H.687

Introduced by   Representatives Brooks of Montpelier and Kitzmiller of Montpelier

Referred to Committee on

Date:

Subject:  Schools; energy performance contracting

Statement of purpose:  This bill proposes to authorize school districts to finance energy conservation improvements through performance contracting;  it creates a pilot project through which four schools may receive up to $250,000.00 each in state aid as an incentive to make the improvements.

AN ACT RELATING TO ENERGY PERFORMANCE CONTRACTING IN SCHOOLS

It is hereby enacted by the General Assembly of the State of Vermont:

Sec. 1.  ENERGY PERFORMANCE CONTRACTING; AUTHORIZATION; PILOT

(a)  Definitions.  As used in this section:

(1)  “Cost-saving measure” means any facility improvement, repair, or alteration, or any equipment, fixture, or furnishing to be constructed or installed in any facility that is designed to reduce energy consumption and operating costs or to increase the operating efficiency of facilities for their appointed functions and that is cost effective.  Cost-saving measures include, but are not limited to, one or more of the following:

(A)  Procurement of low-cost energy supplies of all types, including electricity, natural gas, and water.

(B)  Insulation of the facility or systems within the facility.

(C)  Installation of storm windows or doors, caulking,

weather-stripping, multi-glazed windows or door systems, heat-absorbing or heat-reflective glazed and coated window and door systems, additional glazing, reductions in glass area, and other window and door system modifications that reduce energy consumption.

(D)  Installation of automated or computerized energy control systems.

(E)  Modification or replacement of heating, ventilation, or air conditioning systems.

(F)  Modification or replacement of lighting fixtures to increase the energy efficiency of the lighting system.

(G)  Improvements to indoor air quality.

(H)  Installation of energy recovery systems.

(I)  Installation of cogeneration systems that produce steam or forms of energy, such as heat and electricity, for use primarily within a building or complex of buildings.

(J)  Modification of existing day-lighting systems or installation of new systems.

(K)  Modification or installation of renewable energy and alternate energy technologies.

(L)  Implementation of building operation programs that reduce operating costs, including computerized programs, training, and other similar activities.

(M)  Installation of steam trap improvement programs that reduce operating costs.

(N)  Installation of devices that reduce water consumption.

(O)  Any additional facility infrastructure improvement that produces energy and operational cost savings, improves safety, significantly reduces energy consumption, or increases the operating efficiency of the facility for its appointed functions and is in compliance with applicable state and local building codes.

(2)  “District” shall mean a district or independent school eligible for assistance under 16 V.S.A. § 3447.

(3)  “Energy and operational cost-savings” means any expense that is eliminated or decreased on a long-term basis as a result of any cost-saving measure taken by a qualified energy service company or a qualified provider, but does not include merely shifting personnel costs or similar short-term cost‑savings.

(4)  “Performance contract” means a contract between the district and a qualified energy service company or qualified provider for evaluation, recommendation, and implementation of one or more cost-saving measures.  A performance contract may be structured as either:

(A)  A guaranteed energy savings performance contract, which shall include, at a minimum, the design and installation of equipment, and, if applicable, operation and maintenance of any of the measures implemented; and guaranteed annual savings which must meet or exceed the total annual contract payments made by the district for such contract, including financing charges to be incurred by the district over the life of the contract; or

(B)  A shared savings contract, which shall include provisions mutually agreed upon by the district and the qualified provider or qualified energy service company as to the negotiated rate of payments based upon predicted energy and operational cost-savings and a stipulated maximum energy consumption level over the life of the contract.

(5)  “Person” means any individual, partnership, association, corporation, or other public or private entity.

(6)  “Qualified energy service company” means a person with a record of established projects or a person with demonstrated technical, operational, financial, and managerial capabilities to implement performance contracts.

(7)  “Qualified provider” means a person who is experienced in the design, implementation, and installation of energy efficiency and facility improvement measures and who has the ability to secure necessary financial means to support energy savings guarantees and the technical capabilities to ensure such measures generate energy and operational cost-savings.

(b)  Authorization.  Any district may enter into a performance contract with a qualified provider or qualified energy service company to reduce energy consumption or operating costs.  Cost-saving measures implemented under such contracts shall comply with state or local building codes.  Any district may implement other capital improvements in conjunction with a performance contract provided the measures implemented to achieve energy and operational cost-savings are a significant portion of the overall project.

(c)  Selection of qualified provider or qualified energy service company. 

(1)  Request for qualifications.  As the first step in choosing a qualified energy service company or a qualified provider, the district shall issue a request for qualifications.  The district shall review the qualifications submitted, giving consideration to the following:

(A)  Experience in design, engineering, installation, maintenance, and repairs associated with performance contracts.

(B)  Experience in conversions to a different energy or fuel source, so long as it is associated with a comprehensive energy efficiency retrofit.

(C)  Experience in post-installation project monitoring, data collection, and reporting of savings.

(D)  Overall project experience and qualifications, management capability, ability to access long-term financing, experience with projects of similar size and scope, and other factors determined by the district to be relevant and appropriate.

(2)  Request for proposals.  Based upon its consideration of the submitted qualifications, the district shall select up to three qualified providers or qualified energy service companies to receive a request for proposals.  Each selected person shall prepare a cost-effective feasibility analysis in response to the request for proposals, upon consideration of which the district shall select a qualified energy service company or a qualified provider to engage in final contract negotiations.  Factors to be considered in this final selection shall include contract terms, comprehensiveness of the proposal, comprehensiveness of cost-saving measures, experience, quality of technical approach, and overall benefits to the district.

(3)  Financial grade audit and contract execution.  The person selected pursuant to this subsection shall prepare a financial grade energy audit which, upon acceptance, shall be part of the final performance contract executed with the district.  If after preparation of the financial grade energy audit the district decides not to execute a performance contract, the district shall pay the qualified provider or qualified energy service company for costs incurred in preparing such financial grade energy audit; if the district decides to execute a performance contract, the costs of the financial grade energy audit shall be part of the costs of the performance contract.

(d)  Installment payment and lease-purchase agreements.  A district may enter into a performance contract structured as an installment payment contract or lease-purchase agreement for the purchase and installation of cost-saving measures.  Financing implemented through a person other than the qualified provider or qualified energy service company is authorized.

(e)  Payment schedule and savings.  Each performance contract shall provide that all payments between parties, except obligations on termination of the contract before its expiration, shall be made over time and that the objective of the performance contracts is implementation of cost-savings measures and energy and operational cost savings.

(f)  Term of contract.

(1)  A performance contract, and payments provided under the contract, may extend beyond the fiscal year in which the performance contract became effective, subject to the appropriation of moneys for costs incurred in future fiscal years.  The performance contract may extend for a term not to exceed 25 years.  The allowable length of the contract may reflect the useful life of the cost saving measures.

(2)  A performance contract may provide for payments over a period of time not to exceed deadlines specified in the performance contract from the date of the final installation of the cost-saving measures.

(g)  Allocation of obligations.  Subject to appropriations, each district shall allocate sufficient moneys for each fiscal year to make payment of any amounts payable by the district under performance contracts during that fiscal year.

(h)  Monitoring and reports.

(1)  During the term of each performance contract, the qualified energy service company or qualified provider shall monitor the reduction in energy consumption and cost savings attributable to the cost-saving measures installed pursuant to the performance contract, and shall, no less frequently than annually, prepare and provide a report to the district documenting the performance of the cost-saving measures.

(2)  The qualified provider or qualified energy service company and district may agree to make modifications in calculating savings based on any of the following occurrences:

(A)  Subsequent material changes to the baseline energy consumption identified at the beginning of the performance contract.

(B)  Changes in utility rates.

(C)  Changes in the number of days in the utility billing cycle.

(D)  Changes in the total square footage of the building.

(E)  Changes in the operational schedule of the facility.

(F)  Changes in facility temperature.

(G)  Material changes in the weather.

(H)  Material changes in the amount of equipment or lighting used at the facility.

(I)  Any other change which reasonably would be expected to modify energy use or energy costs.

(i)  Contingency Provisions.  Performance contracts shall include contingency provisions in the event that actual savings do not meet predicted savings.

(j)  Pilot project. 

(1)  The general assembly finds that it is desirable to encourage districts to enter into performance contracts to implement cost-saving measures by permitting a district to retain a higher percentage of its energy and operational cost-savings during the term of the contract.  Accordingly, during fiscal year 2005, the department of buildings and general services, in consultation with the department of education and the school energy management program of the Vermont superintendents association, may designate up to four pilot projects to receive funding pursuant to this section (“Project Grant”).

(2)  A district that intends to enter into a performance contract and desires to receive a Project Grant shall submit a written application to the commissioner of buildings and general services on or before September 1, 2004, which shall:

(A)  Specify the need for and purpose of the project, including details of the cost-saving measure or measures proposed.

(B)  Provide details concerning the qualifications of the person selected from among the proposals submitted under subdivision (c)(2) of this section.

(C)  Provide detailed information concerning the energy and operational cost savings projected to result from the proposed performance contract.

(D)  Provide detailed information concerning the amount and schedule of payments to be made to the person selected from among the proposals submitted under subdivision (c)(2) of this section.

(E)  Provide any other information the commissioner deems necessary for consideration of the application.

(3)  The commissioner of buildings and general services shall choose no more than four districts to receive Project Grants from among those districts that submit a timely and complete application, based upon consideration of the application under the department’s best management practices for performance contracting.  Information regarding the criteria under which the commissioner shall review the applications shall be available to districts in advance of the September 1 submission deadline. 

(4)  On or before October 1, 2004, the department shall award a Project Grant of up to $250,000.00 each to no more than four successful districts, provided that no grant shall exceed the total payment that would be due to the qualified energy service company or qualified provider, less interest, if the entire amount due from the district under the terms of the performance contract were paid in one installment. 

Sec. 2.  ENERGY PERFORMANCE CONTRACTING; PILOT PROJECT GRANTS; ONE-TIME APPROPRIATION

(a)  There is appropriated the sum of $1,000,000.00 from the education fund in fiscal year 2005 to the department of buildings and general services for the energy performance contracting grant pilot program created in Sec. 1 of this act. 

(b)  Any funds appropriated by this section and not disbursed by the commissioner of buildings and general services by the end of fiscal year 2005 shall revert to the education fund.