Date:	October, 2005
To:	All Community Management Association Clients
From:	Bill Cirkus
Re:	Energy Update

As I‘m sure you’ve been following, the effects of Hurricanes Katrina and Rita have been playing havoc with energy costs. We get reminded of it every time we fill up our gas tanks. The natural gas and oil markets are also in turmoil, with everyone waiting for the dust to settle. The energy markets were high before the hurricanes, but this has now added another layer of uncertainty, due to the damage to the oilrigs and refineries in the Gulf region. There is no way to predict when the markets will return to normal, whatever normal is, but one thing is certain. We are all in for substantially higher energy costs for the upcoming winter. For those buildings with central heating systems, depending on your pricing in 2004-2005, you can be looking at increases of 50-100% in energy costs for 2005-2006. For those buildings that qualified for and took advantage of alternative suppliers of the gas commodity and delivery (basis), you have and will continue to save over public utility rates. Since public utilities are permitted to request rates hikes monthly based on actual costs, buildings buying all of their energy from them will most likely have even more volatile rates and costs.

The effects of the hurricanes and higher energy costs will most likely not be limited to heating costs. Much of electricity is produced by the public utilities burning natural gas or oil. This is bound to show up in rate increases for electricity. Insurance costs, which spiked last after 9-11 and were just starting to stabilize in the last year or so, will likely be affected as the claims from the hurricanes are adjusted. Postal rates are now scheduled to go up 2 cents as a result of higher fuel costs to deliver the mail. If you think about all of the services and materials that your building receives, there are virtually none that escape the effects of fuel costs. From gas and insurance for the landscapers, snow plowers and other contractors, shipping costs for supplies, to petroleum materials in supplies such as trash bags, nothing is left untouched.

I’m sorry to paint this gloomy picture, but the time is now to start preparing your owners for these higher costs. We are all bound to be asked why costs are going up much higher than in past years. The sooner we sensitize everyone, hopefully the less amnesia will take over. Our challenge over the next several years will be to make the systems in the buildings run as efficiently as possible, and to look for creative sources of income for the association.

We will continue to keep you updated on the events affecting your building.