4 Reasons Commercial Buildings Must Take Action on Local Law 97

(and Local Laws 88 and 85)

While there is a range of compliance periods that begin in 2024, taking action now is critical for NYC building owners and managers that not only want to avoid large fines but also want to create a solution that generates long-term cost savings. 

It’s critical to have a team in place to not only ensure compliance but also provide continuous monitoring to verify that savings are achieved.

Three Local Laws Commercial Buildings Should Be Aware Of

Local Laws 97, 88, and 85 all play a part in contributing to New York City's ambitious goals to reduce greenhouse gas emissions by 80 percent of the 2005 level by 2050

Local Law 97

Applies to a "covered building" that exceeds 25,000 gross square feet or (ii) two or more buildings on the same tax lot that together exceed 50,000 gross square feet (9290 m2), or (iii) two or more buildings held in the condominium form of ownership that are governed by the same board of managers and that together exceed 50,000 gross square feet.

‌If a building exceeds its annual building emissions limit, it will be liable for a penalty of not more than an amount equal to the difference between the building emissions limit for such year and the reported building emissions for such year, multiplied by $268.

Local Law 88

Large,‌ ‌non-residential‌ ‌buildings‌ (that are greater than 25,000 square feet) ‌must ‌‌install‌ ‌electrical‌ ‌sub-meters‌ ‌for‌ ‌each‌ ‌large,‌ ‌non-residential‌ ‌tenant‌ ‌space‌ (5,000 square feet or more) ‌and‌ ‌provide‌ ‌monthly‌ ‌energy‌ ‌statements.‌

Buildings‌ ‌must‌ upgrade‌ ‌lighting‌ ‌to‌ ‌meet‌ ‌the‌ ‌current‌ ‌New‌ ‌York‌ ‌City‌ ‌Energy‌ ‌Conservation‌ ‌Code‌ ‌standards.‌

Local Law 85

Buildings‌ ‌engaging‌ ‌in‌ ‌renovation‌ ‌or‌ ‌alteration‌ ‌projects‌ ‌must‌ ‌meet‌ ‌the‌ ‌most‌ ‌current‌ ‌energy‌ ‌standards‌ ‌of‌ ‌the‌ ‌New‌ ‌York‌ ‌City‌ ‌Energy‌ ‌Conservation‌ ‌Code‌ ‌at‌ ‌the‌ ‌time‌ ‌of‌ ‌construction.‌ 

1. Being in violation can be costly

As New York City continues to prioritize energy efficiency legislation, building owners and managers who choose to wait to address the legislative requirements will miss out on potential savings, and will be at risk of fines.

The NYC Department of Buildings will charge fees if a building is in violation.

The total fees are not something to blink at either. Before hiring utiliVisor, one client analyzed his property and the potential cost of non-compliance: 

"I ‌did‌ ‌the‌ ‌analysis‌ ‌and‌ ‌saw‌ ‌that‌ ‌our‌ ‌potential‌ ‌violation‌ ‌would‌ ‌be‌ ‌six‌ ‌figures. That‌ ‌definitely‌ ‌caught‌ people's‌ ‌attention.‌"
- NYC Property Manager

Many NYC buildings are facing potential fines for: 

• Exceeding the carbon emissions limits.

• Not executing accurate submetering and billing.

• Not upgrading lighting.   

2. Compliance Dates Are Coming Fast (or Why 2024 Isn't As Far Away As You Might Think)

The average commercial lease is for a ten-year term. Therefore, all newly signed tenants and renovation decisions will affect compliance.

Even if lawmakers amend the legislation and compliance dates are extended, a newly-leased tenant would likely still be impacted.

Additionally, if you want to promote tenant behavior change, offering tenants data and analytics of energy and utilities is critical.

Giving tenants access to their consumption data via submeters may be the best energy conservation measure for some buildings.  

When tenants can visualize their consumption data, it helps drive conservation behavior.

But this effect is minimal until an operations center manned with engineers to promote and assist tenant interaction and success.

3. A software or device-based approach won't be enough to get in compliance

The ongoing explosion of energy dashboards and software may be a tempting solution for buildings. They boast about savings that is theoretical and not measured.

But without accurate data and a team of energy experts monitoring, your building operations will struggle to achieve the new energy efficiency requirements and sustain long-term savings.

• Data Accuracy: The assumption that building automation, controls, and management systems create accurate data on their own is false.  

Systems require accuracy in instrumentation and setup parameters to perform their intended tasks. 

Providing consistent, accurate data only happens when instruments are commissioned correctly and parameters continually checked.

• People vs. Software: To drive tenants to only use the energy they need, you must have quality, energy data in the hands of energy experts who have:

  • Real-world understanding of energy-consuming devices and the systems they serve.

  • Regular ability to audit and understand utility bill(s) including rates, tariffs, and taxes.

  • In your face presence with confirmed facts and actionable recommendations.

  • Prove to tenants that savings and cost reduction is real.

  • Ability to engage with building occupants to promote conservation and eliminate waste.

4. Owners and property managers can see an ROI from their efforts

Building owners and managers often don't realize that their compliance efforts can increase actual asset valuation.

When you improve your building footprint and energy score, your utility and operations cost decrease. With these savings comes a higher Net Operating Income (NOI), therefore an increased valuation.
 

Sample Case Study: The hidden benefit of increased NOI & Valuation

• Sample building has common area utility expense of $1,000,000/year

• After retrofitting mechanical lighting equipment and submetering tenant usage, this is reduced to $900,000/year (10% reduction)

• Immediate Result = $100,000/yr increase in NOI

• Plus Hidden Benefit = $2,000,000 increase in valuation (@5% cap rate)
   

Offset Initial Costs With State & Utility Programs and Rebates

Commercial landlords can expect to see immense utility savings via submetering, BMS/BAS upgrades, lighting controls, etc.

This initial investment can be offset through utility rebates and state programs. 

Property Assessed Clean Energy ("PACE") (also referred to as C-PACE in the commercial building sector) is a new financing option for property owners offering 100% of the upfront costs to complete energy efficiency projects.  

Long-term repayment of up to 30 years makes longer payback projects immediately cash flow positive and buildings more valuable. These payments are embedded into the real estate tax payments.

The Real-Time Energy Management (RTEM) program from NYSERDA funds projects that use technologies to improve building performance by extracting data from existing control systems and creating actionable information to reduce operating costs.

This program has been fully subscribed to for commercial office buildings but still applies to residential.

You Don't Have To Wait Long to See A Return

It's a common misconception that commercial property owners will have to wait a long time to see energy and cost savings.

Richard Angerame, utiliVisor's CEO with more than forty years of energy management experience, shares that ownership won't have to wait long to see ROI when they partner with an energy service provider:

"In many cases, we get savings in the first thirty days. More importantly, savings add up over time and can be sustained."

utiliVisor verifies the savings and is also a “watchdog” on contractors to implement their scopes correctly, and the building engineers operate the systems correctly. This is the “insurance policy” a building owner needs to reduce costs, and we are truly a unique value-added service provider.

Conclusion

If building owners and managers want to avoid the fines associated with non-compliance while also increasing their building or property NOI, they must connect with a team of energy experts. 

A team of energy experts will serve as a bridge to real energy solutions that benefit the owner and tenant while meeting the energy efficiency requirements.

Local Law 97 Audio Series with Richard Angerame and Jennifer Kearney