Consumption billing on a fixed rate has several issues:

1. Potential revenue is left “on the table”. Energy rates have outpaced inflation over the last 5 years, averaging over 10% year over year. Over the lifespan of solar panels, the amount of revenue lost by not charging local utility rates is significant (see MTM approach below)
2. Lack of transparency in energy billing can bring lawsuits. Consumption billing has recently been challenged for arbitrary charges as well as accuracy of the bills. Tenants have demanded that such bills show itemized fees, rather than blended rates. For instance, Conservice, a provider specializing in consumption-based billing, recently faced legal challenges from renters in San Diego. These tenants filed lawsuits against the third-party billing service due to a lack of clarity and unexplained charges on their bills. (See Tenants across San Diego fired up over Conservice billing)
3. Calculating fair electricity pricing is challenging. Prices higher than market rates result in lost profits for the property owner, while lower prices lead to tenant dissatisfaction due to overpaying.
4. Predicting energy consumption is difficult. Higher tenant usage decreases owner revenue, as more grid power must be bought and sold at a fixed rate. Lower consumption results in tenants paying for unused electricity.
5. Overburdening Property Managers. Property managers must track energy usage and generate basic, single-line invoice bills.

Solution: Mark-to-Market Billing

To address these issues, we propose the Mark-to-Market (MTM) billing method. MTM links the cost of solar electricity to the price that the local utility company would have charged the tenant for the power if it had been purchased entirely from the grid. Implementing the MTM approach involves using the published rate schedules from the local utility and combining them with 15-minute interval data from meters to create highly accurate bills.

The Mark-to-Market (MTM) billing method effectively addresses the challenges posed by traditional consumption billing.

1. No More Lost Revenue. MTM tackles the issue of lost revenue by aligning charges with the actual, current market rates, ensuring that property owners capture the full financial potential of their solar investment over time. This dynamic pricing model adapts to rate fluctuations, preventing revenue loss that occurs when fixed rates fail to keep pace with market changes.
2. Enhanced Billing Transparency. MTM enhances billing transparency, which mitigates the risk of legal challenges like those faced by services such as Conservice. By providing detailed, itemized bills that mirror those of local utility companies, MTM billing reduces confusion and disputes over charges, fostering trust and satisfaction among tenants.
3. Guaranteed Fair Pricing. MTM’s precise billing based on actual usage and current rates ensures fair pricing for both property owners and tenants, eliminating the risks associated with estimating future energy costs or consumption patterns.
4. Effortless Management Turnkey Software. Finally, MTM simplifies the workload for property managers by automating the complex task of energy tracking and billing, transforming it into a more efficient, error-free process. This comprehensive approach not only enhances the financial performance of solar investments but also improves the overall management experience for both property owners and tenants.

MTM vs. Consumption Billing

Using the MTM approach, we billed tenants based on actual 15-minute interval usage and the AL-TOU GENERAL SERVICE rate published by SDG&E for the 5 years from 2019 to 2023. We then projected future revenues for the next 15 years based on the average yearly rate increase over the past 5 years, compared to a consumption billing approach.

$6.8M of revenue is missed using consumption billing, highlighting the financial benefit of the MTM approach over 20 years. Our analysis indicates that over the last 5 years, MTM has generated $113,366 more than a consumption bill for a 32,000 sqft. office building. With consumption billing, total revenue over the last 5 years would have been $445,328, compared to $558,694 generated by MTM. Extrapolating MTM use over 20 years, MTM revenues outperform the consumption billing approach by 3x. With energy rates increasing by an average of 10.47% annually, this translates to an impressive potential of $6.77 million in energy revenue for a property owner after 20 years, versus just $2.2 million with a consumption billing approach.

Efficiency and Ease with MTM Software Billing

MTM billing, when integrated with comprehensive services like tracking, online reporting, invoicing, and collections offered by a specialized third-party billing provider like Energy311, significantly enhances the profitability of solar investments for property owners. Our service includes providing detailed, itemized bills that closely resemble those from local utility companies. This similarity ensures a seamless transition for tenants when switching to solar energy — eliminating surprises and fostering tenant satisfaction. Energy311’s MTM technology enables property owners to fully capitalize on their solar energy investments, reliably avoiding the risks of overcharging or undercharging tenants for their electricity usage.

Interested in learning more? Check out Energy311’s Blog!