1. ENERGY PERFORMANCE CONTRACTS Field Office Staff Training November 17, 2010 Tedd T. Termunde, P.A Joseph E. Nemedi, F.A.

2. ENERGY PERFORMANCE CONTRACTS Field Office Training November 2010 ENERGY PERFORMANCE CONTRACTS Field Office Training November 2010 WHAT ARE THEY WHAT ARE THEY WHY AND WHEN TO CONSIDER AN EPC WHY AND WHEN TO CONSIDER AN EPC THE ROLE OF HUD AND THE FIELD OFFICE THE ROLE OF HUD AND THE FIELD OFFICE

3. WHAT IS AN EPC ? Both a Finance Technique and a Contractual Agreement. A Contractual Arrangement for Energy Saving: An agreement that provides for design, acquisition, installation, testing, operation, and - where appropriate - maintenance and repair of energy conservation measures in a building or a group of buildings. A Financing Technique that uses cost savings from reduced energy consumption to repay the cost of installing energy conservation measures. Normally offered by Energy Service Companies (ESCOs), the EPC financing technique allows the PHA/building users to achieve energy savings without upfront capital expenses. THE HA ENGAGES CONTRACTOR THE HA OBTAINS LOAN FROM A BANK

4. WHY AND WHEN WHY AND WHEN TO CONSIDER AN EPC TO CONSIDER AN EPC Major Renovation - complete heating and ventilating system repair - energy savings must be beneficial and substantial.

5. What To Consider In Using an EPC What To Consider In Using an EPC The need or desire to: Make capital energy improvements while preserving limited budget dollars Make capital energy improvements while preserving limited budget dollars Reduce their utility expenses Reduce their utility expenses Reduce repair and maintenance costs caused by inadequate, aging, or obsolete equipment Reduce repair and maintenance costs caused by inadequate, aging, or obsolete equipment Modernize building operations Modernize building operations Provide technical and operations training for building operating personnel Provide technical and operations training for building operating personnel Improve indoor air quality (IAQ) Improve indoor air quality (IAQ) Create incentives for ESCOs to develop highly efficient projects by linking their compensation to project savings Create incentives for ESCOs to develop highly efficient projects by linking their compensation to project savings Conserve energy and water resources and improve the environment Conserve energy and water resources and improve the environment

6. Typical Energy Conservation Measures (ECM) Appliances Appliances Water (toilets and other low flow fixtures) Water (toilets and other low flow fixtures) Lighting Lighting Domestic hot water and related controls Domestic hot water and related controls Heating, ventilation (and cooling) systems and related controls Heating, ventilation (and cooling) systems and related controls Windows Windows Fuel Switching Fuel Switching CHP (Combined Heat & Power, or cogeneration CHP (Combined Heat & Power, or cogeneration

7. What is an Energy Services Company (ESCO) What is an Energy Services Company (ESCO) An engineering firm that develops, finances, and installs projects designed to improve energy efficiency and maintenance costs for facilities. An engineering firm that develops, finances, and installs projects designed to improve energy efficiency and maintenance costs for facilities. Most states have enacted laws to govern EPC use Most states have enacted laws to govern EPC use ESCO’s required to provide a savings guarantee reducing the potential risk to the building owner/PHA and manager. ESCO’s required to provide a savings guarantee reducing the potential risk to the building owner/PHA and manager. If the guaranteed savings do not materialize, the ESCO is contractually liable to pay for any shortfall. This "reconciliation" is done annually. If the guaranteed savings do not materialize, the ESCO is contractually liable to pay for any shortfall. This "reconciliation" is done annually. Even in states without regulations an ESCO should always guarantee performance. Even in states without regulations an ESCO should always guarantee performance.

8. ENERGY PERFORMANCE CONTRACTS Field Office Training November 2010 ENERGY PERFORMANCE CONTRACTS Field Office Training November 2010 PHA COST RECOVERY METHODS METHOD 1: Add-on to Operating Subsidy for payment of the loan METHOD 2: Frozen Rolling Base for Energy Savings

9. METHOD 1: Add-On Subsidy METHOD 1: Add-On Subsidy PHA can request additional subsidy as an "add-on" to its total operating subsidy eligibility. This additional subsidy would be applied to amortizing payments for a loan contracted to finance energy-conservation improvements with a repayment period not to exceed 12 years. With HUDs approval of a waiver request the repayment period can be extended to 20 years. The add-on subsidy is often used to do straightforward retrofits such as lighting, refrigerators and other bulk purchases. PHA can request additional subsidy as an "add-on" to its total operating subsidy eligibility. This additional subsidy would be applied to amortizing payments for a loan contracted to finance energy-conservation improvements with a repayment period not to exceed 12 years. With HUDs approval of a waiver request the repayment period can be extended to 20 years. The add-on subsidy is often used to do straightforward retrofits such as lighting, refrigerators and other bulk purchases. METHOD 2: Frozen Rolling Base METHOD 2: Frozen Rolling Base This incentive freezes the 3-year rolling base utility allowance at the level of consumption before installation of the energy improvements. This incentive applies when payments by the PHA to an ESCO or third party financier are dependent on the amount of energy cost savings realized. The PHA retains 100 percent of the cost savings during the contract period, and at least 75 percent of these yearly profits are used to pay off the loan until it is fully amortized. This portion of the profits would be applied to amortizing payments for a loan contracted to finance energy- conservation improvements with a repayment period not to exceed 12 years. With HUDs approval of a waiver request the repayment period can be extended to 20 years. This incentive gives the PHA additional funds to use for energy-conservation improvements compared with the 3-year rolling base incentive. This incentive freezes the 3-year rolling base utility allowance at the level of consumption before installation of the energy improvements. This incentive applies when payments by the PHA to an ESCO or third party financier are dependent on the amount of energy cost savings realized. The PHA retains 100 percent of the cost savings during the contract period, and at least 75 percent of these yearly profits are used to pay off the loan until it is fully amortized. This portion of the profits would be applied to amortizing payments for a loan contracted to finance energy- conservation improvements with a repayment period not to exceed 12 years. With HUDs approval of a waiver request the repayment period can be extended to 20 years. This incentive gives the PHA additional funds to use for energy-conservation improvements compared with the 3-year rolling base incentive.

10. ENERGY PERFORMANCE CONTRACTS Field Office Training November 2010 Method 1 is simply the annual payment of the principal and interest that is due on the loan - generally paid over an ten to twelve year period. Method 1 is simply the annual payment of the principal and interest that is due on the loan - generally paid over an ten to twelve year period. Method 2 freezes the utility consumption (not the costs) at the base year level. This is the year that the EPC is completed. This would be the highest year of energy consumption. Method 2 freezes the utility consumption (not the costs) at the base year level. This is the year that the EPC is completed. This would be the highest year of energy consumption. The EPC would result is substantial energy savings. Therefore, the HA would save substantial amounts of money for energy and be allowed to retain all of the savings. HUD pays the energy costs to the HA based upon the highest consumption and the current rates. The cost savings are used to pay the loan. The EPC would result is substantial energy savings. Therefore, the HA would save substantial amounts of money for energy and be allowed to retain all of the savings. HUD pays the energy costs to the HA based upon the highest consumption and the current rates. The cost savings are used to pay the loan. HUD pays under either method as the loan payment is added to Operating Subsidy. The utility costs are also part of Operating Subsidy. HUD pays under either method as the loan payment is added to Operating Subsidy. The utility costs are also part of Operating Subsidy. All amounts in the Operating Subsidy are subject to Congressional Budgeting and pro ration. Therefore, HA may not receive 100% of the amount needed to pay the loan. All amounts in the Operating Subsidy are subject to Congressional Budgeting and pro ration. Therefore, HA may not receive 100% of the amount needed to pay the loan.

11. ENERGY PERFORMANCE CONTRACTS Field Office Training November 2010 THE ROLE OF THE FIELD OFFICE-HUD Statutory and Regulatory Compliance Statutory and Regulatory Compliance Financial Compliance Financial Compliance Contractual-Procurement Compliance Contractual-Procurement Compliance  Contract Review, Approval and Monitoring Process

12. ENERGY PERFORMANCE CONTRACTS Field Office Training November 2010 EPC HUD Regulations / Notices / Procedures 24 CFR 990.185 – HUD’s Financial regulations including energy incentives for EPC 24 CFR 990.185 – HUD’s Financial regulations including energy incentives for EPC 24 CFR 990.185 – HUD’s Financial regulations including energy incentives for EPC 24 CFR 990.185 – HUD’s Financial regulations including energy incentives for EPC Part 990 Final Rule Part 990.185 Final Rule (01-16-2009) Part 990 Final Rule Part 990.185 Final Rule (01-16-2009) Part 990 Final RulePart 990.185 Final Rule (01-16-2009) Part 990 Final RulePart 990.185 Final Rule (01-16-2009) 24 CFR 965 – HUD regulations on utility allowances, utility metering and EPC 24 CFR 965 – HUD regulations on utility allowances, utility metering and EPC 24 CFR 965 – HUD regulations on utility allowances, utility metering and EPC 24 CFR 965 – HUD regulations on utility allowances, utility metering and EPC 24 CFR 85.36 – HUD Procurement regulations 24 CFR 85.36 – HUD Procurement regulations HUD Procurement Chart HUD Procurement Chart HUD Procurement Chart HUD Procurement Chart HUD Field Office review Procedure – (February 2006) for Energy Performance Contracting HUD Field Office review Procedure – (February 2006) for Energy Performance Contracting HUD Field Office review Procedure – (February 2006) for Energy Performance Contracting HUD Field Office review Procedure – (February 2006) for Energy Performance Contracting PIH Notice 2009-16 – Guidance on Energy Performance Contracting PIH Notice 2009-16 – Guidance on Energy Performance Contracting PIH Notice 2009-16 – Guidance on Energy Performance Contracting PIH Notice 2009-16 – Guidance on Energy Performance Contracting

13. ENERGY PERFORMANCE CONTRACTS Field Office Training November 2010 THE ROLE OF THE FIELD OFFICE-HUD Review and Approval of the RFP Review and Approval of the RFP HUD Review Checklist 07-27-2010 HUD Review Checklist 07-27-2010 Review and Approval of the ESA Review and Approval of the ESA Field Office Capacity, Field Office Capacity, Energy Services Center Energy Services Center PIH – OFO Contractor Services PIH – OFO Contractor Services Tracking and Monitoring Tracking and Monitoring EPC Tracking Checklist J: Drive 5APH EPC Tracking Checklist J: Drive 5APH

14. ENERGY PERFORMANCE CONTRACTS Field Office Training November 2010 Energy Performance Contract Energy Performance Contract RFP - Technical Review HUD Review Checklist 07-27-2010 07-27-2010 See, Handout and J: Drive EPC Folder See, Handout and J: Drive EPC Folder

15. HUD EPC Review Process 11/10/2009 PHA submits an EPC to the HUD Field Office for review (Including amendments or changes to an existing contract) PHA submits an EPC to the HUD Field Office for review (Including amendments or changes to an existing contract) Field Office has available staff to perform review. Field Office has available staff to perform review. Field Office reviews ESA with support from HUD Energy Center Field Office reviews ESA with support from HUD Energy Center Energy Center has staff to review ESA Energy Center has staff to review ESA HUD Energy Center assigns ESA review to contractor. HUD Energy Center assigns ESA review to contractor. HUD Contractor reviews ESA HUD Contractor reviews ESA HUD Energy Center reviews ESA HUD Energy Center reviews ESA FO Director requests assistance from Energy Center FO Director requests assistance from Energy Center See. Handout and J Drive EPC Folder See. Handout and J Drive EPC Folder

16. ENERGY PERFORMANCE CONTRACTS Field Office Training November 2010 The Role Of The Field Office EPC TRACKING LOG- 5APH J: Drive EPC TRACKING LOG- 5APH J: Drive

17. ENERGY PERFORMANCE CONTRACTS Field Office Training November 2010 Questions Additional Resources http://www.hud.gov/offices/pih/programs/ph/phecc/eper formance/faq.cfm http://www.hud.gov/offices/pih/programs/ph/phecc/eper formance/faq.cfm http://www.hud.gov/offices/pih/programs/ph/phecc/eper formance/faq.cfm http://www.hud.gov/offices/pih/programs/ph/phecc/eper formance/faq.cfm EPC training opportunities EPC training opportunities The PHECC Web site has a list of events including trainings. The PHECC Web site has a list of events including trainings.Web siteWeb site