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The Process of Converting Customers from Oil to Gas

Oil to gas conversion programs are the next big thing in the real estate industry in NYC. The City has banned the use of #6 oil in apartment and commercial buildings. Those owners who are grandfathered in may continue to use No. 6 oil, but if an owner requires a building department permit to change, modify or upgrade their existing equipment, the City will force the owner to convert to a cleaner burning fuel. So the answer is to be proactive and to take advantage of NYSERDA and Con Ed incentive programs while the funds are still available. This process is as follows:

  1. MEMO-Cogen, Inc. will arrange for a building owner to provide us with the buildings' oil bills. Our (or the owner's) plumber surveys the premises in order to provide Con Edison with a load letter to determine the quantity of gas the building will consume. This is done to figure out the size of the service lateral that Con Ed will have to construct when called upon to deliver gas from their pipeline to the premises;
  2. Con Ed's Construction Department will prepare an estimate for the cost of providing the service lateral to the building;
  3. The plumber will estimate the cost of installing new gas piping and providing the following equipment:
    1. Gas train and gas piping
    2. Sleeve through building wall connecting Con Ed's service lateral with building gas piping
    3. New gas-fired burner
    4. New high-efficiency gas-fired furnace for domestic hot water only (for summertime use)
  4. When all of the costs are known, a complete estimate will be prepared for presentation to the leasing company;
  5. Leasing company will prepare a quotation for a 5 year lease; Owner will provide financials to Bank for credit approval;
  6. Upon owner acceptance of the leasing terms and conditions, a contract will be signed between the contractor, the Owner and the Bank;
  7. The leasing terms will be provided to the gas ESCO who will be supplying natural gas to the building. The Owner will receive a fixed-cost gas supply contract at a certain price per therm (for example, $.70 / therm) from the ESCO. Hypothetically, the owner is scheduled to use 50,000 therms per year for his gas supply. If the total cost of the gas conversion is $150,000, the cost to the Owner will be $150,000 / 60 months, which is $2,500 + interest. The Owner is using app 4,166 therms per month @ $.70 / therm = $2,916. Added to this will be $2,500 in P&I for a total invoice to the Owner of $5,416.
  8. The Owner pays the ESCO his check for $5,416. The ESCO forwards the $2,500 to the Bank.
  9. The Bank has extra security for its loan because it is being collateralized two ways, through the UCC filing against the building and through the gas bill. No building owner will ever default on his gas supplier when the gas furnishes heat and hot water to his tenants.
  10. The exciting part of this is the incentive payment: NYSERDA and Con Ed will pay a substantial percentage of the cost of the conversion. When computed over a 5 year payment cycle, it will be possible to create positive cash flow for the Owner. After system start-up, the NYSERDA and Con Ed will write a check to the Owner . This money can be used to make other energy efficiency upgrades to his building, thereby further leveraging the benefits of this program.