Written by the technical committee of the BEC.

Achieving energy savings by implementing energy efficiency measures can sometimes be a real headache in the context of a building with tenants. In principle, the tenant can implement energy-saving measures, but these initiatives come more often from the landlord-lessor. Given that in the majority of commercial leases energy costs are transferred to the tenants, how can one ensure that the benefits  return to the investor who implemented them? One method consists of doing before/after measurements to quantify the savings and to allow the owner to allocate them by means of a clause in the lease to that effect. However, keep in mind that some principles regarding under-measurement can pose a complex challenge.

Regulatory Framework for Allocation of Energy Costs

In Quebec, the provision, transport and distribution of electricity and natural gas are regulated by the Régie de l’énergie (Energy Board, RLRQ, c. R-6.01). The law forbids any resale of electricity or natural gas within the territory set aside for a holder of an exclusive right of distribution. Like all municipal networks and authorized private redistributors, Hydro-Québec thus has the exclusive right to sell electricity within its territory. Under the law, a building owner may not bill energy costs to his tenants at a profit (or with administrative charges added), even if the portion of energy consumed by the tenant is metered and measured.

An owner may, however, establish a procedure for allocating energy costs among tenants according to an agreement in the rental contract. For example, it is possible to apportion energy costs among tenants on a pro rata rate based on the surface occupied or based on actual consumption, with adequate sub-measurement. Moreover, according to electricity rates in effect, some owners are billed for peak demand in addition to off-peak consumption. It sometimes happens that the procedure must include a form of cost allocation for allocating the peak demand cost. Under these conditions, peak demand and the power factor for tenants must also be measured. The procedure is difficult to implement equitably since the real impact of a tenant’s power demand and his power factor is difficult to evaluate in relation to the peak demand and the power factor of the building.

Also, metering electricity consumption in order to bill clients must be carried out in compliance with Measurement Canada regulations. These requirements are outlined in the  Electricity and Gas Inspection Act (L.R.C, ch. E-4) and in the Electricity and Gas Inspection Regulations (DORS/86-131). These stipulate that:

• Contractors must have a certificate of registration issued by Measurement Canada if they wish to sell electricity or gas on the basis of measurement.
• An owner is obliged to keep detailed records for each meter used for billing.
• All meters must be approved by Measurement Canada.
• All meters must be verified and sealed before being put into service. Verification is to be carried out in compliance with the Act.
• The owner must send in writing to Measurement Canada a notice of activation of a metering billing system.

To avoid being subject to these strict rules, owners who wish to install a procedure for allocating energy costs must be able to certify that the procedure is not one of resale, but of allocation. In that case, the sub-metering totals must not under any circumstance exceed the distributor’s bill

In the context of the Building Energy Challenge, which approach is more pertinent for BEC participants?

Advantages/Inconveniences of Individual Meters and Sub-meters

Sub-metering is a relevant and effective means of determining energy savings. It means that those savings can be redirected to benefit the investor who installed the improvements. On the other hand, implementing a sub-metering system for tenants in an existing building is a costly exercise and sometimes impossible for the owner, if the distribution network has not be designed for sub-metering. Whether it be an existing building or a new building, owners and contractors often wonder whether it might be better to install a master meter (with or without a sub-metering system or meters for each tenant). In the case of the BEC, here are a few things to consider.

Désavantages du compteur locataire individuel :

Disadvantages of a Meter for each Tenant:

• Higher cost and complex installation if you have numerous tenants.
• Individuals meters do not eliminate the need for a meter for common areas in the building: corridors, vestibules, basement, underground parking.
• Typically, with individual meters owners tend to decentralize the electro-mechanical systems by choosing separate equipment for each tenant (water heater, air conditioning, ventilation). The potential for implementing efficient improvements is often more limited once electro-mechanical systems have been decentralized and dissociated from each other. In addition, the owner has little interest in participating in the process.
• In the case of multi-residential buildings, if each unit has a Hydro-Québec meter the rate applicable to the units will be Rate D (excluding common areas). A client paying that residential rate is not eligible for grants via the Hydro-Québec Efficient Solutions program (which provides financial assistance to implement energy efficiency measures). By grouping together all energy consumed in a building and recorded on a single meter, the applicable rate will be the business rate (typically DM, DP, G or M), which means eligibility for the Efficient Solutions program.

Advantages of an Individual Tenant Meter:

• If the individual meter is a sub-meter managed by the owner: allocation of energy costs is often more precise and better documented. If sub-metering is well done, it provides equitable allocation of costs.
• An individual meter ultimately allows users to quantify savings generated by energy efficiency measures to the benefit of the party concerned (owner or tenant).
• If the individual meter is a Hydro-Québec meter: less management of energy costs for the owner.
• The tenant is entirely responsible for his energy bill, and thus potentially more interested in voluntarily reducing his energy consumption.

Finally, many buildings have a mix of both types of metering. For example, a hybrid system might have electrical lighting and plug load systems measured individually per tenant, with shared mechanical systems measured on the master meter.

In a case like that, a measuring and verification specialist can help determine the method for apportioning costs based on individual measurement, with additional calculations to determine the tenant’s share of the common measurement .

Food for thought.