Omar from Tucson. Commercial building with two tenants sharing a master meter. Landlord pays the utility bill and charges back to tenants based on square footage. One tenant runs a welding shop with significant demand spikes. The other tenant is a bookkeeper with flat low demand. The welding shop's demand spikes are driving up the demand charge for the entire account and the bookkeeper is subsidizing it through the square footage allocation. Is there anything an auditor can do here?
Demand charge on a shared meter — two tenants one bill
Walt from Pittsburgh. The allocation method is the landlord's choice and usually governed by the lease. If the lease says square footage allocation that is what it is. But you can document that the allocation is materially inequitable and recommend that the landlord consider submetering.
Mike D. Submetering the welding shop is the cleanest solution. With submetering the landlord can allocate demand costs based on actual contribution rather than square footage. The bookkeeper's costs drop significantly and the welding shop pays for the demand it actually creates.
Who pays for the submetering installation?
Derek. Typically the landlord pays for the submetering equipment and either absorbs it as a capital expense or amortizes it through slightly higher allocations to the welding shop. The ROI for the bookkeeper in reduced charges usually makes the conversation straightforward.
This is as much a landlord-tenant negotiation issue as a utility billing issue. Good reminder that auditors sometimes identify problems we cannot fix unilaterally.