by Calvin Cornish, Nania Energy

A lot of folks are up in arms about the city of Chicago’s new benchmarking ordinance and, as an adviser on energy purchasing and consumption, I field a lot of questions. Who will it apply to? Is it really necessary? What’s it going to cost? Is it just an excuse to slowly move from reporting to requiring, which will cost building owners dearly? Why now, why us, why at all, and what do I do?

It is not my place to sell the city’s program – there’s always room for improvement and I definitely have my criticisms; however, it is not all bad. I would like to share briefly why this is a great time to look deeper into your property’s energy usage and why benchmarking can be a very good first step for Associations to save money.

The record-breaking winter of 2013-2014 led to record-breaking bills, and even Associations that thought they reasonably hedged their risk found that their budgets were still be crushed under months of snow and sub-zero temperatures. A few notable numbers from last winter are:

• The year 2014 has seen the most days below zero in 40 years.
• Utilities announced more than 30 “critical days” when the average is less than three per winter
• During the month of February, daily cash rates for natural gas hit $2.88 per therm (when typically it is 40 and 50 cents per therm)
• Mid-day hourly electric rates that might normally be 5-7 cents per kwh were $2/kwh.

While it is easy to write it off as an anomalous winter, this may not be the case. Even though the total dry gas production for 2013 reached a record at 24,280 Bcf, the total consumption for the same period also reached a record at 26,034 Bcf – and that is just through December, before the Polar Vortex and before the groundhog came out and froze solid in the beginning of 2014. The fact remains that energy usage is continually increasing, which in turn raises the risk of usage and pricing volatility due to weather. Along with hedging your price risk, efficient use of energy at your property is a critical piece of managing the threat of increasing usage on your budget. The first step in this process is measuring current usage, which brings us to the new city ordinance.

Officially, the Chicago Energy Benchmarking Ordinance seeks to raise awareness of energy performance through information and transparency, with the goal of unlocking energy and cost savings opportunities for businesses and residents. To comply, covered buildings must track whole-building energy use, report to the city annually, and verify data accuracy every three years.

The ordinance is applies to municipal, commercial and residential buildings 50,000 square feet and larger, with certain exemptions for financial hardship, low occupancy and some specific space uses. Compliance will be phased in over several based on size and sector. See the table below.

Note that periodically it is required that the data be verified. This is important for two reasons. First, it was found in cities that have implemented similar programs that the biggest concern they had was validity of data. People could enter any numbers they wanted, putting the data quality into serious question. There was nothing keeping a building from simply making up all of their numbers. Also, if the goal of the program is to encourage not only the examination but ideally the efficient implementation of energy-saving measures, then it is important to have a professional involved. I’ve heard some grumblings when it comes to this policy – some feel “Big Brother” is watching them or call this the “shame ordinance.” The fact remains that sitting down with a professional and taking a holistic approach to energy maintenance and improvement is the best way to go about it. It can save you money in the long run.

Associations and co-ops are often pulled in different directions when it comes to finances, budgeting and planning. Juggling the needs of today versus the needs of tomorrow is a delicate and detailed process. To help manage that process, there are reserve studies to ensure that you are saving up for planned capital improvements. Unfortunately, with the exception of a new roof or a complete boiler/HVAC replacement, energy usage often is not included in that process. It should be. Instead, the average Association repairs when needed, performs boiler tune-ups periodically or occasionally upgrades lighting or other small projects when the ROI seems to be relatively short – or someone approaches them with potential for rebates on specific items. These are all good things, but they often leave thousands of dollars on the table.

Having an audit and five-year plan not only allows your property to optimize different equipment that will perform better together, but plan for the expense of major upgrades and secure government funding that would otherwise be missed. Beyond rebates for specific items (which are often funded by the fees you pay to local utilities), there are also millions of dollars from state and federal programs that go largely unclaimed because they are project-based. A trusted partner, working with your property in a general contractor capacity, can help you map out potential projects, the return on those projects and the projected improvements to efficiency that are necessary to apply for and receive federal funding. Another benefit of this approach is that you have a knowledgeable and independent professional helping to create bid specifications and evaluate vendors to ensure that the proposal meets the requested project specs.

A great place to start is through your utility or other government groups that will provide low-level initial audits for free. From there, seek a reliable energy adviser and company to evaluate and help implement your plans. When your property is measuring and managing energy costs through a detailed strategic plan, benchmarking will be a simple afterthought.

Calvin Cornish is a Senior Strategic Energy Adviser for Nania Energy, and can be reached at (630) 416-8300 x311 or by e-mail at [email protected].