March 3, 2020
What is Utility Billing Due Diligence? A Short Guide
Utility billing due diligence – or analyzing the performance of your property and the accuracy of your utility bills – can save property owners and managers tens of thousands of dollars a year. In this post, we break down how to do it.
A lot goes into managing the utility billing for multi-unit properties. But too many owners and managers overlook a key step: due diligence. In this brief guide, we break down a few due diligence best practices – for both submetering and RUBS – that will help you avoid a costly mistake.
Submetering Due Diligence
Look at the Raw Data
The first step to analyzing a property’s utilities is to look at the raw data. Compare the raw consumption on the master bill to the combined raw consumption on the submeters. These two numbers should the same, or close to it.
If there’s a discrepancy between consumption on the utility bill and on the submeters, it’s worth looking into the cause. It’s possible there was an error on the utility company’s side. But more frequently there’s an issue with the property’s billing method or set up.
Say, for example your submetering data for electric isn’t matching the bill. If electric isn’t being billed back properly, you’ll want to make sure all of the units are billed off the correct breaker. This sounds obvious, but in old buildings it’s common to have poor isolation, which leads to inaccurate data. This also applies to issues that impact other utilities, like water leaks.
Look at Multipliers
Each submeter has a multiplier that affects reading and calculations. You can see the number on its face.
A submeter works by sending out pulses that represent the amount of utility consumed. To find out the true utility consumption for a unit, you need to manually or automatically identify the raw read from the meter. Then, you need to obtain the factor read by accounting for any pulse multipliers to get true gallon amounts.
This is where things can get tricky. The pulse multiplier varies between submeters. A meter could have a pulse of one, meaning there’s one pulse for every one gallon. But you could also have one pulse for every 100 gallons.
The good news is that multipliers usually don’t pose an issue. However, it’s critical to verify them. Otherwise, you could get the multiplier wrong and end up with serious errors in your utility data and bills.
RUBS Due Diligence
With RUBS, you don’t have access to the same level of detail as submeter. This is because there’s no raw usage data for each unit. That said, it’s important to ensure the accuracy of a bill by analyzing and reverifying your calculations.
This entails verifying the accuracy of the numbers and factors used to calculate the bill. Important data to reverify includes occupancy counts, unit square footage, basic values and demographics. Data like occupancy counts can change month to month. And if you don’t have the right occupancy count, you’ll under- or over-bill.
In addition to verifying data, it is also helpful to run reports on billing percentages and month-to-month data.
With RUBS, it’s harder to identify if there’s an underlying problem with your property. You can, however, stay on top of accuracy and data verification to ensure you’re billing the right amount.
Look at Fiscal Data
To ensure you have an accurate and effective bill, you’ll need to analyze the fiscal data and your master bill. Due diligence during this stage is critical, as it’s a place where errors and discrepancies have serious consequences. If you undercharge, cost recovery suffers. If you overcharge, it’s going to be a legal issue, giving you a ton of liability.
There are three steps to verifying fiscal utility data:
- Verify that the proper utility rate is being applied.
- Ensure the rate multiplied by total consumption comes out to the charge. This verifies the bill was calculated properly.
- Compare the rates, data and total amount billed on your bills to the master utility bill (they should match).
Ideally, you’ll find that all of this data checks out. In practice, it’s common to find a discrepancy between the master utility bill and the submeter-based bills you’ve created.
If this difference is significant, your property likely has an issue with its utility configuration. (More on that in a bit.)
These steps, while simple, are essential for tracking the performance of a property. And once you’ve verified the accuracy of your bills, you can then benchmark the utility bills over time.
Benchmarking is done by analyzing master consumption and submetered consumption over months and years. Some utility billing companies that provide billing analytics will also check for consistent percentages and compare last year’s billing period to the current bill. They do so to confirm the property’s utility expenses are consistent over time.
Identify Overarching Issues
As we mentioned above, discrepancies might arise during the due diligence process. Sometimes a landlord or billing company will use a property’s utility data to identify a significant issue with the utility configuration.
Of course, it’s never fun to learn there’s a glaring and expensive issue with a property. However, utility analytics can help you catch these problems before they cost you even more money.
For example, you might notice that you’re not billing some portion of your water bill. This could indicate you have leaks occurring between the master meter and the submeters. This is common in mobile parks and any property with underground pipes. You’d then have the opportunity to improve cost recovery by repairing your water lines.
Some utility billing companies can use utility analytics to identify what would be a good investment to improve your property. For example, before you roll out a utility billing initiative, you can use utility data to identify if you have an underlying issue you’ll need to address.
If you have major wiring issues or leaks, investing in submetering won’t improve cost recovery. That money would be better spent repairing the major structural issue. Because of this, utility analytics can help you identify what the best investment would be to improve your cost recovery.
There’s a lot that goes into managing utility billing for a multi-unit property. But conducting the proper due diligence to analyze your property’s performance – or hiring a utility billing company to do it for you – could save you tens of thousands of dollars.