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Energy Commodity Purchasing Outlook - February 2014

 

Outlook

Currently, the risk of higher pricing for both natural gas and electric supply outweighs any pricing downturn opportunities.  For property owners still exposed to default pricing or variable pricing, we highly recommend reviewing your accounts now, and preparing for negotiations during possible upcoming pricing breaks. Daily market pricing for the northeast markets, especially New England, continues to set daily records.  If all goes as predicted over the next several weeks, expect some pricing decline, with buying opportunities in late February or early March.  You should consider longer positions in the market, with 18-, 24- or even 36-month terms and delayed contract starts.  Commodity and capacity pricing tend to stabilize further into the future.

 

Natural Gas Storage

Wow, what a difference a month makes.  Many of us survived a very cold December and actually looked forward to a snow-covered Christmas Holiday.  Unfortunately that was not the end of the story.  January came in with a vengeance, registering some of the lowest temperatures many of us have seen in a very long time.  On Monday, January 6th, 2014, below-freezing temperatures registered in all fifty states,  including Hawaii. 

Since our last report we continued to experience record high withdrawals from the national natural gas storage.  Last week the Energy Information Administration (EIA) reported a natural gas storage withdrawal of -230 Bcf, a figure within the analysts’ expectations but well above historic figures.  Natural gas in storage is currently at 2.193 Tcf, 437 Bcf below the five-year average figure and 637 Bcf below last year’s level.  In one month we experienced a 28.6% drop in storage levels while the five-year average called for a drop of only 22%.  Punxsutawney Phil did not have good news for us either.  On February 2nd he predicted six more weeks of winter; a brutally cold and long winter so far.

NYMEX Gas Settle resized 600

Natural gas storage inventories are now officially below the five-year historical range.  We expect the record high withdrawals to continue as long as the current low temperatures continue.

12.13 Hubspot storage graph

 

Temperature Outlook

Near-term forecasts are calling for temperatures to remain in the severe cold ranges through at least the middle of February.  If we do not get any reprieve from these extreme low temperatures by the end of February we will experience further natural gas pricing spikes, which in turn will push for electric pricing spikes right before the upcoming summer season.

Based on NOAA’s latest extended forecast, we should experience above-normal temperatures across the southern part of the US for the next three months.  We can only hope that some of this warmth will find its way up north pressuring pricing for both electric and natural gas lower.

12.13 Hubspot  Winter temps

 Courtesy:  EarthSat

Natural Gas Production & Pricing

Last week, the February 2014 natural gas contract settled at a price of $5.557 per MMBtu, a substantial spike in the pricing trend.  The latest monthly settlement was 26% higher than January’s settlement and the highest since January of 2010.  The NYMEX Natural Gas price settle curve depicted below includes a polynomial trend line (marked in red) which shows a sustained upward curve.  The weather is currently the major factor for the recent price spikes; temperatures through the middle of March could set pricing trends for 2014 and 2015.

12.13 Hubspot  Gas Settle

 

Our national dry natural gas production continues to exceed last year’s levels but it did drop to 65 Bcf/day this month due to the extreme temperatures and well-head freeze offs.  Once the temperatures settle back to normal levels the output is expected to climb back up to record high territory above 67 Bcf/day.

Even though we had very high increases in the price of natural gas, the market did not experience the expected gas-to-coal switching for power generation because the generators needed both types of fuel due to the very low temperatures.  If the current elevated natural gas pricing continues we will eventually see more and more generators ramp up electric generation from lower-cost coal-fired plants.

 

Bottom Line

As of January 30th, 2014 the 12-month average forward pricing curve for natural gas is at $4.44 per MMBtu, compared to last month’s $4.26 per MMBtu price.  In addition, the three-month pricing curve for the remaining heating season, February 2014 through March 2014, jumped to $5.01 compared to last month’s $4.37 per MMBtu, illustrating the obvious effect of the much colder-than-average temperatures on market pricing.

With each passing month it becomes more clear that the market possibly experienced its low point  in May/June 2012.  Several clients took advantage of these positions, but their low-priced contracts are soon up for renewal and they too will experience the market uptrends. However, we did have several clients grab the opportunity last fall tosecure contracts to cover their loads through 2014, with many through 2015. 

Current projections estimate the natural gas market returning to $4.00- $4.50 per MMBtu, but we do not expect to see pricing below the $4.00 mark any time soon.  If the weather gives us a break, we could see a buying opportunity in the next few weeks.

Natural gas and electric prices are continuing to trade higher than last year.  Natural gas production still remains at high levels even though the natural gas rig count has been considerably reduced over the last year.  Advances within the shale gas industry have increased production levels to record highs.  Current high heating demand and increased industrial demand have contributed to higher pricing.  We expect the economy to continue to improve, thus keeping industrial demand strong while the remainder of the heating season could establish the bottom price thresholds for the remainder of 2014.

Market Alert - New York City Local Law 87 Compliance Now Required

 

NYC LOCAL LAW 87 – Energy Auditing &NYC Seal Retro-Commissioning

In December of 2009 New York City Mayor Bloomberg and the City Council signed Local Law 87 (LL87) under the City’s Greener, Greater Buildings Plan.  The law requires buildings with gross square footage of 50,000 sq.ft. or more and two or more buildings on the same tax lot that together add up to 100,000 sq.ft. to perform an energy audit and conduct retro-commissioning of the buildings’ base systems such as the envelope, HVAC, controls and lighting.

Under LL87, property owners are required to file an energy audit report during the calendar year of their assignment and every ten years thereafter.  The completion assignment schedule  is determined based on the last digit of the tax block number assigned to every property in the City.  The first rounds of assessments were due for compliance in 2013.

 NYCLL87

The energy audit must be an ASHRAE level II audit following the strict guidelines established by the Association.  It shall be a formal technical assessment of the property’s base systems such as the envelope, mechanical, plumbing, lighting, and control systems resulting in a detailed findings report enumerating energy and water conservation measures with upfront costs and resulting savings.

Retro-commissioning shall apply the commissioning process to existing buildings by identifying underperforming building systems and controls and provide correction solutions to return them to their original and intended performing state.  In some cases retro-commissioning performed by qualified professionals can identify and provide solutions for issues that were part of the original design and/or construction.

Property owners and managers that fail to comply with the due dates associated with LL87 shall face fines that accumulate over every non-compliant year. Failure to submit an Energy Efficiency Report will be regarded as a Class 2 violation, which may result in a fine of $3,000 for the first year and, will compound with each additional non-compliant year until the Energy Efficiency Report is submitted. Furthermore, the Department of Buildings will not accept a report if outstanding fines have not been paid.

Contact AUM today for further information and assistance with LL87 and other mandates currently in force across the US.  Our experts will evaluate your compliance requirements and schedule the site visit by our Certified Professionals for the completion of the mandate requirements.

Click here to understand all LL87 Compliance Requirements

Energy Commodity Outlook - December, 2013

 

Outlook

We continue to believe that the risk of higher pricing for both natural gas and electric supply outweighs any pricing downturn opportunities.  For clients still having exposure to both electric and natural gas market pricing for the upcoming winter months we highly recommend covering their positions for the short term.  If all goes well with temperatures, natural gas storage inventories and production, we could see buying opportunities in late February/early March.  Clients should highly consider longer positions in the market with 18-, 24- or even 36-month terms.

 

Natural Gas Storage

Given the current extreme weather gripping most of the Nation, many in our industry are wondering if the high natural gas inventories in storage and the record high dry gas production numbers of the past several weeks offer enough support for the upcoming winter heating demand.  A reminder of the upcoming winter season was given to us with the arctic blast engulfing the Eastern two-thirds of the country and the foul weather spoiling travel plans for many Americans.  In Chicagoland we are currently experiencing 20-degree daytime temperatures, usual weather for us, but not until late January.  Since our last report we have experienced the first withdrawals from the national natural gas storage. 

Last week the Energy Information Administration (EIA) reported a low natural gas storage withdrawal of -13 Bcf; a figure within the analyst’s expectations, yet pricing went up.  Natural gas in storage is currently at 3.776 Tcf, 17 Bcf above the five year average figure and only 100 Bcf below last year’s record setting levels.

12.13 Hubspot storage graph

Temperature Outlook

The National Oceanic & Atmospheric Administration, commonly known as NOAA has issued preliminary winter temperature forecasts calling for above normal temperatures for New York, New England and Texas while the Midwest and Midatlantic should expect normal temperatures.  Normal temperatures sound like a favorable forecast but we do need to keep in mind that the past two winters registered above normal temperatures.

12.13 Hubspot  Winter temps

 

Natural Gas Production & Pricing

Our national dry natural gas production continues to exceed last year’s levels; we continue on the year- over- year higher production of 2.5 Bcf per day.  It appears that the magic price for the coal to natural gas switch made by many electric generators is still at the $4 per MMBtu mark; recent market pricing approaching this threshold will test this theory.  In addition coal prices are still at their lowest point over the last three years so the incentive for electric generators to switch to an alternate fuel such as natural gas has diminished.

Last week the December 2013 natural gas contract settled at a price of $3.818 per MMBtu, an uptrend compared to the last four months.  The NYMEX Natural Gas price settle curve depicted below includes a polynomial trend line (red line) which shows a sustained upward pricing curve.  Despite the above forecast storage inventory reports over the last couple of weeks, the NYMEX forward natural gas futures contracts have not reacted with substantial pricing downtrends.  On Cyber Monday, the January gas futures contract settled at $3.988 per MMBtu, approaching the $4.00 psychological mark.  For the market to experience a substantial drop with a sustainable duration will require December and possibly January to experience above normal temperatures, for production levels to remain at current record highs and industrial load to remain as is without any major capacity increases.

12.13 Hubspot  Gas Settle

 

Bottom Line

Currently the 12-month average forward pricing curve for natural gas is at $3.995 per MMBtu, compared to last month’s $3.697 per MMBtu price.  In addition the four month pricing curve for the upcoming heating season, December 2013 through March 2014, receded a little to $3.93 from last month’s $3.64 per MMBtu.  The effect of the upcoming cold weather on the market pricing is obvious.  As stated last month the market appears to be bouncing off a bottom threshold and several buyers have taken advantage of recent lower pricing in order to cover their positions for the upcoming winter loads.  Several energy executives continue to project that the natural gas market will continue to fluctuate in the $3.50 to $4.00 per MMBtu range for the first part of 2014.

The fact still remains that natural gas and electric prices continue to trade higher than a year ago.  Natural gas production is at an all-time high even though the natural gas rig count has reduced by 13% compared to last year.  Advances within the shale gas industry have increased production levels to record highs. We continue to have minimal demand and the record high production levels are keeping energy pricing in check.  Both the natural gas and electric pricing are currently trading near their second-lowest levels in the last decade. Hurricane activity was non-existent this season but the winter heating season of 2013-2014 is just starting.

Energy Commodity Outlook - October, 2013

 

Outlook

We continue to believe that the risk of higher pricing for both natural gas and electric supply outweighs any pricing downturn opportunities.  We are currently experiencing a buying opportunity, clients should seriously consider covering their winter electric and natural gas exposure if they have not done so already.  If all goes well with temperatures, natural gas injections and the hurricane season, we could see buying opportunities last through October.  Clients should consider longer positions in the market compared to shorter 12- or 18-month deals.  We are seeing competitive pricing for 24- and even 36- month terms due to the lower capacity charges.

Natural Gas Storage

It’s Autumn, and shoulder season has arrived. But higher than normal temperatures have remained throughout the country.  Last week temperatures in Chicagoland reached as high as 85 degrees, in October!!  But no complaints here considering that the days are getting shorter, the nights are getting longer and the temperatures will soon follow their natural downward path.  On September 30, the Energy Information Administration (EIA) reported a natural gas storage injection of 101 Bcf; a figure above the analysts’ expectations yet pricing was not affected much.  Natural gas in storage is currently at 3.487 Tcf, 49 Bcf above the five-year average figure and only 155 Bcf below last year’s record setting levels.

Natural Gas Storage: Storage Buildup
Continues on Strong Pace During September

October Storage Tables resized 600

 

Natural gas storage inventories are still lower than last year’s levels, but the variance continues to shrink at a faster pace.  Injections over the last couple of weeks have surpassed expert forecasts.  Today’s injection report of 101 Bcf for the week ending 9-27-2013 was much higher than last year’s injection of only 77 Bcf.  The traditional storage injection season runs through October 31st so we have at least four more storage injections forecasted to continue strong; expectations still stand for the natural gas market to possibly loosen up a little more before the onset of the heating season.

October Storage resized 600

Temperature Outlook

Weather forecasts for October and November are indicating that the majority of the country will experience normal to above normal temperature patterns.  We have also learned that the scheduled nuclear plant maintenance shut downs for this fall are substantially lower than the rolling average.  These two factors could potentially help the market by reducing natural gas usage for both electric generation and heating loads allowing natural gas storage inventories to build to near or above record levels before winter temperatures set in.  Last week we had our first Tropical Storm, named “Karen”, which luckily did not become a hurricane before hitting the natural gas producing area of the Gulf.  We are not done yet with the Hurricane season.

 

Natural Gas Production and Pricing

 

Our national dry natural gas production continues to exceed last year’s levels; we are currently at 2.5% above last year.  It appears that the magic price for the coal to natural gas switch is the $4 per MMBtu mark; sustained pricing above the mark means that power plants will continue to burn coal while sustained pricing below that mark is a good incentive for generators to fire up their natural gas units.  Currently coal prices are at their lowest point over the last three years so the incentive for electric generators to switch to an alternate fuel such as natural gas has diminished.

There have been several articles and reports stating that tight natural gas supply balance in the Northeast and especially in the New England area are driving forward-basis pricing much higher than the rest of the country.  Winter forward prices at the Algonquin Gas Transmission city-gates, a highly constrained and often volatile New England hub, are averaging $8 per MMBtu year to date, a 31% increase compared to last winter.  Even without any clear forecast for the upcoming winter’s temperatures the pricing for basis (capacity coverage) is heading higher and higher every day.  Last November spot prices at Algonquin city-gates jumped by $4.10 per MMBtu within a week’s period.  This year it could get even more volatile.

On Friday, September 27th the October 2013 natural gas contract settled at a price of $3.498 per MMBtu, a slight improvement over the September settle.  The NYMEX Natural Gas price settle curve depicted below includes a polynomial trend line (red line) which shows a sustained upward pricing curve.  Despite the above forecast storage inventory reports over the last couple of weeks, the NYMEX forward natural gas futures contracts have not reacted with substantial pricing downtrends.  It appears that natural gas pricing is bouncing off a bottom threshold. Any pricing downtrend will be small and brief but an uptrend could be large and much longer.

October Gas Settle resized 600

 

Bottom Line

Currently the 12-month average forward pricing curve for natural gas is at $3.789 per MMBTU, compared to last month’s $3.873 per MMBTU price.  In addition the five month pricing curve for the upcoming heating season, November 2013 through March 2014, receded a little to $3.77 from last month’s $3.885 per MMBTU.  For all practical purposes, the heating season is around the corner.  As stated last month the market appears to be bouncing off a bottom threshold and several buyers have taken advantage of the recent lower pricing in order to cover their positions for the upcoming winter loads.  Several energy executives project that the natural gas market will continue to fluctuate in the $3.5 to $4 per MMBTU range for the rest of the year.

The fact remains that natural gas and electric prices continue to trade higher than a year ago, but they are still close to the lowest levels of the last ten years set back in May of 2012.  The recent development of shale gas production has provided some protection against extreme pricing spikes usually accompanying the hurricane season, but a large region of our country, the Northeast, inclusive of the NYC area and New England, has remained very volatile due to high dependence on natural gas for electric generation and capacity constraints.  A coastal storm such as Sandy or a sustained winter storm with snow accumulation and Arctic temperatures could create major disruptions and substantial price spikes particularly for these markets.

We continue to believe that the risk of higher pricing for both natural gas and electric supply outweighs any pricing downturn opportunities.  Clients should seriously consider covering their winter electric and natural gas exposure if they have not done so already.  If all goes well with temperatures, natural gas injections and the hurricane season, we could see buying opportunities last through October.  Clients should consider longer positions in the market compared to shorter 12- or 18-month deals.  We are seeing competitive pricing for 24- and even 36- month terms due to the lower capacity charges.

California SB 750 Fails to Pass Committee

 

describe the image

 

Bill Will NOT be Revisited During 2013 Legislative Session

 

California Senate Bill 750 will not be proceeding during the 2013 Legislative Session.  AUM, through our lobbying group the UCC, has confirmed that the bill’s author, Senator Lois Wolk, will not be pursuing passage in 2013.  The bill did not pass the Senate Water, Parks and Wildlife Committee on August 13th due in part to the UCC’s lobbying efforts pointing out several key issues that needed to be resolved.  Prior to the start of the 2014 session, all parties involved will be working together to craft a bill that will equitably satisfy the overall goal of the bill to conserve water.

While the bill is not moving forward at this time, the progress made over the past year makes it clear that much can be accomplished when all parties, on both sides, work in conjunction.  The UCC, along with several other groups including but not limited to the CAA and UMCA are looking forward to making great progress in the coming months.  Look for updates in 2014 when the California Legislature reconvenes.

Market Alert- California SB 750 Fails to Pass Committee - Senator Wolk's Office Working to Revise

 

describe the imageCalifornia SB 750, requiring submetering on newly constructed Multifamily properties, did not gain enough votes on Tuesday to pass out of the California Assembly Committee on Water, Parks & Wildlife.  

Stakeholders involved on both sides of the aisle are now working on possible modificationsto gain enough support, or tabling to the next legislative calendar.  AUM will continue working diligently with California Lobbyists, the California Apartment Association, CA Senator Wolk's Office, and other utility billing providers to ensure that multifamily property owner's interests are protected.  

Be sure to subscribe to this blog to get the latest events on CA SB750 as they unfold.

Obama's Intent to Overhaul Fannie Mae and Freddie Mac Affects Multifamily Mortgage Financing

 

Freddie Mac HeadquartersLast week in Phoenix, President Obama outlined plans to overhaul housing mortgage giants Fannie Mae and Freddie Mac. This announcement is the public unveiling of a bill created by a group of bipartisan senators, led by Senators Mark Warner (D-Va.) and Bob Corker (R-Tenn.)

The bill, S. 1217, The Housing Finance Reform and Taxpayer Protection Act of 2013, aims to wind down Fannie Mae and Freddie Mac over five years, replacing them with a single housing finance system that promises to better protect taxpayers from potential loss, while relying more heavily on diverse private capital.  Armed with a government guarantee for a large portion of each mortgage, the new mortgage finance system would promote investment and keep the mortgage market competitive and liquid.  The bill also supports dedicated capital to fund loans and grants for affordable housing activities.

At the heart of the new system would be the Federal Mortgage Insurance Corporation (FMIC), a government corporation that would oversee mortgage lending activities; capture and report market information with greater transparency; establish and monitor compliance with mortgage requirements; and guarantee and insure a conforming mortgage segment.

Key Multifamily Provisions 

From NHMC - The legislation would consolidate the existing multifamily mortgage lending programs of Fannie Mae and Freddie Mac while calling for a continuation of private capital risk-sharing. This specifically includes both the delegated underwriting and servicing (DUS) program and the plus/preferred lender and commercial mortgage execution (CME) K-series bond securities issuance program. In both cases, the subordinate private capital exceeds the proposed 10 percent capital requirement envisioned for the residential mortgage securitization.

However, there are some specific mortgage lending activities that the legislation fails to address, such as future multifamily secondary activities. These include the loan purchase, mortgage loan origination and aggregation process and the mortgage securities execution. The language is so broad that one could interpret it to be inclusive yet vague enough to warrant further clarification. NMHC/NAA will continue to work with the legislation sponsors and others to ensure that the current secondary market system, which has served the apartment industry well during the past 25 years, remains effective.

 

Energy Commodity Outlook - August 2013

 

Outlook

We continue to believe that the risk of higher pricing for both natural gas and electric supply outweighs any pricing downturn opportunities.  Since we are currently experiencing a buying opportunity, clients should consider covering some or all of their electric and natural gas exposure for the remaining summer loads if they have not done so already.  If all goes well with temperatures, natural gas injections and the hurricane season, we could see additional buying opportunities in the late September early October timeframe.  At that point clients should highly consider longer positions in the market compared to shorter 12- or 18-month deals.  We are seeing competitive pricing for 24- and even 36- month terms due to the lower capacity charges.

 

Natural Gas Storage

July 2013 gave us a real taste of summer heat throughout the country. Power plants were working overtime and the need for natural gas was very high.  On Thursday, August 1st the Energy Information Administration (EIA) reported a natural gas injection into storage of 59 Bcf, slightly above the analysts’ expectations.  As a result natural gas in storage is currently at 2.845 Tcf, 34 Bcf below the five-year average figure and 368 Bcf below last year’s level.


Gas Injection August

 Natural gas storage inventories are still lower than last year’s levels, and the five year average, but the variances continue to shrink with every week’s storage report.  Most of the country experienced a heat wave in the middle of July that directly affected natural gas storage injections but as shown with the latest injection as soon as the weather returned back to normal temperatures the numbers bounced up immediately.  This week’s injection of 59 Bcf more than doubled last year’s injection of only 28 Bcf, and was 25% higher than the five-year average of 47 Bcf. 

describe the image 

 

The traditional storage injection season runs through October 31st , so we have three months left with storage injections forecasted to continue strong, and expectations still standing for the natural gas market to possibly loosen up further.

 

Temperature Outlook

The weather forecasters missed the extended July 2013 heat wave that resulted in 120-degree temperatures in the Southwest and Chicago areas. Believe me, having lived in the Washington, DC area for more than twenty years and currently residing in the Western Suburbs of Chicago, it was definitely a flash back; who doesn’t love a 90-degree day with 75% humidity and a heat index above 100?  This month’s report will not include a weather forecast because most likely it would miss its mark anyway.  We still have two full months of summer temperatures and the hurricane season will be entering its peak period.

 

Natural Gas Production and Pricing

Natural gas production continues to nationally exceed last year’s levels; we are currently at 2.5% above last year.  It appears that the magic price for the coal to natural gas switch made by many electric generators is the $4 per MMBtu mark. Sustained pricing above this mark means that the power plants will continue to burn coal, while sustained pricing below that mark is a good incentive for generators to fire up their natural gas units.  When we have a situation of high electric demand such as the heat wave that covered most of the US a couple of weeks ago, the generators do not have a choice but to fire up their peak units which are predominately natural gas driven.

On Tuesday, July 30th the August 2013 natural gas contract settled at a price of $3.459 per MMBtu, a drop from the July settle.  The NYMEX Natural Gas settle curve depicted below includes a polynomial trend line (red line) which shows a sustained upward pricing curve; we are hoping the latest pricing break will allow for a reversal by the end of the summer season.

describe the image

  

Bottom Line    

Currently the 12-month average forward pricing curve for natural gas is at $3.69 per MMBtu, compared to last month’s $3.785 per MMBtu price.  In addition the five month pricing curve for the upcoming heating season, November 2013 through March 2014, dropped to $3.72 from last month’s $3.85 per MMBtu.  The heat wave experienced by the majority of the country in mid-July had its temporary effect on pricing, but the current lower-than-average temperatures have caused pricing to drop.  As stated last month, the market appears to be bouncing off a bottom limit and several buyers have started to take advantage of the current low pricing in order to cover their positions for the upcoming winter loads.  Several energy executives project that the natural gas market will continue to fluctuate in the $3 to $4 per MMBtu range for the rest of the year. 

The fact still remains that natural gas and electric prices continue to trade higher than a year ago, but they are still close to the lowest levels of the last ten years set in May of 2012.  The recent development of shale gas production has provided some protection against extreme pricing spikes usually accompanying the hurricane season, but a large region of our country, the Northeast (inclusive of the NYC area and New England) has remained very volatile due to high dependence on natural gas for electric generation.  A coastal storm such as Sandy could create major disruptions and substantial price spikes particularly for these markets.


SAVE Act Introduced in the Senate – a Precursor to Energy Efficiency as a Variable in Mortgage Financing?

 

describe the imageThe Sensible Accounting to Value Energy (SAVE) Act [S. 1106] was reintroduced earlier this month by Senators Michael Bennet (D-Colo.) and Johnny Isakson (R-Ga.). The bipartisan bill would factor energy efficiency into mortgage financing by providing lenders and homeowners with more flexible underwriting rules that would include a home’s expected energy cost savings when determining the value and affordability of the home.  The bill brings together a broad and diverse coalition of supporters, including the National Association of Realtors, the U.S. Chamber of Commerce, the National Association of Home Builders, the Natural Resources Defense Council, and the Alliance to Save Energy

Though this legislation is initially limited to residential mortgages, it potentially opens the door for similar incentives in the Multifamily sector.  As your advocate for increased energy efficiency, improved NOI, and enhanced real estate value, AUM will continue discussions with various government and financial organizations to study this relationship.

Chicago Introduces Benchmarking and Disclosure

 

Chicago Flag resized 600 On June 26, Mayor Rahm Emanuel introduced Chicago's Building Energy Use Benchmarking Ordinance, which was referred to the Committee on Zoning, Landmarks and Building Standards. If passed, this ordinance would require 3,500 commercial, residential and municipal buildings that are larger than 50,000 square feet to submit property characteristics and energy usage into EPA’s Portfolio Manager Energy Benchmark Tool, to receive an energy efficiency benchmark.  This effort is a significant part of meeting Mayor Emanuel's Sustainable Chicago 2015 goal of improving citywide energy efficiency by 5% through voluntary efforts and effective policy measures.

Similar policies to increase awareness and transparency of building energy consumption are already in place in two states and eight major cities.  Like Chicago, these cities and states are seeking to unlock market forces to encourage economic savings, job creation, and positive environmental impacts linked to energy efficiency.

Chicago's proposed ordinance for benchmarking, verification, and disclosure divides affected buildings (including Multifamily) into two groups, based on gross square footage. Deadlines will phase-in from 2014-2016. 

  • Buildings larger than 250,000 square feet will be required to report their energy efficiency information to the City before June 1, 2014 (residential buildings by June 1, 2015).
  • Buildings between 50,000-250,000 square feet will be required to report their energy efficiency information before June 1, 2015 (residential buildings by June 1, 2016).

As with other municipal benchmarking efforts, the difficulty for multifamily owners will be in acquiring tenant usage data.  The ordinance, as currently written, states that tenants must provide utility data upon landlord request if that landlord cannot obtain the data directly from the utility provider.  It does not specify how property owners are to acquire 12 months of utility statements from the utility provider, but it has outlined penalties for the non-compliance, which may be applied to both the owner and the tenant.  Regarding tenant usage information:

  • Within 30 day of building owner request, tenants must provide all information that the owner cannot get from the utility provider (their usage);
  • Failure of tenant to provide data does not relieve owner from benchmarking;
  • Any violation (including tenant) fine is $100 for first offense, $25 for each additional day.

 

There are many operational details left out that will require property owners’ attention as the practical problems of implementing the ordinance progresses.  AUM clients utilizing AUM Invoice Processing or AUM’s industry-leading SCORE benchmarking tool may have the operational burden of submitting information to Portfolio Manager lifted, as AUM is and EPA Energy Star partner, with interface capabilities to submit data on their behalf.

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