gives PHAs wide latitude in how they develop utility allowances
for their public housing units. Although the federal regulations
state the various factors that should be taken into account, they
do not require that any particular methodology be used to calculate
allowances. Instead, it is left to the PHA to decide which methodology
to use in establishing allowances.
are two basic ways to calculate allowances:
section describes these two methodologies and discusses the advantages
and disadvantages of each. The most appropriate methodology to choose
depends on a PHA's particular characteristics and resources. The
information here is intended only to familiarize you with these
methodologies. For more guidance in determining which approach may
be most suitable for your particular PHA, see HUDs Utility
Allowance Guidebook. More information on this publication is
available in the Resources section.
the engineering-based methodology, the PHA uses engineering calculations
and technical data to estimate reasonable energy and water consumption
for a particular type of dwelling unit or household. The reasonableness
of allowances set using the engineering-based methodology depends
on assumptions made in the calculations. This section provides help
in developing the allowance categories and gives recommendations
on these important assumptions.
first step in establishing allowances with the engineering-based
methodology is to develop allowance categories that group dwelling
units according to factors that affect consumption requirements.
Then, the consumption requirements for the various end-uses to be
covered by the allowancespace heating, hot water, cooking,
lighting, refrigeration, appliances, and/or waterare each
determined separately. In some cases, not all of these end-uses
are included in an allowance. For example, when a utility is master-metered,
it is not included. Depending on the end-use, the consumption requirement
may be estimated based on engineering formulas, standardized consumption
tables, or in-house information on equipment used or the physical
condition of the developments. Below is a brief description of how
the consumption requirements for various end-uses are commonly estimated
under the engineering methodology. A more complete, step-by-step
description of this method can be found in Chapter 5 of HUDs
Utility Allowance Guidebook. More information on this publication
is available in the Resources section.
Heating. The energy requirement for space heating is estimated
using an engineering calculation. One calculation is done for
each allowance category. The following inputs are needed:
heat loss of a dwelling unit;
30-year average heating degree days for the region;
efficiency of the heating system;
Btus per fuel unit;
indoor temperature; and
outdoor design temperature in winter.
heat loss calculation for each unit category will be either already
on file or can be performed by the local utility, a consultant,
or an in-house engineer. (Data on heating degree days and outdoor
design temperature are provided in Appendix C of HUDs Utility
Allowance Guidebook. More information on this publication
is available in the Resources
section.) The efficiency of the heating system can be estimated
based on the age and type of system. Although there is no standard
specified by the regulations, PHAs frequently establish an indoor
temperature of 72 degrees F for family units and 75 degrees F
for elderly units.
Water. The energy requirement for hot water is estimated using
an engineering calculation. One calculation is done for each allowance
category. The following inputs are needed:
temperature of the cold water;
temperature of the hot water;
number of gallons per month reasonably consumed by a
efficiency of the hot water heating system; and
Btus per fuel unit.
temperature of the cold water can be estimated based on the geographical
region. Maintenance staff can measure the temperature of the hot
water at the tap. If the temperature at the tap is lower than
the temperature in the hot water heater because of storage or
distribution losses, this difference will be accounted for in
an accurate estimate of the system efficiency. The number of gallons
per month can be based on standard consumption levels. The efficiency
of the hot water heating system depends on the age and type of
system. If the hot water heating system involves an extensive
distribution system or a storage tank, estimating the system efficiency
is a more complicated task because of storage and distribution
heat losses and should be performed by a licensed professional
The energy requirement for cooking is estimated using standard
The energy requirement for lighting is estimated by multiplying
the wattage of each light bulb by the number of hours the average
household would have the lights on.
The energy requirement for refrigeration is determined using
in-house information on the annual energy consumption of the refrigerators
provided in the dwelling units. Refrigerators manufactured during
the last decade have labels that provide this information.
Appliances. The energy requirement of miscellaneous appliances
can be estimated using standard consumption tables available from
the local utility.
Some PHAs provide an allowance to cover the reasonable utility
requirements of laundry. For example, the energy requirements
of clothes washers are estimated based on the wattage of the washer
and how often it is used.
Air Conditioning. Some PHAs provide an allowance to cover
the reasonable utility requirements of air conditioning. The energy
requirement for air conditioning is determined based on the wattage
of the air conditioner and how often it is used. PIH does not consider energy used for air conditioning as an allowable expense. See the
Utility Allowance Air Conditioning Fact Sheet.
Water. A household's water consumption requirement depends
on whether water-saving devices have been installed and is determined
using standard consumption levels.
the utility allowances derived from the engineering methodology
are not linked to past patterns of resident consumption, a PHA that
switched to this method from the consumption-based methodology might
experience a significant increase or decrease in the percentage
of resident households whose actual consumption exceeds their allowance.
a PHA finds that a large percentage of its residents have consumption
levels that exceed the allowance developed under the engineering-based
methodology, the PHA will want to re-examine its assumptions about
consumption levels to make sure that they are not too strict and
that any excess consumption is within the residents' control to
avoid. As one approach to evaluating the reasonableness of the allowances,
PHAs can compare the allowances derived under the engineering method
with those calculated under the consumption-based method. (This
is fairly straightforward if the PHA was previously using the consumption-based
the re-examination suggests that the engineering-based allowances
that were initially calculated are too low, the PHA can go back
and make adjustments in the assumptions used for calculating the
individual utility/end-use consumption levels (such as in the number
of loads of laundry per week, etc.) to provide more reasonable allowances
of the Engineering-Based Methodology
energy requirements of an "energy-conservative household"
can be estimated using this methodology. By focusing on
what consumption levels should be, this method promotes
do not need to be recalculated every year. Allowances should
be recalculated periodically, however, to account for gradual
changes in equipment and appliance use and efficiency. They
should also be recalculated whenever major changes are made
to the developments.
PHA does not need to obtain actual consumption data for
its residents to use this methodology.
of the Engineering-Based Methodology
PHAs must have certain technical information available,
such as heat loss calculations, efficiency of appliances
and equipment, and weather data.
must make assumptions about what is reasonable consumption.
allowances are not linked to actual consumption and may
be far off from actual consumption patterns.
the consumption-based methodology, the PHA uses actual utility data
on past consumption by its residents to establish utility allowances.
These data are in the form of billing records (where utilities are
individually metered) or checkmeter records (where utilities are
checkmetered). The first step in establishing allowances with the
consumption-based methodology is to specify the allowable and non-allowable
end-uses. The PHA then needs to decide on the timeframe that its
historic consumption data will span.
section will describe two different approaches that a PHA can take
in defining the timeframe of its consumption data:
Rolling Base. Many PHAs use a three-year rolling base of data
to calculate allowances. Every year, new consumption records are
added to the database, and consumption records from the oldest
year are removed. With this approach, the PHA must recalculate
allowances every year.
Database, Normalized for Weather. An alternative approach,
which may be used when an allowance is provided for space heating,
is to use a fixed database of consumption information from one
or more years, adjusted for the effects of weather using local
weather information. When this approach is taken, the PHA
does not need to obtain consumption data every year.
the PHA needs to develop allowance categories that group dwelling
units according to factors that affect consumption requirements.
are then established through the following process:
the consumption data
the data into allowance categories
the data and checking the statistical validity of the data sets
the "typical" consumption for each allowance category
the data for any non-allowable end-uses (if such consumption has
not already been removed from the data)
consumption allowances to dollar allowances.
the Consumption Data. The first step in establishing allowances
with the consumption-based methodology is to collect the consumption
data. In the case of individually metered utilities, PHAs obtain
consumption records from the local utility. Generally, PHAs must
present a release form signed by the resident for each billing record.
Where utilities are checkmetered, the consumption data are records
of checkmeter readings that the PHA makes on a routine basis. PHAs
that provide allowances for more than one utility (for example,
electricity, gas, and water) must collect consumption data for each
of those utilities.
the Data into Allowance Categories. Consumption data are then
grouped according to the allowance categories developed by the PHA. Each
allowance category should have one data set.
the Data and Checking for Statistical Validity. These are two
distinct but related activities, which are both concerned with ensuring
that the data set (i.e., the sample of consumption records) can
provide a good approximation of the typical utility consumption
experience of all units within the allowance category being studied. This
is a critical step in the use of the consumption-based method. To
improve the quality of the consumption data being used for its calculations,
a PHA will generally want to "clean" the data by deleting
dwelling unit utility records that are atypical or inaccurate because
of vacancies, estimated readings that are not corrected for by subsequent
actual meter readings, and/or non-allowable end-uses.
the variation in the levels of consumption among units in an allowance
category is high, however, a large sample size (i.e., data on a
lot of the units in the allowance category) may be necessary in
order to achieve statistical validity. If this is the case, then
the PHA may not have enough extra data available to be able to drop
the units with vacancies or non-allowable end-uses, etc., entirely
from its sample; instead, the PHA may need to make adjustments in
these data to allow their inclusion as part of the allowance calculations.
the Typical Consumption for Each Allowance Category. Once statistical
validity is confirmed, the PHA determines the "typical"
usage for each allowance category. The typical usage is determined
by finding the point of central tendency. Both the mean and
the median are points of central tendency.
reasonableness of the calculation of typical consumption using the
consumption-based methodology depends on the selection of proper
allowance categories, the quality of the consumption data, and on
whether the data set was statistically valid.
after an PHA has derived an accurate estimate of a typical (whether
mean or median) consumption level, however, the PHA must still decide
whether the standard for the "energy-conservative household"
should be set at that level. For example, if the mean (average)
is used as the standard, then in all probability a sizable percentage
of resident households will have consumption above this level; the
PHA needs to ask itself whether the "excess consumption"
of these other households was actually wasteful and within the residents'
ability to control. If the answer to either part of this question
is "no," then the PHA should consider establishing the
allowances at some level above the mean (average) consumption figure.
of the Consumption-Based Methodology
This methodology is familiar to most PHAs.
For smaller PHAs with a homogeneous housing stock and readily-available
consumption data, this methodology may be simpler than the
allowances have a direct link to actual consumption.
of the Consumption-Based Methodology
methodology does not provide insight into what proportion
of usage may be attributed to wasteful consumption, so there
is no guarantee that the average consumption for a given
allowance category is representative of an "energy-conservative household."
When the three-year rolling base approach is used, consumption
data must be obtained every year and allowances must be
Where utilities are individually metered (resident-paid),
obtaining the consumption data from the local utility can
be a burdensome process.