Submetering and cogeneration face a common foe


New York State (NYS) has had difficulty relying on the integrity of its existing supply and grid network to meet the ever-increasing electrical demands imposed by its energy consumers. This problem is magnified in the New York City metropolitan area, where the existing infrastructure is insufficient to bring in additional power from outside sources. Major users of electricity in this region include the vast number of large multi-family residential developments, many of which were built as master metered buildings in order to minimise initial construction costs.

New York State has recognised this problem and has developed programmes through its energy agency, New York State Energy Research and Development Authority (NYSERDA) to promote conservation and assist in the development of on-site generation. However, the barriers to the implementation of these conservation measures continue to limit the effectiveness of these programmes, and to minimise their widespread implementation within the multi-family residential sector.

The implementation of both electrical submetering and cogeneration is of particular value to the large, multi-family residential building sector. Both these technologies offer sound solutions to master metered residential buildings which need to reduce their operating costs.

In order to promote the implementation of electrical submetering and cogeneration, NYSERDA offers both technical assistance and substantial financial incentives to residential buildings to evaluate and subsequently install these types of system, using Comprehensive Energy Management (CEM) and Combined Heat Power (CHP) programmes. New York State also encourages many of its directly metered residential buildings to convert to master metering by making them eligible to participate in CEM and CHP programmes.

These buildings also benefit from the bulk purchasing power and discounted utility rates available only to master metered buildings. As an example, master metered residential buildings in the Con Edison territory pay approximately 25% less for electricity than directly metered residential customers.

Cogeneration requires that the building be master metered in order to have the apartment sector electric load available to the cogeneration equipment. Limiting the cogeneration equipment to satisfying only the building common area electric loads (monitored via the utility house meter) typically limits the available electric load to approximately 25% of the total building load, which may drastically reduce the economic viability of implementing cogeneration in a directly metered building.

Any barrier to an electrical submetering retrofit in a master metered building, or which limits the ability of a directly metered building to convert to master metering, then becomes a barrier to cogeneration.

Master metered buildings consume approximately 20% more electricity than either directly metered or submetered buildings, because the apartment residents are not financially accountable for the electricity they consume. The charge to individual apartments is typically based on apartment size, and there is no correlation between usage and cost. Building owners or co-operatives have two options available to change this process and to transfer the financial accountability to the apartment residents – by converting to either submetering or direct metering.

The advantages of submetering over direct metering include:

  1. Submetering is usually a less expensive retrofit than a direct metering conversion.
  2. The building may receive a substantial financial incentive from NYSERDA, which is only available for submetering.
  3. The building maintains its utility bulk rate as a master metered building.
  4. Under submetering the building residents are able to participate in other New York State programmes such as Load Curtailment and Time Sensitive Pricing, both of which can generate revenues for participants or reduce the billable utility costs.
  5. The building maintains the ability to implement cogeneration.

Only in master metered buildings is the apartment sector electric load available for the cogeneration equipment. The advantages of direct metering over submetering are:

  1. The building transfers the responsibility of billing and collection to the utility.
  2. The utility has the ability to disconnect for non-payment, whereas under submetering the building cannot disconnect residents for non-payment.
  3. The building does not require Public Service Commission (PSC) approval, as the responsibility for overseeing the metering process lies with the utility.

As the barriers to submetering become what seems to be insurmountable, building owners and board members may be forced to choose between direct metering and cogeneration, as both technologies combined are typically not compatible or cost effective. It is therefore in the best interests of both submetering equipment manufacturers and cogeneration equipment manufacturers to work together in order to overcome these barriers.

A major source of the existing barriers stems from some of the rules and regulations imposed by the New York State PSC. Ironically, the PSC has jurisdiction over NYSERDA and has delegated this agency to manage over $150 million annually, collected from the Systems Benefit Charge (SBC) Fund which rate-payers pay as part of their utility bill, to develop conservation programmes. On the other hand, with the intention of serving the public, the PSC adopts and enforces some regulations which tend to hamper NYSERDA’s efforts.

Some specifics examples include:

  • The PSC requires a shareholder vote in all co-operatives and condominiums, and will not permit the building’s Board of Directors (BoD) to make the final decision for submetering, despite the fact that the BoD is elected by the shareholders and is responsible for overseeing the entire building’s operations. The BoD is empowered to make major capital expenditure; supervise, including hiring/firing building personnel; select energy service companies (ESCOs) to supply its energy needs, and so on, but it is unable to decide how the electricity it purchases is to be paid for. Submetering will allow it to allocate the cost to consumers in a fair and equitable manner. In fact some legal experts, including attorneys retained by some of these co-operatives, have questioned the jurisdiction of the PSC in this area. Even buildings under the direct supervision of the NYC Department of Housing Preservation and Development (HPD), which strongly advocates submetering, are required to meet these same stringent standards. In recent years HPD has tried to have the PSC amend this policy and defer to the HPD on this matter.
  • Experience has shown that a very small number of shareholders or renters can sabotage or stall the efforts of the BoD or building owner by disseminating misinformation to other residents, contacting local politicians and generating all sorts of complaints that, at best, tend to delay the submetering process. A well written letter to the NYS Attorney General, Borough President or NYS Assemblyman by a building resident who is opposed to submetering, which is then usually passed on to the PSC for evaluation, will significantly jeopardise the submetering process by causing further delays. This tends to empower those who are opposed to submetering. Why would a resident be opposed? Simply put, 10% of a building’s residents use approximately 25% of the electricity consumed and it is to their economic benefit to have the status quo remain.
  • Politicians and agency personnel are often caught in the middle of trying to satisfy their individual constituents or acting in their best interests. The fact that energy policy is not treated in a bipartisan manner becomes a major barrier
    for conservation.
  • The submetering process which requires PSC approval will take a minimum of six months before actual implementation can begin. This timeline is expanded by an additional three to six months if other agency approvals, such as the NYS Division of Housing and Community Renewal (DHCR) for rent stabilised apartments, are also required. This long timeline works against those who are trying to move these projects forward.
  • The Home Energy Fair Practices Act (HEFPA), as currently interpreted by the PSC, essentially establishes a relationship between tenant and building owner as if the building owner were a utility as far as billing and verification are concerned. Building owners are not able or willing to deal with tenants in this manner, and this process may add considerable administrative costs for the building owner to absorb. Considering that a direct metering solution does not require PSC approval, and transfers all the financial responsibility of billing and collection to the utility, it is no wonder that some buildings owners will choose the direct metering option, even if it means incurring an additional 25% cost for electricity to satisfy their common areas.

Figure 1 - Direct metered residential building can only supply electricity to common area as generated on-site

New York State legislatures must recognise that in order to decrease the state’s electrical demand, they must act to remove as many of the obstacles to implementation of submetering as possible. A simple solution is to mandate that all master metered buildings implement submetering, which was one of the recom-mendations offered by a panel of experts asked to study the barriers to submetering imple-mentation in 1996. This ruling would take considerable pressure off building owners, BoDs and politicians, as the matter would be taken out of their hands. A good initial step in improving the process at this time would be to minimise the role of the PSC.

Figure 2 - Submetered residential building can supply electricity to both apartments and common area as generated on-site

While submetering technology has moved forward at an impressive pace, many of the regulatory barriers which were identified by NYSERDA years ago continue to impede the submetering process.