Utility Distribution And Allocation
Large, enclosed facilities, which contain common space shared by several tenants, represent an excellent opportunity for shared tenant services and the distribution of one or more utilities.
In the case of enclosed shopping centers, all tenants share the Mall Common, which uses electricity for lighting, miscellaneous use, and space conditioning purposes. Small tenants which do not have restricted entrances to their spaces and "fast-food" tenants by nature of their operation actually share space conditioning with the Mall Common. In these instances, the operation of Mall Common space conditioning equipment directly affects the space temperature, humidity and ventilation of tenants, and conversely.
Properly installed and maintained utilities, which are operated by Landlord and distributed to tenants, can be a benefit to the Landlord, Tenants and Utility Company.
Benefits to Landlord
- Improved Cash Flow since the tenant pays a levelized monthly charge prior to actual use of the utility.
- Net Revenue generation due to the difference in cost per unit of utility purchased on the "small" user versus the "large" user rates. In the case of shopping centers, net revenue is independent of tenant sales performance.
- Greater Opportunity for Energy Conservation and Cost Reduction. In the case of electricity distribution, a BAS (Building Automation System) is better able to coordinate and regulate consumption usage and demand load shedding.
- In the case of electricity, reduced new construction costs related to the electrical distribution system.
Benefits to Tenants
- Reduced Operating Costs since Landlord can afford to pass through some of the savings realized from "large" user utility purchases.
- Single Point of Responsibility allows tenants to concentrate on merchandising and sales operation.
- Levelized Monthly Utility Charge makes budgeting and payments easier.
Benefits to Utility Company
- Potential for Improved Profitability due to a single, larger, billing to a more stable commercial entity.
- Lower Operating Costs due to reduction in manpower to perform:
- Calibration and maintenance of multiple meters
- Monthly multiple meter reading, invoicing and collection
- Metering changes due to tenant relocations and modifications
- Tenant complaints.
The methodology used in the distribution of utilities consists of the following:
- Architectural and thermal envelope details are obtained from tenant plans and specifications.
- An on-site audit and survey of energy consuming elements is performed.
- Information obtained from energy audits or plans/specifications is subsequently loaded into an energy simulation program.
- This program utilizes the hourly Transfer Function method for heating and cooling loads; resulting energy profiles are expressed in kWH, kW and mBtu, summarized into monthly totals.
This program considers all primary variables, which affect energy consumption at this facility. Some of the variables considered, include, but are not limited to, the following:
- Local climatologically data is based upon hour-by-hour average annual temperature and humidity profiles available from the National Oceanic and Atmospheric Association.
- Average city water temperature is based upon local historical sources.
- Local solar energy radiation characteristics (effective integration is attained by utilizing daily Clearness Numbers to account for specific atmospheric density conditions).
- Specific physical thermal characteristics of the facility obtained from plans and specifications.
- Internal load characteristics of the facility, including occupancy profiles, equipment operating parameters and thermostatic diversities. This includes specific operating characteristics of the facility.
Subsequent to calculating the tenant monthly kWH and kW values for an annual period, appropriate utility company rates, average fuel adjustments and a discount factor are applied to the calculated kWH and kW values. The result is a budgeted annual electricity charge, which is levelized on a monthly basis. At the end of each fiscal year, the tenant's budgeted electricity charge is adjusted to account for changes in:
- Utility rates schedules
- Fuel adjustment factors
- State taxation rates
- Tenant remodels
- Tenant openings and closings
- Incidental errors in calculations or data entry
Also at the end of each fiscal year a "new" budged charge is determined for the ensuing fiscal year based on the following:
- Most recent rates
- Most recent fuel adjustments
- State taxation rates
The master metering and distribution of electricity makes economic sense for the following reasons:
- Only minor modifications to the electrical distribution system are usually required to configure to a single point of service i.e. a master meter.
- Tenants will pay a discounted electricity charge.
- Downside risk is minimal since the center can be re-configured to the original individual metering.
- Generates cash flow and revenue income, which is independent of tenant sales.
- Potential exists for significant energy conservation and electricity cost reduction.
Valquest can usually provide an All-Inclusive Utility Distribution and Allocation Service for about 7% of the Net Revenue (Utility Income less Utility Expense) realized on the project. This All-Inclusive service would include:
- Tenant/common area initial utility charge estimates
- Field audits of tenant/common area lighting & equipment installations
- Tenant/common area final utility charge calculations
- Check meter processing
- Tenant/common area utility rate updates
- Year-end tenant/common area utility charge adjustments and reconciliations