Utility Management: A Powerful Way to Boost NOI
The Rising Cost of Operations
Operating expenses have risen dramatically, with utility costs being a major factor. Rising costs and the ability to maximize revenue were ranked among the top challenges facing the property industry in 2022.
Energy Index Increases (June 2021 – June 2022):
Total Energy Index: +41.6%
Gasoline: +59.9%
Natural Gas: +38.4%
Electricity: +13.7%
Fuel Oil: +98.5%
Key Insight: Utilities represent the third largest operating expense for multifamily properties. Passing these costs through to residents can dramatically reduce expenses, boost Net Operating Income (NOI), and incentivize conservation.
Strategic Approaches to Utility Bill-Back
There are three primary methods for recovering utility costs, each with varying levels of accuracy and administrative complexity.
| Method | Description | Pros | Cons |
|---|---|---|---|
| Flat Fees | A set monthly fee charged to residents. | Easiest to implement. | Least accurate; often results in over or underbilling. |
| RUBS | Ratio Utility Billing System; divides bills based on occupancy or square footage. | Reflects consumption more accurately than flat fees; no hardware needed. | Complex to manage; requires compliance with local ordinances. |
| Submeters | Individual meters for each unit measuring exact consumption. | Most accurate and transparent; reduces water usage by ~27%. | High complexity; requires hardware and manual or digital readings. |
The Challenge of Manual Administration
Implementing these programs is often "easier said than done" due to several factors:
Regulation: Inconsistent and frequent changes to local utility laws.
Labor Shortages: Staffing and recruitment challenges make manual calculations a burden.
Data Entry: Manual readings and tariff schedule investigations are error-prone and time-consuming.
The Solution: Automated Utility Management
Automated software streamlines the billing process and provides detailed analytics to manage utilities at scale.
Benefits of Automation:
Efficiency: Eliminates repetitive, manual data entry.
Employee Morale: Boosts satisfaction by offloading tedious tasks.
Analytics: Highlights usage spikes or variances to catch maintenance issues faster.
Financial Accuracy: Ensures bills are paid on time and residents are billed correctly.
Featured Integration: Conservice + AppFolio Property Manager
Through the AppFolio Stack™, this integration offers a seamless technology solution for:
Utility invoice processing and payment.
Tenant bill-back (automated via square footage and occupancy data).
Vacant recovery and benchmarking compliance.
Resident Experience: Allows residents to pay rent and utilities in one convenient digital ledger.
Closing the Tap
Billing residents for utility consumption is a powerful way to turn a major expense into income. By moving away from manual processes and adopting automated management software, property managers can make their teams more efficient and their portfolios more profitable.