Mandatory Benchmarking

Energy efficiency regulations—coming soon to a city near you?

Energy Efficiency Regulations—Coming Soon to a City Near You?

By Brad Berton, Contributing Writer

Get ready to report your building’s energy efficiency. The roster of U.S. cities requiring commercial property owners to benchmark such performance and disclose results to municipal authorities and the market at large is quickly approaching double digits.

The Minneapolis City Council approved the city’s ordinance in early February, boosting the number of municipal benchmarking mandates to seven—all of them major markets. The larger of the Twin Cities joined New York City, Washington, D.C., San Francisco, Seattle, Austin and previous newcomer Philadelphia in adopting mildly controversial annual benchmarking and disclosure regulations, each with its own program tweaks.

Boston became the eighth member of the club on May 9, planning to reduce greenhouse-gas emissions 25 percent by 2020. Nearby Cambridge is debating a proposed program, along with Chicago, Portland and Boulder.

On a more limited basis, statewide benchmarking mandates are in place in California and Washington, with Massachusetts and Illinois undergoing pilot programs. But at least eight others have seen corresponding legislative proposals introduced, reports the policy analysis coalition: Connecticut, Colorado, Maryland, Michigan, New Mexico, Oregon, Tennessee and Vermont.

As the list of mostly progressive-leaning jurisdictions pursuing benchmarking mandates continues to grow, at least some landlord-side stakeholders are suggesting municipal and state officials should slow down and see how a few of the initial programs perform.

Indeed, equipping entire city property-owner populations to monitor and report energy consumption (and in some cases water) in a common format takes years rather than weeks or months, making it far too early to definitively quantify the impacts. These include efficiency-minded operational and technological upgrades (particularly for poor-performing properties); corresponding general market-wide energy-efficiency improvements; and perhaps most fundamentally, longer-term reductions in building-sourced greenhouse gases.
Ditto for potential negative consequences some regulation-wary detractors fear, especially for owners of smaller properties: undue user-demand erosion at low-scoring buildings; burdensome compliance requirements; and with some programs, mandatory (and costly) periodic energy audits, as well.

Meanwhile, among the municipalities with programs underway, launches in many cases are proving to be protracted. In fact, among the several ordinances mandating public disclosure of Energy Star ratings and other data culled from the Portfolio Manager benchmarking tool (which all jurisdictions are using), only New York’s has posted data online so far.

But launch delays are to be expected, given the huge inventories in the pioneering jurisdictions, noted Jessica Lawrence, program manager for building energy performance policy with the Institute for Market Transformation. New York’s initial-phase public disclosure last September alone covered well over 2,000 privately owned, primarily commercial properties totaling more than a half-billion square feet.

And while Portfolio Manager is relatively simple to install and generates data and reports automatically, city officials are generally giving property owners considerable leeway with respect to initial compliance periods, continued Lawrence, whose organization has consulted with several jurisdictions considering benchmarking mandates and is a partner in, along with the Natural Resources Defense Council.

Rather than threatening to impose statutory financial penalties or otherwise taking hard lines in compelling compliance, program administrators are mostly endeavoring to minimize complexity and costs of participation, she added. Hence, it is no surprise that initial reporting deadlines of some early programs have frequently been extended.

Indeed, in part because San Francisco’s Department of the Environment has been more focused on helping participants prepare than reporting results, that city is running many months behind its initial schedule for posting benchmarking data online, explained Barry Hooper, the program’s private-sector green building coordinator.

Owners of San Francisco commercial buildings in the high-volume 10,000- to 25,000-square-foot range are required to provide benchmarking data for the first time this year, joining larger properties phased in over the past two years. Helping all these owners get processes established has been the top priority, stressed Hooper, who at press time was expecting initial online disclosure by the end of June.

Utilities participating in benchmarking programs are likewise offering resources aimed at smoothing program implementation and streamlining reporting. As in New York, San Francisco’s local electric and gas utility, PG&E, is joining the effort, providing a free automated benchmarking service that uploads data to Portfolio Manager on a monthly basis.

Portfolio Manager itself is undergoing a major enhancement, including a new architecture and technology set for the automated benchmarking functions. The upgrade promises faster downloading, streamlined data input, easier and more thorough report generation—and automated Energy Star certification processes.

Public Disclosure
In addition to The Big Apple and The City by the Bay, programs in D.C., Philly and Minneapolis require public disclosure of building energy data, with the nation’s capital slated to go live next year with public posting of 2012 data for properties of 150,000 square feet or more.

The ordinance in Seattle, as well as the pair of existing state programs, does not mandate public disclosure but requires owners to provide data to prospective tenants, buyers and lenders. Austin requires disclosure to buyers.

In both cases, the general underlying theory is that disclosure of standardized efficiency data at least to key occupancy and investment decision-makers will unleash competitive forces, motivating owners to run properties more efficiently and/or pursue financially feasible energy retrofits. They are considered more politically feasible alternatives to mandating minimum efficiency ratings.

While such ordinances still lack sufficient track records to assess effectiveness, studies demonstrate that benchmarking correlates to improved efficiency—and in turn reduced greenhouse gas emissions.
A recent study commissioned by the California Public Utilities Commission found that roughly 84 percent of property owners that benchmark either had invested in efficiency upgrades or planned to do so soon.

Meanwhile, a federal Environmental Protection Agency analysis last year concluded that among some 35,000 buildings using Portfolio Manager and pursuing Energy Star ratings for the three years ending in 2011, the average score improved six points and the annual energy consumption reduction amounted to 2.4 percent. That factors to $40,000 in utility savings for a 500,000-square-foot office building.

All of which appears to suggest mandatory benchmarking, along with full or limited disclosure, should spur efforts to boost ratings and reduce energy costs as tenants with space requirements consider their more transparent options. While that general expectation may well become reality, in many cases energy efficiency often takes a back seat to other considerations once alternatives have been trimmed to a short list, related veteran tenant representative Tom Poser, vice president with Jones Lang LaSalle Inc. in San Francisco.

In relatively tight landlord’s market environments such as San Francisco and D.C., tenants are typically more focused on affordability and employee comfort than Energy Star ratings, Poser noted.

Time will tell just how long the roster of municipal and state benchmarking mandates ultimately grows in coming years. As a generally skeptical analysis commissioned by the Boston BOMA chapter concluded: “Experience from these programs may provide valuable insights into whether these types of requirements are an effective approach to addressing market and behavioral failures that can limit cost-effective energy-efficiency investments and energy-use decisions.”