Required Benchmarking--Are Your Ready?

Sept. 12, 2009 - PRLog -- by Thom Gottberg

       Energy accountability is coming whether we like it or not.  Are you ready? If you are a commercial property owner, you may want to prepare yourself because Assembly Bill 1103 is scheduled to go in effect on January 1, 2010.

       California Assembly Bill 1103 (AB 1103) will require energy consumption data to be disclosed to all prospective buyers, tenants and lenders of commercial properties related to the entire building.  Under this bill, commercial property owners and operators will need to release their benchmarked data and ratings for the previous 12 months.   To meet this equirement, electric and gas utility providers will be obligated to maintain their customers energy use data and supply it on the non-residential buildings they service.  However, because the details for the energy benchmarking process have not all been worked out, there is a possibility that the requirements of AB 1103 will be postponed to a later date.

     Regardless of when AB1103 is implemented, this Assembly Bill activates the process of transparency for energy and operating costs related to commercial buildings.  So, what does this mean to a commercial property owner?  Overall, this could have either a very negative or very positive impact on the value of a commercial property, especially when the economy is struggling.  During boom times, most commercial property owners did not worry as much about operating costs.   Excessive operating costs were either passed on to their tenants, or rents were high enough to absorb the extra costs.  At the same time, lenders paid little attention as most were just trying to keep pace with getting as many deals done as possible.  Business owners themselves appeared occupied by making money or expanding their business.

    Obviously the economic climate has dramatically changed. Now everyone is cutting costs any way they can. Today, any business looking to open or relocate is not only looking for the right location, but they would be wise to gauge the energy efficiency of any building they are considering before occupancy. Think of it this way, if one building offers you a 30% savings on your electric bill over another, with all else being equal, there really isn’t much of a choice.  In the boom times, older inefficient buildings sold for almost the same price as newer buildings, which were much more energy efficient.  We won’t see that any more!

    Energy transparency is not going away. Lenders will be taking a much more active roll in assessing the value of commercial buildings based upon energy efficiency. At a recent Urban Land Institute Conference, the Vice President in charge of the appraisal department for Wells Fargo Bank explained that lenders are going to be “less inclined” to make loans on commercial buildings that have high operating expenses. Lenders will now be factoring all the costs related to operate and/or bring the building up to current energy efficient standards.

    Beyond that, the U.S. Green Building Council has also recently updated their requirements with regard to energy and water usage.  Now under the LEED 3.0 rating system, buildings seeking LEED Certification will be required to report at least five years of energy and water usage.

     Here in the Coachella Valley the water districts have begun to change to a tiered system that will penalize users for going above efficiency standards that have been set. The logic is that the only way to get consumers to reduce their excess consumption is to make them pay.  Personally, I immediately began paying much more attention to my water usage after receiving my first bill.   It is clear that electric rates will also continue to climb. Most of us know that we have an electrical grid system that needs to be completely updated.  Plus, the electric companies are mandated to provide a large portion of their electricity from clean alternative energy.  These changes are going to cost billions more and assuredly will be passed on to consumers and property owners.  

      Now that benchmarking energy and water consumption of buildings will soon be required in California, why not get a jump on it and start saving those wasted dollars today? Benchmarking is nothing new as government buildings and many large established businesses have using different versions to gauge their energy and operating costs for many years. Ultimately this practice will save millions of dollars in wasted energy and operating expenses.  It will also go a long way towards identifying the true value of any commercial property and/or business by providing an accurate comparison to its energy efficiency.   A good practice for us all to remember is this simple phrase: Wasted Energy = Wasted Money!

For more articles like this go to: CoachellaValleyGreen.com

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Coachella Valley Green (CVG) is an information gateway to the people, businesses and places that are green and sustainable within the Coachella Valley of CA and beyond--including Palm Springs, Palm Desert, La Quinta and Indio.