Multi-Housing News (MHN) recently reached out to AUM's Dimitri Kapsis for insight regarding benchmarking in our industry.
Below you will find the article where Kaspis speaks on behalf of AUM and sheds a light onto AUM's experience with benchmarking in multifamily.
Making Your Mark
By Joshua Ayers, Senior Editor - Published November, 10 2014
Most operational tasks at multifamily communities strive to maximize efficiency in order to increase the bottom line. The web-based revolution in the past 10 to 15 years has helped these businesses to streamline their operations and as that technology evolves, companies are taking a closer look at, and improving, the ways they are spending money on property utilities through benchmarking.
So what is benchmarking? Putting it simply, benchmarking is the process of taking an entity’s specific set of metrics and measuring or comparing those metrics to the metrics of another entity or the average of metrics of other similar entities. In multifamily—and commercial and industrial buildings as well—an example would be taking the total use of electricity at one building and comparing that usage against other similar buildings, or the average usage of multiple buildings that are similar in stature.
While this might sound relatively simple, there are several factors that make utility benchmarking at multifamily communities and buildings more difficult than their commercial and industrial counterparts, including sub-metering, resident privacy and the willingness of utility companies to cooperate with requests for accurate data. Having the right tools, finding the right benchmarking vendor and being aware of local, state and federal benchmarking efforts can all help companies to build a benchmarking strategy that will help reduce utility costs and increase NOI.
A few vendors and tools
In order to effectively benchmark utilities, a company needs nothing more than a method of collecting, analyzing and storing the data, as well as a way to determine how other similar multifamily properties are consuming in order to track results. An initial gut response might include opening up Microsoft Excel or signing into Google Drive, but, unfortunately, the labor costs for tedious manual data entry for benchmarking would likely outweigh any savings that could be had, and there would be no guarantee that the data could be appropriately analyzed.
“This can be done in spreadsheets, but it is time consuming and tedious, and the analysis required to do it accurately is not as simple as adding up utility bills,” says benchmarking guru Jonathan Braman, vice president of the New York-based benchmarking company BrightPower. “For example, in climates with a lot of heating or cooling needs, building energy consumption varies a lot based on how hot the summer [is] or cold the winter is. If I installed a new efficient boiler before last winter’s polar vortex, I still probably used more gas than the previous winter. I may have used less than I would have with the boiler—but utility bills alone won’t show that.”
BrightPower is just one of many benchmarking companies that have emerged in the multifamily industry. One tool that the company offers its clients is its EnergyScoreCards platform, which automatically fetches data from most large utilities, and then “provides weather-normalized benchmarks at the building, property and portfolio levels,” he notes.
Braman says that the use of EnergyScoreCards has helped long-term clients decrease utility spending since they started using the project, but he also notes that the benchmarking alone isn’t necessarily a cause for energy saving.
That combined with working with BrightPower analysts can help companies sort through the data. If consumption problems are evident, BrightPower engineers and procurement experts help clients work through the problem.
“Benchmarking only helps owners make better decisions and take action to save energy,” he says. “We think of benchmarking as a critical component of energy management, but it must be combined with smart operations and maintenance, behavioral changes, and in some cases, capital improvements, to save energy.”
Another major player in the benchmarking industry is American Utility Management (AUM) Inc., which has been providing energy management solutions to the multifamily industry since 1994.
AUM Chief Energy Officer Dimitris Kapsis says that the most important tool for benchmarking is good data.
“The most essential tools for benchmarking is the availability of the actual comparative data, its integrity and overall size of the comparative group,” he says.
AUM’s primary benchmarking tool, SCORE, utilizes data captured from a state-of-the-art data capture process that checks the data’s integrity, and then provides benchmarking that takes into account geographic region, property type and other property characteristics and their overall utility usage to rate a property’s energy efficiency again similar peer groups.
Kapsis stresses the importance of the data integrity checks, since manual data entry can be flawed, as can data that comes directly from the utility companies.
“It could be a situation where we have some data entry issues such as fat fingering, or we even have data issues coming from the utility, because unlike the popular consensus, utilities make mistakes and sometimes [they] make big mistakes,” he says.
Once the data is validated and entered into the system, AUM’s system monitors the data for anything that is out of trend, including utility usage.”
“It’s pretty straight forward. We put some variances in place up or down, and if they break through those barriers that we manually set into the system then the system notifies us,” he says. “We look into it as to if it’s a legit variance. If it is, we let it go through the system and the client receives a notification. From there, either themselves or with our help, we can work on fixing the issue.”
Kapsis referenced an AUM Energy Management client with a portfolio of more than 100 properties that was able to identify conservation opportunities through benchmarking efforts that led to $400,000 in annual savings with a ROI in just 13 months.
NWP, which offers benchmarking through its analytics portfolio, offers a product called ScoreCard, which allows clients to rank a property within a portfolio to see how it is doing against its peers.
ScoreCard also takes into account factors such as weather normalization, and benchmarks several utilities both individually and combined.
“You can look at gas, electric and then a combined gas and electric,” says Chris Dorando, product manager for NWP’s Utility Smart product line. “So for instance, if you’re a property that has electric heating and you want to know how that property is performing against other properties in the area that have gas heating, we normalize that so that you can actually make a comparison.”
NWP also works with clients that use the EPA Energy Star Portfolio Manager, which anonymously tracks whole-building energy and water consumption data that can be used for benchmarking.
All three energy management and consulting companies, BrightPower, AUM and NWP, are service and product provider (SSP) partners through the Energy Star Portfolio Manager program. According to Energy Star, SSP partners “have demonstrated their expertise and achievements by meeting strict Energy Star program requirements for benchmarking customer buildings using Portfolio Manager and gaining Energy Star certification for buildings.”
Challenges and the future
Utility benchmarking has been around since the 1990s, but was primarily restricted to more commercial buildings, where whole-building consumption data is easier to acquire and track.
Even though an assortment of industry suppliers have assisted EPA in creating and improving the Portfolio Manager, whole-building data remains one of the biggest challenges for multifamily due to property complexity and the various types of metering structures set up at those properties.
“The main difference between the rest of the industry and multifamily, especially when we’re talking about commercial or retail, is that each individual unit-—an individual unit could be a retail shop or an entire office building—tends to have central metering for electric, gas and water. So, when we capture the data, we know what the entire unit is using on a per-month, quarterly and annual basis.”
This type of cumulative data makes a platform like Portfolio Manager easy to use and compare to other similar properties by type and region.
With multifamily, however, properties can range from garden-style, to high-rise buildings and beyond, with each of those different types of buildings. Utilities across the spectrum can be measured across the entire property, such as water, which tends to be measured by whole-building, combined with utilities such as gas and electric, that are measured in either entire building or individual apartments or somewhere in between.
“To be able to compare apples to apples for a particular property, it’s not just location and type of property, it’s also what type of metering they have in place. And, not just for one type of utility, it could have a diversity of metering types depending on what utility you’re looking at … that was the difficulty that the EPA had up until recently and they still do.”
Currently, whole building data can only be acquired from utilities that have willingly agreed to provide the information in good faith or that have been mandated by
cities to provide the information, with the first option being subject to a variety of
“Benchmarking laws in several cities have also helped owners and vendors to improve the process and greatly expand the number of properties benchmarking,” BrightPower’s Braman says.
Kapsis, who notes that owners are gravitating toward individual metering for gas and electric as residents demand more control over factors like individual unit climate settings and knowing their own utility usage, is in agreement that the availability of whole-building data will help with benchmarking.
“As a result of those mandates, we will be able to capture whole-building data,” he says.
Dorando believes that the mandate trend is not going to fade away anytime soon.
“As those urban areas like Seattle and New York and Washington D.C. [and] Chicago start to roll out, I think you’ll start to see a lot more of that happen across the country,” he says. “Other communities will start to follow that. It’s something that’s going to be happening, and it’s something that we help our clients with. It’s pretty cutting edge at this time. I think it’s going to be a valuable tool for the property owners because they’ll be able to really improve their properties.”
As this whole-building data becomes more accessible to vendors and their clients, more research and evidence on the effectiveness of benchmarking will become available to owners and operators.
“People used to say, rightly at the time, that there were no good databases of multifamily energy and water use data, so no one knew what was good or bad,” Braman says. “Now we know.”