Going Dutch treat on water bills

Submetering makes tenants responsible for utilities.

by Scott Williams   Owners of apartment complexes are in the business of renting space–not providing utilities. And yet landlords throughout Texas and the U.S. routinely provide water service to their tenants, a service that accounts for a substantial portion of their monthly operating budgets.

Landlords would prefer to get out of the utility business, and that’s how billing-services companies like National Water and Power can help. This Santa Ana, California, company was founded in 1995 and is among several businesses trying to make a living by helping apartment owners recoup $5 billion a year in water and wastewater expenses.

Billing-services companies help landlords recoup these costs by measuring water consumption in individual apartments using submeters or water-allocation methods. Submeters send out pulses that are picked up by an on-site detector. The detector transmits the information to a data-collection device that sends the data via the Internet to a centralized collection point. Water-allocation methods estimate water consumption based on square footage, occupancy, or number of bedrooms.

The companies then bill individual tenants, collect payments, and send the money to owners, minus a fee for their services. The owners pay their monthly water and wastewater bills, using their own funds to pay the remaining portions of the bills.

"The really important growth area has been apartments, and I think that will continue for a while," asserts Bill Griffin, vice president and general counsel for National Water and Power.

Griffin believes the industry can capture 12-15 million of the 27 million apartments in the U.S. The multifamily housing industry is 10-20% penetrated, recovering somewhere between $500 million and $1 billion annually for property owners nationwide, says Griffin. He claims market penetration in Texas is 20-30%. However, recouping water and wastewater expenses in other properties–office buildings and shopping malls, for example–is a slow-growing market.

Suzanne Perry, co-president and managing partner of Minol-MTR in Addison, says Texas represents a mature market for water submetering and allocation systems. Its state-supervised rules on how to operate are widely copied by other states, and its market is huge and concentrated in urban areas experiencing fast-paced growth.

Because of that growth, a majority of Minol-MTR’s business comes from new construction; however, Perry says retrofitting an existing apartment complex works well because the company installing the meters determines the pace rather than the construction company building new apartments.

"You can do a 300-unit project in maybe a month," she estimates.

Kate Wilkins, program specialist for the Texas Natural Resource Conservation Commission (TNRCC), says any owner who installs submeters or implements an allocation method must register with the TNRCC, which writes rules regulating the industry.

She says the first property registered with the TNRCC in 1988, and by 1995, they had 200 properties. So far this year, approximately 2,300 properties have registered with the state.

For landlords, the main advantage of the system is financial. Chuck Stolberg, executive director of the National Submetering and Utility Allocation Association, asserts that meters can be installed on apartments under construction for $200 per unit or $300 per unit for retrofitting existing apartments. Despite the initial investment, Griffin says these programs can cut costs, improve cash flow, stabilize rent prices, and increase property values. He estimates that a well-run program in a fully penetrated property can recoup as much as 90% of tenant water-usage costs. While installing such a system in a 300-unit apartment complex can run $90,000, it can generate savings equivalent to adding another 10 units.

According to Stolberg, the largest players in the industry are National Water and Power; Vitera Energy Services USA of San Diego; and Utiliman Systems Inc. of Norcross, Gorgia; and, in Texas, Minol-MTR. He reports that in addition to the financial benefits for landlords, studies show that use of submetering and allocation systems lead to water conservation of 6-39%.

Scott Williams is a freelance writer in Corpus Christi.

Photos © PhotoDisc and Corbis Stock Market.

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