I'm seeing some concerning patterns in Consumers Energy demand charge allocations in multi-tenant buildings here in Michigan. Landlords are using "diversity factors" to reduce the total demand charges before allocating to tenants, but I suspect they're keeping the savings for themselves rather than passing the benefit through. Has anyone else noticed this with Consumers or other utilities? The math doesn't seem to add up on these diversity calculations.
Consumers Energy demand charges - lease audit red flags
Tina, that's a sophisticated scam if true. Here in Memphis, MLGW has diversity factors for certain building types, but the savings should absolutely flow through to tenants if they're paying demand charges. What does the lease say about demand charge allocation methodology? If it's vague, the landlord might be exploiting that ambiguity.
I've seen similar issues with Green Mountain Power here in Vermont. The diversity factor is legitimate - not all tenants hit peak demand at the same time - but the landlord should be transparent about the calculation and pass the savings through proportionally. Request the actual Consumers Energy bills and the landlord's demand allocation spreadsheets to verify the math.
Chester's right about transparency. I caught a similar scheme with Dominion Energy in South Carolina where the landlord was applying a 0.85 diversity factor but only passing through 0.95 worth of savings to tenants. Kept 0.10 of the savings for "administrative costs" that weren't disclosed in the lease. Made for a nice recovery when we challenged it.
George, that's exactly the kind of creative accounting I've learned to watch for. Here with BGE in Baltimore, I always calculate what the tenant would pay based on their proportional share of total building demand, then compare to what they're actually being charged. Any significant variance needs to be explained and justified by the landlord.
Thanks everyone. I've now requested three years of Consumers Energy bills plus all demand allocation worksheets from the landlord. Initial review shows they're using a 0.82 diversity factor but only crediting tenants with 0.91. That's about $400/month my client should be saving on demand charges. The landlord's pocketing the difference.
Tina, that's a nice catch! $400/month adds up to serious money over a lease term. Make sure you also check if the diversity factor is being applied consistently across all tenants or if some are getting better treatment than others. I've seen landlords play favorites with their anchor tenants while overcharging smaller spaces.
Sylvia raises an excellent point about consistent application. I've found cases where national chain tenants had lease amendments specifically addressing diversity factors while local tenants got stuck with the standard lease language. Always worth checking if your client is being treated fairly compared to other tenants in the building.