; and New York City's First Service Residential for its 205 Church St. building in New Haven. Those permit applications are still under review by PURA.

However, PURA has not ruled on whether submetering could be used to pay for a renewable energy installation — where tenants are charged for power from a fuel cell or solar array instead of the main electric grid. That has put Fairfield developer Bruce Becker in limbo, because he planned to submeter a fuel cell at two of his properties: 777 Main St. in Hartford and 360 State St. in New Haven.

PURA is expected to issue a draft ruling on submetering in buildings with renewable generation Nov. 19, with its final decision coming Dec. 10. Since tenants would be charged by an unregulated, third-party administrator, PURA is working to make sure proper consumer protections are in place, said agency spokesman Dennis Schain.

"This model requires careful attention to consumer rights to ensure that those receiving power are treated fairly and have protections when it comes to rates and terms of service," Schain said

Other than PMC and Becker, which have fought for submetering for four years, and First Service Residential, no other multi-unit property owner has filed for a submetering permit.

There will not be a huge rush by landlords to submeter, McCary said, but third-party submetering providers like New York-based Quadlogic are eager to tap into the Connecticut market.

Quadlogic is a submeter manufacturer that First Service Residential has retained to service meters at its 205 Church St. property in New Haven. Phil Fram, the company's vice president of sales and marketing, testified at a PURA hearing in June about his company's business.

He said Quadlogic performs monthly submeter billing at about 400 residential and commercial buildings in New York and California.

"We actively work with property owners, developers, managers, professional engineering firms and contractors selling the benefits of submetering," Fram told PURA. "We look forward to expanding our reach into residential buildings in Connecticut."

For its own submeter billing services in Connecticut, PMC Property relies on vendor Energy Management Systems of Exton, Pa., which invoices about 45,000 tenants across its client base.

PMC actually started submetering its 915 Main St. building in Hartford in 2011, before it was legal and has fought with PURA over the practice.

PURA's investigation into PMC's submetering has since been rolled into the broader submetering review that will be finalized in December.

The third-party submetering services market could ramp up quickly once the final regulations are approved, McCary said.

The situation is somewhat similar to the changes Connecticut made in its renewable power incentive programs, which led to solar installation companies rushing into the state to sign up new customers under a favorable regulatory environment.

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