Our Insights

RUBS or submeter?

Submetering enables utility cost recovery as it allows utility billing providers like NWP to allocate utility charges to residents based on actual consumption, helping property owners recover several hundred dollars per unit in annual operating expense

Submetering increases property value because it is a capital investment that leads to increased recurring revenue. You gain resident support as residents appreciate the assurance that they are being charged based on actual consumption.

Industry reports show that you can con-serve valuable resources as submetering stimulates conservation: submetered proper-ties use 20-30 percent less water. Still, a case can be made for RUBS (ratio utility billing system) under the right circumstances as proven by one asset manager in Indiana.

Gabrielle Gonzalez is vice president of property and asset management for J.C. Hart, headquartered in Carmel, Indiana. Named 2014 Carmel Business of the Year, the private company manages over 4,200 apartment units primarily located in Central Indiana. J.C. Hart is in its 40th year of operation and spans development, construction and management services throughout the great state of Indiana.

At NWP’s 2015 Energy Summit, Gonzalez presented a case study comparing the benefits of RUBS against the cost of repairing and updating the legacy submeters already installed at her properties. The over-arching objective of her initiative was to increase property income while reducing expense and improving asset value. She sought to accomplish these goals by stabilizing resident utility billing, while devising both the fastest and most efficient way to solve the costly challenge of outdated and malfunctioning submeters.

Through the years, the inoperative sub-meters on her properties had steadily grown in number. After analysis, Gonzalez deter-mined that shuttering the submeter program in favor of a RUBS billing would net a faster yield and more favorable return in the shortest time.

Before launching the new RUBS initiative, the legacy submeters had become a real thorn in the operation and their unreliability was costing upwards of 67 percent of the generated income to maintain. Maintenance of the equipment was hemorrhaging costs for an inadequate result.

In order to identify, and repair or replace multiple malfunctioning submeters, Gonzalez would have needed to invest in cumbersome auditing to identify the problem units, and then spend time and resources to complete the maintenance and repair necessary to get the submeters operating at full speed.

The projected cost and time to replace and service the submeters and related equipment, and bring the entire system to full operating capacity in order to net a positive gain turned out to be cost prohibitive. The estimated cost of replacing the submeters was $45,000 per property.

Aside from the projected hard costs of such an endeavor, the ongoing inconsistencies in billing and perceived lack of confidence in meter reliability was creating a customer service issue amongst her residents that was hard to tangibly quantify. Still, negative tension grew with every billing cycle.

Gonzalez discontinued the use of submeters at her existing properties and implemented a RUBS program through NWP.

Conclusion

Her projections and subsequent plan not only had an impact on the company’s existing properties, but in the development of new communities. J.C. Hart has opted to forgo the purchase and installation of sub-meters on 5 of their new projects and their second phases. They’ve standardized their CADs (common area deductions) and have now implemented RUBS across those properties set to come online.

The properties are now collecting 97 per-cent, on average, of water, sewer and trash expense. Annual savings is estimated at over half a million dollars.

Using capitalization rate of 6.25 percent, this decision increased the portfolio asset value by $8 million.

For a counterpoint to the RUBS method, read http://utilitysmartpro.com/multifamily-leading-water-conservation