CHAPTER l. LIFE-CYCLE COST ANALYSES OF UTILITY COMBINATIONS

1-1. PURPOSE.

a\. To analyze the utility system of a proposed new

construction/substantial rehabilitation public or Indian

housing development.

b\. To evaluate the cost-effectiveness of a passive/active

solar system in public or Indian housing development

projects.

1-2. AUTHORS AND APPLICABILITY

a\. The legal and regulatory authority for life-cycle cost

analysis of utility combinations are as follows:

\(1\) U.S. Housing Act of 1937, as amended in 1979 (Section

13, P.L. 96-153 dated 12/21/79).

\(2\) U.S. Housing Act of 1937, as amended in 1980

(Section 5(i), P.L 96-399 dated 10/8/80);

\(3\) [24 CFR 941.404](http://www.gpoaccess.gov/cfr/index.html);

\(4\) 24 CFR 968.115(d);

\(5\) 24 CFR 950.603(d).

b.APPLICABILITY.

(1)The U.S. Housing Act of 1937, as amended, (the Act)

requires that, to the maximum extent practicable,

newly constructed and substantially rehabilitated

developments assisted under the Act be equipped

with heating and cooling systems selected on the

basis of criteria which include a life-cycle cost

analysis of such systems. The Housing and Community

Development Act of 1980 requires these developments

to be equipped with a passive or active solar

energy system that would be cost effective over the

estimated life of the system to be installed.

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(2)Public Housing Agencies and Indian Housing

Authorities (HA) must complete a Life-Cycle Cost

Analysis of Utility Combinations (LCCAUC) for

proposed new developments and developments which

are to be substantially rehabilitated. HAs

replacing utility systems with either modernization

or other funding are also required to complete a

LCCAUC. The LCCAUC must be based on criteria which

include installation costs and long term operation

and maintenance costs.

(3)HAs may use data and procedures that they have

developed as long as elements stated in 1-2.b.(2)

above are included in their analysis. Energy

savings for solar energy systems should be

calculated in accordance with recognized industry

procedures.

(4)Alternatively, HAs have the option to use the

procedures and methodologies of this Handbook. If a

HA prepares an analysis using the procedures and

methodologies of this Handbook, all the provisions

of this Handbook should be followed. The data

contained herein is based on national averages

which may not be applicable to a particular

locality or housing project. Therefore, the data

contained herein should be considered as a guide

only and should be adjusted to fit local

conditions. \*

1-3. UTILITY SELECTION.

a\. The selected utility combination must provide safe and

adequate service at the lowest life-cycle cost. This

selection must be made in the planning stage of a

project.

b\. Considerations in selecting a utility combination:

\(1\) A substantial portion of the operating expenses of a

multifamily housing project is the expense of

providing lighting, refrigeration, cooking, domestic

hot water, space conditioning, water and sewage

disposal services.

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7418.1 CHG-1

\(2\) Construction costs may be materially influenced by

the choice of utilities for such items as central

heating plants with distribution lines, fuel storage

and handling facilities and chimneys.

\(3\) A utility system\'s quality, dependability, space

requirements, maintenance, comfort potential,

environmental impact and energy conservation. For

example, two types of space heating systems might be

vastly different in these characteristics but still

have nearly equal total annual owning and operating

costs.

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\(4\) Systematic analysis of costs must be made because of

the large number of possible combinations of fuels,

energy, purchasing methods, types of installations

and utility rate schedules. For example, gas may be

used for any single or a combination of the

following functions: cooking, domestic hot water and

space heating. Each combination will require

different facilities and equipment and may change

the operating costs due to applicable rate schedules

and methods of purchase. In comparing combinations

of utilities, it is the relative differences rather

than the absolute dollar amounts that are

significant.

1-4. PRINCIPLES OF UTILITY PLANNING AND EVALUATION.

a\. The analysis must include all feasible types of

fuel/energy and methods of utilization, distribution, and

purchasing that are available in the area.

\(1\) The data must show initial and monthly costs for

both individual dwelling unit and project operated

heating plants, where each type is feasible. The

monthly costs must include both those costs which

would be paid by the tenants and those paid by the

PHA/IHA.

\(2\) The analysis must show the total relative costs for

the various utility services, including water and

sewage disposal, whether purchased and paid for

directly by the tenant (retail basis) or purchased

by the PHA/IHA and included in the rent (master

metered).

\(3\) A large number of utility combinations is

theoretically possible. However, only those which

are reasonable and practicable where the project is

to be developed should be evaluated.

\(4\) Where an analysis has been prepared for a prior

project of similar size and condition, it is not

necessary to prepare a new analysis for the proposed

project. Instead, the prior analysis may be used by

reference. However, it should be verified that the

utility and escalation rates used in the prior

analysis represent current conditions and forecasts.

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b\. The analysis of utility costs should include the

following elements, when feasible:

\(1\) Fuel and energy;

\(2\) Fuel and energy price escalations;

\(3\) Operating labor (project operated heating and air

conditioning plants);

\(4\) Repair and maintenance;

\(5\) Replacements of equipment and facilities;

\(6\) Initial costs of utility systems and the interest

rate used in the Annual Contributions Contract

(ACC).

c\. In addition to the factors that can be calculated, there

may be convenience factors which may be important in a

particular situation and should be considered.

d\. In applying such rates to master-metered service, all

provisions that affect costs including taxes, adjustments

and other clauses must be included to compute costs

correctly.

\(1\) To maximize the benefits of a master metered rate,

the rate should be applied to the estimated total

project consumption.

\(2\) Where project size or the distribution system design

requires more than one delivery point, the local

utility company should be requested to combine

readings and apply conjunctive billings.

e\. A nominally lower master-metered rate could be negated by

excessive tenant consumption unless there is monitoring

beyond the master meter;

\(1\) An equitable and effective way to control tenant

utility consumption is to install a checkmeter for

each dwelling unit and surcharge tenants for

excessive consumption.

\(2\) In making the determination to purchase a utility

service through a master meter, the cost of the

installation and the maintenance and management of

checkmeters must be warranted after consideration of

the following:

\(a\) Generally, elderly tenants will not use

excessive amounts of gas or electricity except

possibly for space heating and air

conditioning. Therefore, gas or electric

checkmeters would not be appropriate in

projects exclusively for elderly occupancy

except where: (1) project supplied fuel or

energy is used for space heating or air

conditioning in individual dwelling unit

equipment and (2) the tenant has control of the

thermostat.

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\(b\) Where natural gas is supplied to individual

units for cooking only, checkmeters would be

inappropriate.

\(c\) Some utility companies will not permit the

installation of checkmeters or the collection

of surcharges by a customer purchasing its

services.

\(d\) Electric, gas, and water checkmeters should be

installed to measure all major utility

consumption for non-dwelling purposes.

\(1\) Among the types of project installations which may

be checkmetered are heating and cooling plants,

elevators, offices, clinics, maintenance shops,

community buildings, large ventilating fans, water

pumping, sewage pumping plants and corridor and

outdoor lighting.

\(2\) Examples of nonproject use which should be

checkmetered are child-care centers, commercial

establishments, and other housing projects supplied

by project distribution systems.

f\. To preclude a utility or fuel dealer from declining to

provide its service after a project is designed or under

construction, a letter of obligation stating that its

fuel or energy will be available to the project should be

requested.

g\. Some utility companies and fuel suppliers may offer cash,

special services or other promotions to entice developers

to use their products and services. If a monetary value

can be put on the promotion and if the tenants will

benefit or if the initial cost of the project would be

reduced as a result, the value of the promotion may be

used in preparing a Life-Cycle Cost Analysis of Utility

Combinations.

h\. The data in this handbook were developed on the basis of

national averages; if reliable local data are available

such data may be used in lieu of the handbook data.

1-5. COST COMPARISONS.

a\. A Life-Cycle Cost Analysis of Utility Combinations shall

be prepared on Form HUD-51994 (Life-Cycle Cost Analysis

of Utility Combinations), appendix l.

\(1\) Form HUD-51994, Part A, provides columns for showing

the details and costs of four utility combinations

in summary form. Space is provided also for

indicating the utility

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combination recommended by the PHA/IHA and the

appropriate justification for the recommended

selection.

\(2\) Form HUD-5l994, Part B, provides general information

on local design conditions and the proposed project.

\(3\) Form HUD-5l994, Part C, is used to develop monthly

operating costs. In all combinations involving

tenant-purchased fuels or energy, the amounts

required by the project for elevators,

streetlighting, water and sewage pumping, operating

of maintenance shops, administration and community

buildings, and for other general purposes should be

included. Definitions and explanations of master-

metered service and tenant-metered service used in

the form and definitions of technical terms are in

Chapter 2 of this Handbook.

\(4\) Form HUD-5l994, Part D, is used to develop estimated

initial costs and annual repair, maintenance, and

replacement charges for the utility combinations.

b\. Costs to be considered. In conducting the analysis, only

facilities and equipment costs that are different in the

various combinations need be considered. Lighting

fixtures and cold water piping costs, for example, may be

omitted as these will be installed under any combination.

However, interior wiring and or gas piping costs will

vary with the functions for which gas and electricity are

used and must be included in the analysis of each

combination.

1-6. PREPARATION OF LIFE-CYCLE COST ANALYSES OF UTILITY

COMBINATIONS.

The Life-Cycle Cost Analyses of Utility Combinations shall be

prepared in the following order using copies of Form HUD-

5l994.

a\. Procedure.

\(1\) Obtain general project information and data and

insert in Part B, Form HUD-5l994. Include the

number and type of dwelling units proposed and the

utilities available at the proposed site.

Information as to the number of dwelling units by

number of bedrooms and the number and heights of

dwelling buildings will increase the accuracy of the

analysis. If the project is to be on scattered

sites, use a separate sheet for each site showing

only the data which are different for each site.

\(2\) From the utility systems and fuel suppliers,

ascertain which utilities and fuels are available

for the project and obtain all current electric,

gas, water and sewage

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disposal rate schedules and costs, and oil and

liquified petroleum gas prices which may be

applicable for the project. Discuss rate

applications with local utilities which will serve

the project.

\(3\) Adjust energy and utility costs to reflect long-term

energy price escalation. Obtain the escalation

rates from the local utility and power commission,

or use a escalation rate of no more than 7 percent

if the rates are not available from the commission.

\(4\) Obtain the annual heating degree-days, the annual

cooling hours, the design temperatures used, and the

average annual cold water temperature.

\(5\) List on a separate sheet all feasible combinations

of utilities, fuels, and purchase and utilization

methods and select those that should be analyzed.

\(6\) Obtain the consumption requirements for the energy

and fuel required for each combination to be

analyzed from local experience in existing projects

or from Chapter 2 and insert such data in Part C,

Form HUD-5l994.

\(7\) Consult with the public utility commission, local

utility companies, Department of Energy, American

Gas Association and the Edison Electric Institute on

the long-term costs of energy for total life-cycle

cost of utility systems. PHAs/IHAs shall use the

following calculation showing the effects of the

escalated energy rates in life-cycle cost estimates

of utility combinations being analysed.

n

(average current cost) x (1 + e) - 1 x 1

\-\-\-\-\-\-\-\-\-\-\-\-\-- \-\--

e n

Note: \"e\" is the energy escalation rate expressed as a

decimal and \"n\" is the assumed economic life of a

project. However, because of the uncertainty of

long range estimates of energy costs \"n\" should not

be greater than 20 years.

Example: Average current cost of electricity is \$25.00 per

dwelling unit (DU) per month (Part C, line 14). The

long-term escalation rate of electricity is 5

percent per annum. Determine the average monthly

cost of electricity for a 20-year period.

20

(\$25.00) x (1 + .05) -1 x 1

\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-- \-\--

.05 20

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=(25) x (33.066)x 1

\-\--

20

=\$41.33.

\$41.33 is the adjusted average long-term cost of

electricity and should be entered on line 16, Part A,

Form HUD-5l994. Similar calculations, using applicable

energy escalation rates, should be made for gas and other

fuels. Gas cost should be entered on line 17, Part A.

Fuel cost should be entered on line 18, Part A.

\(8\) Calculate the monthly costs of fuels, energy,

heating supplies, and heating labor. Heating labor

costs should not be shown for individual dwelling

unit equipment. Complete a Part C for each

combination.

\(9\) Estimate the initial costs of the facilities and

equipment required for each combination. Insert

data in Part D, Form HUD-5l994 and show source

thereof.

\(10\) Compute the repair and maintenance, and replacement

costs for each combination using Part D, Pages 1 and

2, Form HUD-51994. Total the costs and enter it on

Page 2, Part D.

\(11\) Calculate the interest (line 16, Part A) using the

HUD applicable interest rate based on the total

initial costs per dwelling unit and enter the per

dwelling unit per month (PUM) figure in the proper

column of Part A. (The HUD interest rate can be

obtained from the HUD Field Office.)

\(12\) Enter in Part A, Form HUD-5l994, the appropriate

data from Parts C and D and summarize the estimated

costs PUM for the various combinations analyzed.

\(13\) Insert the number of the recommended combination and

the justification of the recommendation at the

bottom of Part A, Form HUD-5l994.

b\. Symbols to be used. Utility combinations should be

listed on the analysis sheets, Form HUD-5l994, using the

following symbols:

\(1\) For Type of Domestic Hot Water and Space Conditioning

Equipment

IND - Individual Dwelling Unit Equipment

BLDG - One Plant in Each Building

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Equipment (continued)

GP - One Plant per Group of Buildings

CP - One Plant (Central Plant) for the Whole Project

or for One Site if there is More Than One Site

CPJ - One Plant for Two or More Projects

GWA - Gravity Warm Air Furnace with Ducts (No Blower)

FWA - Forced Warm Air Furnace with Ducts (Blowers)

FHW - Forced Hot Water System (With Pump)

LPS - Low-Pressure Steam System

HPS - High-Pressure Steam System

HTW - High-Temperature Water System

LPS-FHW - Low-Pressure Steam Converted to Forced Hot

Water at buildings

RT - Roof Top Forced Warm Air Ducted System

ACC - Central Plant Air Conditioning

ACR - Room Air Conditioners

ACM - Multi-Unit Air conditioning by Zones

BB - Baseboard

CBC - Cabinet Convectors

CC - Ceiling Cable

DH - Duct Heaters

AS - Active Solar Energy System

PS - Passive Solar Energy System

DUCS - Dwelling Unit Central System - Air Conditioning

FC - Floor Cable

HP - Heat Pump

MAH - Make-up Air Heaters

RWP - Radiant Wall Panels

RCP - Radiant Ceiling Panels

TWH - Through the Wall Heaters

TWHC - Through the Wall Heating and Cooling

HRS - Heat Recovery System

O - Other (Explain)

(2)For Fuel and Energy

E - Electricity LPG- Liquified PS- Purchased

G - Gas Petroleum Steam

FO - Fuel Oil Gas O- Others

(Specify)

\(3\) For Purchase Method: (See Chapter 2 for definition

of \"Master-Metered Service\" and \"Tenant-Metered

Service.\")

M- Master-Metered Service

T- Tenant-Metered Service

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c\. Utility combinations for Study. The following is an

illustrative example of a typical local utility

combination:

Combinations

Type of Installation No 1 No 2 No 3 No 4 No 5 No 6

Domestic Hot Water Bldg Ind Ind Bldg Bldg Bldg

Space Heating Ind Ind Ind Bldg Bldg Bldg

Space Heating System BB FWA FHW FHW FHW FHW

Space Cooling System ACR ACR DUCS ACC ACC ACR

Function No 1 No 2 No 3 No 4 No 5 No 6

Lighting and Refrigeration E-M E-T E-T E-M E-M E-T

Cooking E-M E-T G-T G-M G-M G-T

Domestic Hot Water E-M E-T G-T G-M FO-M FO-M

Space Heating E-M E-T G-T G-M FO-M FO-M

Space Cooling E-M E-T E-T G-M E-M E-T

1-7. SELECTION OF UTILITY COMBINATION.

a\. The utility and fuel combination with the lowest cost

PUM, including project and tenant costs, on Form HUD-

5l994 should be selected. If the cost difference between

the lowest PUM and the next lowest is not significant,

the comparative operating costs should be evaluated. The

combination with the lower operating costs should be

selected.

b\. A higher cost utility combination may be selected,

with written Justification, if the following conditions

exist:

\(1\) The lowest cost combination is unsuitable for the

locality because State and/or local law

prohibits the use of such combination. For

example, coal may be cheaper but environmentally

unacceptable;

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7418.1 CHG-1

\(2\) The inconvenience and expense of fuel handling

are reduced or eliminated and the difference in

monthly cost between the lowest cost combination

to be selected is not more than five percent;

and

\(3\) The lowest cost combination is technically

infeasible.

c.Tenant-metered service versus master-metered service.

If there is no substantial difference in cost per

dwelling unit per month between utilities and fuels

purchased by the tenants and those purchased by the

PHA/IHA under a master-meter service rate, the PHA/IHA

should select the utility combination that provides for

tenant purchases. However, if experience indicates that

a more satisfactory operation results where the PHA/IHA

is responsible to the greatest extent feasible for the

supply of utilities rather than tenants being

responsible for the payment of bills to the utility

company, the PHA/IHA may select master-metered service.

In evaluating these two methods of providing utilities:

(1)Consideration should be given to the tenant\'s

ability to pay the utility bills and to make a

utility deposit;

(2)Availability of budget billing arrangements to

tenants; and

(3)Whether the utility supplier permits checkmeters

and surcharging for excess consumption.

d.Justification for the project utility and fuel

combination shall be included in Part A, Form HUD-51994

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