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California State Assembly Bill: AB 1103

Preparing for AB 1103: California’s Energy Benchmark Law for Commercial Property Owners & Managers

 

California’s ardent support of energy efficiency legislation is evident once again as Assembly Bill 1103 goes into effect this year starting in January 1, 2013. It was enacted in October 2007 by the State of California, with implementation intended to have begun in January 2010, but finally went into effect this year. AB 1103 requires energy disclosure of California’s commercial properties’ energy consumption data from the preceding year (12 months) by inputting it into the Environment Protection Agency’s (EPA) ENERGY STAR Portfolio Manager free online tool. The resulting value is a score between 1 and 100 that shows how efficiently a building operates as compared to others having similar characteristics, operations and regional weather.  The benchmarking data and ratings will be used for disclosure to prospective buyers, lessees, or “lenders that would finance the entire building”.

 

Background on AB 1103: California’s Energy Disclosure Law

The law was enacted to curb California’s greenhouse gas emissions, a large portion of which are attributed to California’s commercial properties. California’s commercial buildings consume more than 35% of the state’s electricity, making this legislation very pertinent for targeted GHG emissions reduction in California State, as required by the California Global Warming Solutions Act of 2006 (or AB 32).

 

What Does AB 1103 Try to Measure?

AB 1103 rules seek to measure two metrics to report building energy use: the ENERGY STAR performance score and the Energy Use Intensity (EUI). After building owners have benchmarked energy use in Portfolio Manager, AB 1003 requires that they must disclose to a prospective buyer, tenant or lender a “Disclosure Summary Sheet, Statement of Energy Performance, Data Checklist and the Facility Summary”. The bill will ensure higher transparency by requiring California’s commercial properties to benchmark energy use, the results of which will be useful for any transactional or financial disclosures associated with sale, leasing, sub-leasing, refinancing or any other activities involving prospective buyers and tenants.  Overall, energy disclosure will enable comparisons among similar building types and higher recognition of energy efficiency standards among the high performers.

 

Who Will Benefit?

California’s energy benchmarking bill will impact commercial property owners and managers that are selling, leasing, financing or refinancing their properties. Energy disclosure can be very useful to property owners, managers and real estate brokers in that a high ENERGY STAR rating can justify a higher asking price, with premiums reaching upwards of 6% per square foot compared to non-rated buildings.  A higher ENERGY STAR rating is indicative of lower operating costs, lower occupancy costs and higher net worth of the building.

 

Schedule for Compliance with AB 1103

(i) California’s Commercial properties that exceed 50,000 square feet will have to benchmark energy consumption and disclose results starting July 1, 2013.

(ii) California’s Commercial properties that exceed 10,000 SF but are under 50,000 SF will benchmark energy use starting January 1, 2014.

(iii) California’s Commercial properties that exceed 5,000 SF but are under 10,000 SF will benchmark energy use starting July 1, 2014.

 

Who Should Be Involved in the Benchmarking Process

Knowledgeable commercial property owners who are familiar with inputting energy consumption data in the ENERGY STAR Portfolio Manager tool can input the building size, occupancy levels, energy equipment types, hours of operation, monthly energy usage data supplied by their utility in addition to other building parameters.

Realistically, the energy benchmarking process can be quite complex and calls for professional data analysis and tracking by an energy expert. Therefore, in-house energy benchmarks can result in inaccurate energy scores if the data is not entered correctly or obtained from skewed sources. For highly accurate energy efficiency scores, professional experts should take the lead on the energy benchmarking process with involvement from property owners, managers, key maintenance staff and tenants.

 

Read the bill as enacted in 2007: AB 1103

For new updates on the bill AB 1103, read the information released by the California Energy Commission.

To learn more about the energy benchmarking process, energy reporting rules or other compliance issues related to AB 1103, contact the Energy Solutions team at info@associatedrenewable.com

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