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Submetering Payback Analysis Overview

Revenue Generated Payback – Currently, the community utility expenses are being paid using budget allocation.  During a budgetary process, expected annual utility expenses are calculated and folded into rent for apartments or monthly fees for condominium associations.  Hence a percentage of revenue is currently allocated to the payment of utilities.  When a submetering system is installed, a new revenue stream is created that pays utility expenses.  The percentage of the current budget that has been allocated for utilities becomes unencumbered and usable for other purposes.  Applying this unencumbered money to the capital expense of installing submeters is one method of calculating the payback period.  Here is an example.

Number of Units200
Installation Cost Per Unit$300
Total System Cost$60,000
  
Average Resident Utility Bill Monthly$40
New Monthly Utility Income$8000
Payback Time Period In Months7.50

It should be noted that when the system is paid for, the percentage of the budget formerly allocated to utility expenses becomes profit in the case of apartments.  For condominium associations, that percentage may be used to help fund reserves, and invest in other property projects or monthly fees may be lowered.

Proposed Savings Payback – Communities that have not invoiced residents directly for utilities may expect a 20% - 40% drop in overall consumption.  This occurs for a number of reasons.  When a resident pays for a utility directly, they become conscious of the amount of the utility used.  Likewise, leaks are discovered and repaired in a timely way.  Submetering provides an ongoing mechanism that identifies issues and incentivizes residents to take prudent action.  The 20%-40% savings are currently being paid out of the community budget. That new unencumbered money may be used to service the cost of the submetering system.  Here is an example.

Number of Units200
Installation Cost Per Unit$300
Total System Cost$60,000
  
Annual Utility Costs$100,000
20% Reduction Saves$20,000
Payback Time Period In Months3.00
30% Reduction Saves$30,000
Payback Time Period In Months2.00
40% Reduction Saves$40,000
Payback Time Period In Months1.50