Property managers gear up for another long summer

Real Estate Weekly, April 18, 2001 by Natalie Keith

With summer two months away, energy conservation has become a major concern for the real estate industry. "I don't think there's a single issue that affects more people than this one," said John Gilbert, chief operating officer of Rudin Management.

Although New York City hasn't seen the types of problems found in California, industry officials say the city is facing a critical shortage over the summer months when electricity use soars.

A report issued recently by the Real Estate Board of New York, the New York Building Congress and the Building Construction Trades Council of Greater New York said the city is facing a 315-megawatt deficit.

"New Yorkers could well experience routine spikes in the price of electricity, brownouts, and even blackouts unless immediate action is taken to provide additional supply," the report states.

The report calls for the construction of 12 new and more efficient power plants to increase the supply of electricity to New York City, which has seen tremendous growth over the past 10 years. Other recommendations include accelerating conservation programs including the New York Energy Smart Program administered by the New York State Energy and Research and Development Agency. The industry should also improve demand response management programs, institute price signals to encourage consumer response, and pro vide additional transmission capacity.

In response to the issue, Mayor Rudolph Giuliani has said that he favors putting a federal cap on wholesale electric prices of $250 per megawatt hour. The limit is currently $1,000 per hour.

P. Leonard Jones, president of the New York Association of Realty Managers, said the residential market in New York City is strong, but could falter due to increased electricity costs. Jones, who is property manager for the Fordham Hill Owners Corp., said he budgeted $75,000 for electricity in January and received a bill for $220,000.

"It's becoming more and more difficult to run buildings," Jones said. "I know landlords are experiencing the same thing."

In the short-term, commercial and residential building owners are looking for ways to decrease the demand for electricity in their properties. REBNY held a program two weeks ago, which outlined energy conservation programs offered by the New York State Energy Research and Development Authority, Con Edison and the New York Independent System Operator. Gilbert was moderator for the event.

"Last summer we would have had brownouts and blackouts if we had had a normal summer," he said. "But the temperatures were so cool that we didn't."

Last year, Rudin Management instituted energy saving measures in its 10-million-square-foot portfolio in New York City such as reducing the use of perimeter lighting, elevators and escalators.

"We decreased the amount of electricity by almost six-tenths of a megawatt per square foot or six megawatts total," Gilbert said.

Among programs offered by NYSERDA are ones that pay building owners that install energy-saving de vices and run emergency diesel generators during times of peak usage.

The city's Public Service Commission recently approved several energy efficiency and cost-savings pro grams proposed by Con Edison. The programs, de signed for both commercial and residential customers, seek to reduce peak usage this summer season by as much as 70 megawatts, and by as much as 200 megawatts by 2003. Seventy megawatts is approximately equal to the energy needed to power about 70,000 homes. All programs are voluntary and offer incentives to customers to reduce energy consumption during periods of high electric usage, according to Con Edison.

"Our new programs will enable customers to man age their energy usage in response to market prices of electricity," said Ken Burke, president of Con Edison. "By reducing energy demand at times of peak load, they will be helping to improve the supply and demand balance in the wholesale electric market."

Among the new programs are the "voluntary real-time pricing program" which will provide day-ahead electric market prices to large customers so that they can voluntarily reduce their electric requirements in response to the projected prices for the next day. The "direct load control program" available to small commercial and residential customers will enable Con Edison to remotely control the operation of air conditioning systems in exchange for incentives.

Michael Zerner, principle of RAK Group LLC, said energy conservation has been "away of life" for the company since the oil embargo in the 1970s. The company, which owns about 3.5 million square feet of commercial space in Chicago, Dallas and Boston, has instituted energy savings devices such as energy management systems, variable frequency drives, and energy efficient window treatments.

"Often we buy buildings that are older and are in need of rehabilitation," Zerner said. "We take a long-term approach to energy conservation."