AB 1103 has finally been passed and is now officially in effect! Following a number of delays to address comments from the real estate industry, full compliance with California’s new energy disclosure law is required from January 1, 2014 for all buildings 10,000 square feet or larger. 

AB 1103 – benchmarking California’s buildings

AB 1103 requires commercial building owners to benchmark and disclose a building’s historical energy usage prior to selling, leasing or financing the entire building.  The statute requires energy consumption data to be collected from utility companies and entered into the Environmental Protection Agency’s ENERGY STAR Portfolio Manager system, which generates an energy efficiency rating for the building. 

Buildings with high ratings (75 out of a 100 and up) that have had their data verified by a Professional Engineer (PE) can apply for an ENERGY STAR certification.  Buildings with ratings below 75 should consider implementing energy efficiency upgrades to reduce energy consumption.

By providing recognition for green buildings and improving transparency in real estate transactions, AB 1103 aims to encourage California building owners and operators to reduce their building’s energy consumption and lead real estate market forces to reward energy efficiency in buildings.

Meeting AB 1103 Compliance Requirements

The key element of complying with the new law is the accurate and complete capture of data. We’ve already been working with a number of clients to help them cost- and time-efficiently meet the compliance requirements and maximize ROI. Let me address some of the questions we encountered during this process:

1.  What happens if I can’t get all the tenant data?

The statute and regulations of AB 1103 require a building owner to collect data from utilities and tenants. The California Energy Commission has worked with utilities to simplify and automate the process of gathering information from utilities, but obtaining information from tenants can be more difficult. AB 1103 states that if a building owner has made reasonable effort obtain data, reasonable approximation or default values may be used to replace the missing information. Engaging an experienced energy consultant will help to improve the comprehensiveness of your data set, accurately fill in any data gaps, and justify to authorities that reasonable effort was made to obtain complete data.

2.  What is the Penalty for Non-compliance?

While there is no specific financial penalty for non-compliance, the California Energy Commission (CEC) may initiate enforcement proceedings. The CA Code of Regulations authorizes a complaint to be filed against a person seeking appropriate remedies for an alleged violation of any statute administered or regulation enforced by the CEC.  A buyer of an inefficient real estate asset could also be damaged by the seller’s failure to comply with the disclosure laws and may back out of a transaction or seek compensation from the seller or broker. Therefore, brokers are likely to insist on their clients complying with AB 1103 as they do with other disclosure laws.

3.  What’s the difference between Benchmarking and the ENERGY STAR Portfolio Manager

The ENERGY STAR Portfolio Manager is one method to benchmark the energy usage of your building. Although other benchmarking programs exist, building owners must utilize the ENERGY STAR system to comply with the requirements of AB 1103.

4.  What if my building is not eligible for an ENERGY STAR?

A number of building types are exempt to the Statute and Regulations of AB 1103, namely Factory and Industrial; High Hazard; Institutional; Residential; Laboratory and mixed-use buildings with part residential. However, under AB 1103 all other building types are required to enter their building data into the EPA’s Portfolio Manager system and make energy disclosures, even if the building type is not eligible to receive the ENERGY STAR energy performance score (it will still receive an energy intensity output report).

To learn more about the specifics of AB 1103, the requirements for compliance and to be able to ask questions, tune in to Partner’s upcoming “How to Comply with AB1103” webinar on January 15th, 10am PST, presented by my colleagues Kelsey Namara and John Rockwell. Register here.