In Office Buildings, the Lights Are On, But Nobody’s Home

Despite power outages and soaring energy prices, workers stream out of California’s downtown and suburban offices each evening leaving lights blazing and computers humming. And there has been scant incentive to conserve, since commercial building leases typically include the cost of energy.

Energy experts and other analysts say metering of individual office tenants would encourage conservation by pushing companies to shut off lights, computer monitors, desk fans and other electrical devices at night, but state regulations and utility policies are in the way.

That conflict between policy and conservation efforts has drawn the attention of state Sen. Debra Bowen (D-Marina del Rey), who chairs the Senate Energy, Utilities and Communications Committee. On Tuesday, Bowen asked California Public Utilities Chairwoman Loretta Lynch to review what Bowen called “archaic” regulations governing how electricity meters are used in office buildings. Bowen said she also plans to take up the issue in her committee.

At issue is Rule 18, a regulation established by the commission two decades ago that prohibits landlords from using submeters to assess energy charges to tenants.

“It is quite old and dates back to a different era of electricity distribution in California,” said Bowen, who was urged to take action by the Building Owners and Managers Assn. “I asked Loretta Lynch to open a proceeding to revise or eliminate that ban.”

Lynch did not return calls for comment on the state’s metering policies, but PUC regulatory analyst William Gaffney said more metering “would be a boon to energy conservation” because “you could see what you are using.”

“Direct metering would ultimately foster greater energy savings . . . more permanent savings, because it would encourage capital investments in more efficient equipment, windows, etc., etc.,” said Evan Mills, a scientist in the energy analysis department of the Lawrence Berkeley National Laboratory in Berkeley.

Usually, the only tenants in office buildings with utility meters are retail and restaurant businesses, according to commercial real estate experts. Most tenants in California office towers sign what are called “gross leases” that include power. When electricity usage or rates go up unexpectedly, landlords can charge monthly or annual “escalation fees” to cover the extra cost. The fees typically are apportioned by the percentage of the building a tenant occupies.

This method of billing is counterproductive to energy savings, said Willet Kempton, senior policy scientist at the University of Delaware’s Center for Energy and Environmental Policy. Energy hogs are subsidized by other tenants. Conversely, savings through conservation are only fractionally shared.

Two key obstacles block metering of individual tenants in a building.

One is economics--high-rise buildings get a far better rate with one utility meter than if each floor is metered.

“We can sell a lot of energy on just one bill,” said Randy Howard, manager of commercial services at the Los Angeles Department of Water and Power. “If we had 200 meters there and had to do the billing and meter reading for each of them, each tenant would pay a higher rate.”

Moreover, utilities aren’t anxious to send meter readers to every floor of a building, going through private offices to find the meters. One alternative--locating all the meters in a central area where the main electrical line enters the building--would require massive rewiring of existing office towers that could cost several hundred thousand dollars or more, depending on the size of the building, said Ali Sherafat, senior vice president of the Los Angeles office of Syska & Hennessy, a consulting engineering firm.

A 1995 ruling by the PUC required that individual tenants in office buildings be placed on meters operated by a public utility (as opposed to landlord-managed submeters), but relatively few have been installed because of exemptions.

For example, Southern California Edison Co. officials typically meet with developers at the start of a building project to determine how many meters it might require, said Matt Deatherage, a planning support manager for the utility. But because developers build office space so that its configuration can change easily as tenants shift, the estimate is often wrong. A building designed with three meters for three tenants might find itself with six tenants or more by the time it opens.

“We don’t require them to go back and rewire the building if it turns out to be wrong, that would be too expensive,” Deatherage said.

The second obstacle is Rule 18, the 1981 ban on submetering originally intended to protect utility monopolies and to prevent landlords from getting electricity at a discount price and selling it at a markup to tenants.

“When you resell electricity like that, you function as a utility and that’s not allowed,” said Deatherage.

Nonetheless, Bowen believes that deregulation may have superseded those issues and that current policy should emphasize conservation.

Although the leasing model used in California is common, it’s not universal, said Peter L. DiCapua, energy chairman of the Building Owners and Managers Assn. International.

Many New York tenants have individual meters. Others are on landlord submeters, a system that allows them to tap into the lower, high-volume rates paid by the building’s operator but still pay for actual, rather than estimated, energy use.

Landlords would welcome a changed regulation to allow submetering for several reasons. There are the conservation benefits, said Dan Emmett, chief executive of Douglas Emmett & Co., one of the largest building owners and managers in Los Angeles County. It also would reduce some of the inevitable arguments with tenants who claim they pay more than their fair share for services at a building.

“I think submetering could be practical,” Emmett said. “It is not that complicated and is fairly inexpensive.”

Sherafat said it would cost about $2,000 per tenant for the submeter and the necessary software. Submeters could be installed at the electrical panel level without expensive rewiring for utility meters, he said. Better yet, the software allows data to be collected at a central point, eliminating the need for meter readers. Such a system also could allow big buildings to use one master meter to get the best rate .

Though submetering would foster conservation, it still is not a panacea, said Kempton of the University of Delaware. When it comes to energy conservation, changing the behavior of businesses and workers is notoriously tricky.

“Attorneys literally can’t be bothered with the nuances of energy,” said DiCapua, an executive at Atco Properties & Management in New York. “They are focused on things other than if the air conditioning was left on all night.

That is typical of professional services firms, because energy is just a small fraction of their expenses, Kempton said.

And individual metering sounds great in theory, Kempton added, but it is useless if the bill goes to a home office elsewhere or if the on-site manager of the firm never sees it.

In any push to change the rules, however, people should remember that the current system was developed for sound reasons, often based on reducing the expense of constructing buildings and finding tenants the lowest prices for energy, Howard said.

“Right now we are in a conservation mode, so everybody is talking about this,” he said. “But that hasn’t always been the case, so a single meter for a big building made sense.”

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Electricity Use in the Office

Under current rules, office buildings have little incentive to conserve. Where electricity typically goes:

Outdoor lighting: 6%

Heating: 2%

Ventilation: 12%

Indoor lighting: 39%

Cooling: 18%

Office equipment/other*: 22%

*Includes computers, other office machines, elevators and water pumps

Source: California Energy Commission