Here is an example of this type of phase-in:
Year One
Current Utility Allowance
$90
Decrease in First Year
40%
New Calculated Utility Allowance
$54
Year 1 Utility Allowance
$76
With a phase-in cap of 15% each year, the new capped utility allowance is $76 ($90 – (90*.15)). This is the utility allowance that gets implemented in Year 1.
Year Two
Second Year UAF (applied to calculated, uncapped new utility allowance)
+2%
New Actual Utility Allowance
$55
$54 + (54*.02)
Tenant’s Second Year Capped Utility Allowance
$65
$76 – (76*.15)
The utility allowance that gets implemented in Year 2 is $65 even though the calculated utility allowance is $55.
Year Three
Third Year UAF (applied to calculated, uncapped new utility allowance)
+2%
New Actual Utility Allowance
$56
$55 + (55*.02)
Tenant’s Third Year Utility Allowance
$56
Implement the actual calculated utility allowance as it is less than 15% lowerthan the previous year’s utility allowance.
In this example, the phase-in occurs over two years of the cycle (baseline year, plus first factor-adjusted year). In each of the factor-adjusted years, the factor is applied to the previous year’s calculated utility allowance (i.e., what the utility allowance would have been if there were not a cap put on it because of the requirement to phase it in). After that, there is a new baseline and phase-in requirements no longer apply.
Any year there is a decrease in the utility allowance, tenant notification must be provided.