Peter Belisle: Don’t Like Audits? Start Loving ENERGY STAR

San Francisco's new law requiring owners to make energy improvements based on information uncovered in mandatory audits exempts buildings with ENERGY STAR labels or LEED certification.

San Francisco Mayor Ed Lee signed legislation last week requiring energy efficiency audits in commercial buildings every three years. Owners will be required to make improvements, including those requiring capital expenditures, that auditors determine to have a simple payback of five years or less. The law also mandates regular retro-commissioning and public disclosure of ENERGY STAR Portfolio Manager ratings.

New York City passed a similar law about a year ago over the objections of owners, who are understandably concerned about financial decisions being placed in the hands of outsiders. There is currently no universal standard for determining costs and payback of the dozens of possible energy measures, so an owner’s fate may depend on the perspective of the professional who conducts the audit.

There are a couple of ways around the audit requirement for owners who have planned ahead. Both the San Francisco and New York energy audit laws excuse buildings that have gained ENERGY STAR labels in multiple years, as well as LEED EB certified buildings in good standing. (Financial hardship is another way to get a pass.)

It wasn’t hard to see this legislative trend coming. The San Francisco law was under discussion for at least a year, and the state of California, along with several other states and cities, previously passed rules mandating energy performance measurement and disclosure. This is one reason our firm insists on ENERGY STAR participation at every property we manage for investors. Enrolling in Portfolio Manager doesn’t guarantee a label, but we’ve found that ratings continue to rise the longer a building participates in the program.

A three- or four-year head start on ENERGY STAR is going to help some buildings in San Francisco and New York avoid energy audits and the mandated capital improvements that follow. How much longer before these mandates come to your city?