Written By E. Mitchell Swann, PE, LEED
MDC Systems® Consulting Engineer
June 2012 – The City of Philadelphia has unanimously passed two new pieces of legislation (Bill No. 120056 and Bill No. 120428) which will help the City, and both its business and residential communities, to better understand their energy and water use. This process should ultimately help to reduce the City’s overall eco-footprint.
Residential Real Estate Energy Disclosures
Bill 120056 requires that a good faith estimate of “a year’s worth of energy costs” is provided whenever a residential property owned by the City of Philadelphia, or related agency, is transferred to a new owner. If the property is subsequently transferred from an “intermediary” (let’s say a developer), an annual energy cost record must also be transferred to the final owner/occupant. This represents a major step forward in the transparency of a residential real estate purchase. Energy costs can be a significant recurring cost for a homeowner. Providing the annual energy cost to a prospective homeowner will enable better decision making and result in more fiscally prudent purchases. The initial legislation was written to use either a year’s worth of actual energy bills or the Energy Information Agency’s Residential Energy Consumption Survey. The EIA’s Consumption Survey will provide typical energy usages for a property of similar size in a similar weather zone. In many instances, however, the City owns a property that it intends to transfer and has been unoccupied, or sparingly occupied, for an extended time period prior to transfer. In that instance, actual usage bills can be artificially low. Clearly, as detailed above, the EIA’s Consumption Survey is not a perfect benchmarking tool.
To address some of these benchmarking challenges, the legislation was amended to ensure that the “year’s worth of energy costs” was a contiguous year of energy bills and not a cherry picked set that showed an artificially low cost profile. The legislation was also amended to include the use of the US Department of Energy’s “Home Energy Score” methodology. The “Home Energy Score” approach requires a property energy use assessment, analysis via the DOE procedure (including possibly a blower door test for infiltration or leakage) and a final rating by the property assessor. Such an approach would provide a more accurate estimate of annual energy use than the EIA Consumption Survey. The EIA Survey data should still be provided (especially when actual bills are used) so that a homeowner can assess how his or her property stacks up against the normative properties throughout the US.
The adoption of this reporting metric goes a long way toward ensuring that consumers better understand what they are buying and what they can expect in on-going energy costs. It would be an unfortunate result to purchase a house, handle the mortgage note only to be driven out by high energy bills. Keep in mind that the legislation makes no mention of any mandatory ‘performance target,’ only that the buyer be told what to expect with regard to future energy costs. Consumers will drive the market to better performance as they vote with their checkbooks for better value in their home purchases.
Non-Residential Real Estate Energy Disclosure
The second piece of legislation is Bill No. 120428 which provides for the benchmarking and reporting of energy and water usage data for certain types of non-residential buildings. The legislation requires all “commercial” buildings in the City of Philadelphia larger than 50,000 square feet to collect and report their annual energy and water usage and to record and transmit that information using the EPA’s Energy Star Portfolio manager system. This is a major step forward in the evaluation and comparison of the energy performance of commercial properties in Philadelphia. The requirements are simple and the methodology is well understood. The Energy Star program for buildings has been in existence since 1999 and the Portfolio Manager program has evolved into a system which allows an owner of multiple buildings to track energy and water use across his or her portfolio and to compare that portfolio against comparable sets using the EPA’s large data base of submitted and tracked buildings.
By tracking your own usage and comparing it with similar buildings you can evaluate how you measure up and where there might be opportunities to improve. Once again, by making this information available to potential buyers and tenants, the consumer can make better choices about where they may prefer to rent or what they prefer to buy. Once again, like the above residential disclosure bill, there is no mandate that all properties be brought up to Energy Star standards but the process of assessing where one stands goes a long way to helping consumers set reasonable energy goals. The legislation takes a two step approach towards full implementation. The first year will involve recording data as needed to complete the Portfolio Manager requirements and transferring it over to the City, but the information will not be made publically available until the second year of the program. This approach gives building owners and operators one year to make energy performance improvements before their performance rank is made public.
Legislation Aims to Educate Buyers
Both of these legislative bills give consumers more information about the energy and resource performance of their residential and non-residential investments. Clear information in a concise and consistent format will also help to educate the public about how energy is used and what separates a ‘good’ building from a ‘bad’ building. In the end, consumers will drive the market to better performance as they vote with their checkbooks for better value in their home and business property purchases.