Plugging Leaks

by Katie Sloan

With utility costs rising, an effective utility management plan can result in huge savings.

In the not-too-distant past, managing utility bills for student housing communities was easy. Property managers would usually charge residents a flat monthly amount, which had been determined by looking at average resident utility usage.

This method made life a lot easier for property managers. What it didn’t do was help owners’ bottom lines. Students had little incentive to conserve, and owners had to eat any overages that occurred.

But times change, and today there are several tools on that market that can help student housing providers minimize utility bill collection expenses.

Third-Party Utility Management

NWP Services Corporation was founded in 1995. The Costa Mesa, Calif.-based company provides utility management and billing services for 5,500 properties in 43 states and recovers $480 million in utility expenses and pays $370 million in utility invoices for properties annually. It also provides a proprietary e-payment solution that processes more than $70 million in rent and utility payments each month.

NWP has been involved in the student housing space since 2002, but it became increasingly active in 2009, when it invested approximately $250,000 in research and development to ensure its products contained features catering to student housing properties.

Vaughn Chase“If you get billed for utilities, and it is being calculated by square footage or occupancy, then you have to get a majority of residents to conserve before you actually see savings,” says Vaughn Chase, vice president of operations and client services for NWP.

If a student community has sub-metered units, NWP is able to provide several tools to help property managers recover utility costs. One method is for NWP to process sub-meter readings for each unit and divide them between the occupied beds in the unit. This method provides one of the easiest ways to manage utilities and causes fewer headaches for owners, as NWP handles all of the work.

“If you don’t require students to switch utilities to their names, the volume of utility invoices is a nightmare,” Chase says. “If you say the average multifamily property has 60 utility invoices, a similar student housing property could be managing as many as 300 invoices.”

Conservice also specializes in third-party utility management. Founded in 1999 in Logan, Utah, the company sends out approximately 1 million utility bills per month. It is also increasing its foothold in the student housing community. Its portfolio in the space currently comprises more than 100,000 beds.

“It’s a tough market for companies like us,” says Maliece Sorrows, national account manager for Conservice. “It is pretty standard in the market to bill in-house.”

Facing such a challenge, Conservice prefers not to focus simply on its utility billing program when approaching new clients. Instead, the company frames its services as a way to conserve. Through its billing platform, Conservice allows student housing communities to continue flat-fee utility billing while instituting a cap on usage — called a utility allowance. Residents are billed for any overages under this system. Conservice can also segment utility bills by the unit and by the bed if a community does not want to institute a utility allowance.

“Managing utilities is a very complicated issue, and to become an expert on it takes a lot of time,” says Shauna Karren, director of marketing and training for Conservice. “It’s not really practical to expect in-house team members to invest in acquiring all that knowledge and experience. If clients decide to partner with us, then they’re able to concentrate on what they do best, which is leasing beds and taking care of students. They don’t have to worry about utility management, because it’s in the hands of an expert.”

A third-party utility management company can assist student housing owners with properties in multiple states, as utility regulations can vary widely based on location. Conservice offers a service that helps clients negotiate the best utility deals in deregulated markets. Both Conservice and NWP staff legal teams that keep track of state utility regulations on behalf of their clients.

“That is one of the things that gets underestimated — the amount of knowledge you have to have and the amount of risk you have to mitigate in regards to regulations,” Chase says.

The billing services provided by companies such as Conservice and NWP often come with specialized customer service.

“Our business model is a very cost-effective model,” says Cary Brzezinski, vice president of student living for Conservice. “It costs them a lot less than they get out of it.”

Utility Billing Solutions

Third-party billing is not the only option available to student housing providers. Property Solutions has been providing a product allowing property managers to simplify in-house billing for the past 10 years. The company is unique because it got its start in the then-burgeoning student housing sector of the previous decade.

“Our company started from pain points in the industry,” says Coby Rich, senior product marketing manager for Maliece SorrowsProperty Solutions. “There was no unified way for property managers to get all of their needs done with one single solution.”

Rich’s company got its start by providing a platform for student housing communities to manage resident portals, marketing and accounting needs with a single login. They also addressed another need. Communities who billed students a flat rate for utilities felt they were taking a shot in the dark when estimating how much they should charge.

From this need Resident Utility was born. The program imports all utility bills into a system and matches them with existing customer information.This process allows communities to track and rate bills accordingly as well as bundle utility bills with rent payments. Auditing can be completed in-house, rather than by a third party.

“We want to give property managers the tools to automate things without having to worry about the hassles of multiple billings or inaccurate reports,” Rich says. “We tell them this is a service that is going to make your life easier.”

One of the biggest hurdles faced by utility management companies, whether they are third-party providers or technology solutions providers, is one put up by owners themselves. Some of the big names in student housing have already implemented utility management for some of their properties, but it is going to take a major commitment from a major player to get others interested.

“There is a lot of student housing out there that hasn’t jumped on the automated bandwagon yet, but I can see the shift in the billing process,” Rich says.

A Greener Future

The shift to automate utility management may come sooner than many think. Carbon reporting has become common in Europe as a way to mitigate greenhouse gas emissions. Several major U.S. cities including New York City, San Francisco and Seattle already have ordinances mandating carbon reporting for multifamily buildings, and it is likely that college towns will follow suit in the coming years.

In addition, the American College & University Presidents’ Climate Commitment has grown increasingly popular. As of press time, 665 schools have signed the document, in which schools agree to develop a plan to achieve carbon neutrality. Conservation among residence halls will be key to these schools achieving their goals.

“A lot of our customers are already looking at prepping for how they’re going to handle carbon reporting and the way they are going to collect their data. And the way they’re going to collect their data is through software programs,” Chase says.

NWP already has an Energy Star portfolio manager interface built into its UtilitySmart product that automates for property managers the submission of consumption data for Energy Star certification. The same technology can be used if carbon and greenhouse gas benchmarking becomes more widespread.
“When the program came online, we were able to go to all of our current clients and tell them we had all of the information that was required for the reporting already in place,” Karren says. “It was only a matter of designing the report.”

Utility bills often make up the second-biggest student housing expense behind rent. Utility management services and programs are evolving to help mitigate some of these expenditures and help property managers ensure their billing costs are watertight.

— Coleman Wood

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