This ebook presents component processes involved in handling medical campus-based internal/interdepartmental invoicing for energy-related expenses using energy management software in conjunction with submeters. It also includes best practices and desirable features for energy management software.
This eBook is most relevant for energy managers and/or accounting or utilities staff members responsible for granular energy reporting and/or internal/departmental invoicing for energy expenses.
Chargebacks are also referred to as cost or usage allocations, re-billings, and/or distributions. All of the terms can refer to a process by which energy provided for an organization by the energy vendor(s)-internal or external-is distributed to various component departments or divisions of that organization. Then the individual departments or divisions are assessed a fee for that energy. In practice, the organization’s facilities or accounting department often becomes the local energy “vendor” for the rest of the campus.
Because chargebacks include energy use and energy cost, they represent an intersection of accounting and energy management needs for a campus-type organization.
NOTE: For the purpose of this eBook, a campus represents a number of buildings in relatively close proximity, such is characteristic of a large medical facility. Other campus-type organizations might include colleges & universities, prisons, resorts, theme parks, and industrial complexes. Most campuses of that sort have centralized utility distribution systems. They often have their own utility plants and may distribute their own energy.
In most chargeback situations, individual buildings are served from an in-house system. Typically, these smaller divisions or departments do not receive utility bills from commercial vendors. Generally, a chargeback involves taking the energy and other utilities provided by the campus as a whole, and allocating or charging the individual campus divisional units for the energy used in their buildings.
Why do people want to do chargebacks? Why do people spend a lot of time and money doing it?
1. Often, it is a matter of budgeting and accountability. Most organizations have a general budget, but then there are auxiliary budgets for laboratories, emergency rooms, dining facilities, grant-funded research labs. Often, those kinds of activities are required to be self-supporting, and the divisions may have to pay their own way from the fees they collect. Or there may be contractual or legal obligations to external funding sources which require accounting for all spending, including utilities.
2. Sometimes chargebacks are important as a step toward more detailed energy reporting. If we want to receive building-based ENERGY STAR ratings, we need to know individual consumption for those buildings. And that doesn’t work unless we have a way to allocate the energy use.
3. Chargebacks are helpful in meeting mandates or legislated energy reporting. A number of local governments now have energy reporting requirements for public and commercial facilities over a certain minimum square footage. Some state governments are also requiring that certain types of buildings report their energy use. In order to report it, you need to know what it is. So use and cost allocation become necessary to keep an organization in compliance.
4. Another value associated with chargebacks is their role in assessment and reporting on energy conservation projects. Measurement and verification involves cost and use comparisons of the pre-retrofit or baseline period with the post-retrofit period. So it becomes very important to be able to allocate energy use and cost in a very granular fashion. This is where a chargeback can help provide.
5. Chargeback data is also helpful in benchmarking and other types of comparisons. One increasingly popular type of comparison is the competition (agency vs. agency). These types of comparisons would be impossible without the behind-the-scenes bookkeeping associated with chargeback processes.
6. Energy dashboards displaying various types of sustainability data are common in certain types of buildings. Campuses that are more aggressively and publicly tracking energy use may present that data from a kiosk location, or a large monitor in a lobby or other public area. Often these dashboards include a real-time representation of the building or organization’s current energy use. And often, these dashboards are populated to some extent with chargeback data.
The EnergyCAP user-configurable Dashboard displays the most important energy metrics in a graphical format.
7. Another value stream for chargebacks is in allocating line loss. Line loss represents the energy consumed in moving power through the distribution system between the point of receipt and the point of delivery. Often, an institution needs to reconcile the total energy received or generated with the total energy actually used or measured at the meter level. Chargebacks provide a valuable tool for allocating line loss in an equitable fashion, perhaps on a square footage or use basis.
8. Some medical campuses have privatized their central energy plant, so the central heating plant or the central cogeneration plant is no longer owned by the healthcare provider. It may be owned by a private company that operates it for a profit. In this type of situation, the cost and use accounting becomes very important.
We’ve seen why chargeback data is valuable. But how is that data obtained? One way is simply to estimate it. Estimates are necessary if submetering equipment is unavailable. If a meter is not present at a facility, the energy use can be estimated using building square footage as an approximate but impartial measure. The estimate can be further refined by incorporating a weighting factor, so that a less energy-intensive building (such as a warehouse with marginal climate control) would be weighted less than a more energy-intensive building (such as a primary computer lab).
Data is also available from the utility vendor. Not every building has its own direct connection to the local vendor, but somewhere on the campus, the organization is buying water and electricity and natural gas and maybe other types of commodities as well. So all organizations get some actual bills from their local utility vendors and that’s another source of potential information that can be used in the chargeback process.
Optimally, all or most locations would be submetered. This would allow for calculations that would provide the most accurate view of the actual energy consumed in each managed building.
There are two primary types of metering systems. The first type includes the manual read meters. These are the older and less expensive meters. To obtain energy data, someone is going to have to walk around to each facility once a month and read the dial on the meter. That meter reading will be compared to the prior reading, accounting for any rollover and the meter multiplier. The end result will be a monthly record of utility use for that meter. The advantage with a manual read system is that it is relatively cheap and easy to implement. The disadvantage is that someone has to walk around and read the meters.
The second type of metering system includes the Automated Meter Reading (AMR) instruments. Early automated read instruments were essentially old-style manual meters with a simple reader mechanism bolted on top. The reader transmitted the reading data to the utility vendor automatically at a predetermined interval frequency. Meter data was then stored in a computer database. Then the computer could do the math to convert meter readings to commodity use and cost.
Today, smart meters have opened the door to two-way communication between the utility vendor and the individual meter, or even three-way communication with the vendor, meter(s), and building owner(s). This increasingly networked Advanced Metering Infrastructure (AMI) presents a host of new possibilities for energy tracking, efficiency, grid demand management, and cost reduction. State-of-the-art smart meters are capable of recording and reporting virtually in real-time.
For many organizations, chargeback processes that are already in place can present a number of potential pitfalls. The first pitfall is that the process has become increasingly Byzantine, unwieldy, and unworkable over time, despite everyone’s best intentions.
Implementation engineers at EnergyCAP, LLC have worked with a number of organizations that were using elaborate homegrown chargeback processes, including an impressive and dizzying array of Excel spreadsheets. Data was being passed from cell to cell and worksheet to worksheet. These spreadsheet systems had in many cases been developed over a period of years.
The primary weakness of these systems is that they were not flexible enough to accommodate all the needs of a comprehensive chargeback process.
Integrating submeter data is only part of that process. What changes need to be made when a meter is swapped out? How do you handle departmental reorganization? How do you apply cost to use? Are you allowed to add a surcharge? What about an administrative fee? Do you have a good accounting of what those fees should be?
A frequent result of outdated homegrown chargeback processes is that they fail to accurately allocate energy expenses. Eventually, the general budget subsidizes a hefty portion of the auxiliary budget because the process has become increasingly unreliable.
Additionally, many homegrown chargeback processes do not consider demand charges, which can be quite substantial. One research university in the Northeast had a high number of funded medical research spaces, which were quite energy-intensive. Without a demand allocation system in place as part of the chargeback process, the university was subsidizing higher demand users through the general budget.
Another problem with homegrown processes is that they are often very opaque. The utility end-users have little or no access to their accounts. Since data is handled in the background, they can’t log in and view the account history. Sometimes there is no audit trail, particularly with spreadsheet management. Problem bills become very hard to track and audit.
Homegrown systems tend to be labor-intensive. And they often rely on a single individual’s know-how and expertise. So if Lisa, who has been doing this for 20 years and has put together all the spreadsheets, is out sick, then the organization may have a problem.
Ultimately, chargebacks should flow smoothly to the accounting system, because they are utility bills. They are not payables; they are receivables. Someone is being billed, and either they are going to cut a check or the expense is going to be deducted from their budget line item. Either way, it’s a receivable. And without an automated interface for transferring chargeback data to and from the accounting office, then someone is going to have to key that utility billing information all over again. And that process can be very cumbersome, inefficient, and error-prone.
We’ve looked at some of the challenges of maintaining an effective chargeback process. So what are the best ways to do this?
The most important way to maintain an effective chargeback system is to use submeters to track energy use in the most granular fashion possible. Allocations based on floor area and an agreed-upon weighting factor may be acceptable, but submetering will be the best by far.
Second, invest in an energy management software package that includes chargeback functionality. That system should be capable of producing all required energy management reports, and data must be portable to the organization A/P system. As we have observed, handling energy data in a comprehensive and efficient way can be very challenging.
The end result of a quality chargeback process should be that the energy data is processed in a timely fashion, with a full accounting for all related expenses. Chargeback data should be transparent, auditable, and shareable.
Considering the importance of submeters in an effective chargeback process, what considerations should drive implementation of a useful submetering system? Here are some suggestions:
1. Ensure that 15-minute interval data is available. Interval data enables demand-related reporting—that data is a prerequisite for participation in demand reduction programs. Interval data also enables more detailed analysis of energy use patterns associated with the metered buildings. This type of analysis can provide more insights into energy savings opportunities.
2. Consider storing your submeter data in the cloud, and not on your own servers. Submeter data, particularly 15-minute interval data, accumulates very quickly. This type of data can be stored in the cloud very economically, avoiding concerns about adding to your organization’s server capacity.
3. Consider and implement an effective data validation process. You would be surprised how often this vital step is overlooked. Just because the submeters are installed, and data is flowing smoothly back to a database, does not mean that the data will be helpful or even usable.
Fortunately, largely automatic processes can be set up to check for data dropouts and outliers. In most cases, those same processes can estimate replacement data or at least flag unreliable data for review by a human being. Validation is very important because a chargeback process built on submeter data is only as credible and reliable as the data itself. And raw data is exactly that—raw. It can be indigestible if not cooked (at least a little)!
4. Consider the data end users—the energy stakeholders in the organization. Who will be using the data, and how will it be used? At the very least, the submetering system should produce an output which can be easily translated to a variety of different formats to enable communication and analytics.
5. Ensure that the system can easily and seamlessly create and deliver chargeback bills.
6. Make certain that the submeter system has some sort of early warning capability. Ideally this would include configurable alerts and alarms so that you can get a text message or email when something doesn’t come on or something doesn’t turn off, or if some critical value is under or over the limit.
7. Consider implementing a metering system that provides assistance with remote diagnostics. Obviously, if the submetering system is very intelligent, it can help diagnose what’s going on in the building without the need to send a repairperson out there to take a look at the system. Remote diagnostics can indicate if controls have failed, schedules were altered for a special event, and many other issues.
8. Consider a system that can interface directly with data display systems including dashboards and kiosks. This is becoming very popular.
9. For very sensitive facilities, such as certain types of laboratory buildings, you may be very concerned about power quality. If that is the case, consider looking at more expensive, more capable meters that can monitor fine gradations in power readings.
10. One final suggestion—consider the capabilities of the system for energy use forecasting. This can be very helpful in budgeting. You can project how much energy you’re going to be using in the future using heating degree day and cooling degree day forecasts. This is one more analytic that can add real value to your submetering system.
Energy management software is the ‘glue’ that binds together the submetering system hardware and your chargeback processes. It does this by providing a database for storing submeter data, and an interface for designing and updating chargeback calculations using that data. Powerful energy management software can leverage submeter data for in-depth analytics.
Here are 11 recommendations for energy management software features that will help ensure an efficient and effective chargeback process. The software should:
1. Provide integrated tracking of external purchased utility bills, as well as internal chargebacks. Often, the unit cost for the chargeback is based at least in part on what was paid per unit for the big bill that was received at the substation. It’s important to integrate from the production and consumption angles.
2. Be web-based so that customers can login and view their accounts conveniently, just as they might do with a utility vendor.
3. Provide flexibility to track supplied energy and chargebacks without double-counting the use or cost in reports. This can be trickier than it sounds.
4. Provide comprehensive functionality for creating chargebacks based on submeter readings and calculations, since there may be situations where some of the space is submetered and some is not. For example, you might have a complex of three buildings, two of which are submetered. The energy use of the third building could be calculated by subtracting the submetered use of the remaining buildings from the total energy supplied to the complex. So the software needs to do more than just process the submeter data. You may want to use formulas for calculating the allocations.
5. Accommodate percentage splits. In many multi-use facilities, building wiring may make more granular submetering impractical. There may also be HVAC limitations. In those cases, you may want to submeter the entire building but then split the use using different budget/GL codes.
6. Accommodate a process for entering estimates for energy use. There will certainly be situations where that need will arise. A meter might fail, requiring an estimate for a month of utility use. It might be necessary to provide estimates for buildings that are not yet adequately submetered.
7. Add administrative fees and surcharges to your chargeback transactions. This is one way to help recover the cost of the submetering system and the software—an important part of the cost of doing the business of providing utilities for your internal customers.
8. Allocate expenses related to energy generation. This is important in the event that your medical campus has a cogeneration plant. It is important to factor in more than the cost of kilowatt hours. There might be additional allocations of labor and maintenance, as well as capital costs that you are allowed to recover. But you need a way to do that.
9. Seamlessly integrate with your accounting system to the degree that is desirable and necessary to avoid duplication of labor and provide for prompt handling of utility invoices externally and internally.
10. Provide an interface with the ENERGY STAR Portfolio Manager, a ubiquitous energy benchmarking service provided by the EPA. This will dramatically streamline the process of obtaining ENERGY STAR building ratings.
11. Provide robust analytics, including measurement and verification, as well as cost avoidance.
Developing a new chargeback process, or revising an existing chargeback process provides a unique opportunity to enhance an organization’s energy management capabilities. The software and hardware components that encompass a submetering system must work together to provide a maximum benefit. Multiple value streams can be realized with thoughtful planning and implementation.