ENERGY PERFORMANCE CONTRACTING (EPC) VABSO Conference May 19, 2016 Roanoke, VA

GOVERNOR’S EXECUTIVE ORDER 31 SIGNED OCTOBER 16, 2014 15% REDUCTION BY 2017 USING 2009 -2010 BASE STRONGLY ENCOURAGED TO USE EPC STATE AGENCIES AND PUBLIC BODIES ADMINISTRATION SERIOUS ABOUT ENERGY CONSERVATION BUDGET REDUCTIONS EPC IS A GREAT FINANCIAL TOOL DMME SUPPORT

WHAT IS EPC? LEGISLATION PASSED IN 2001 PERFORMANCE CONTRACTING ALLOWS YOU TO GREEN/UPGRADE YOUR FACILITIES AND PAY FOR THE UPGRADES BY REALLOCATING EXISTING ENERGY DOLLARS USING A SELF FUNDING PROJECT FREES UP EXISTING $ TO FUND OTHER UNFUNDED NEEDS IN THE DISTRICT

OVERVIEW OF IMPLEMENTING AN EPC ENERGY PERFORMANCE CONTRACT (EPC) DGS CONTRACT # DEB20110611 FOR ALL PUBLIC BODIES 18 PRE-QUALIFIED ESCO’S AMERESCO, ABM Building Services, Atlantic Constructors, Bay Electric Co. Inc., Comfort Systems USA, Constellation New Energy, Energy Systems Group, Honeywell, Johnson Controls, Lifecycle Construction Services, NORESCO, PEPCO, SIEMENS, Schneider Electric, Southland Industries, TRANE, US Energy Management, Wendel Energy Services LLC, CONTACT 4 OR MORE FROM THE PRE-QUALIFIED POOL ESCO’S MEET WITH YOU TO DISCUSS THE PROJECT (KICK OFF MEETING) ESCO’S PERFORM A “BACK OF THE ENVELOPE” (BOE) AUDIT INTERVIEW AND DISCUSS THE BOE AUDITS SELECT 1 OR MORE ESCO’S AND BEGIN NEGOTIATIONS. SELECT 1 ESCO AS YOUR ENERGY PARTNER AND SIGN THE MOU FOR THE INVESTMENT GRADE ENERGY AUDIT (IGA) UPON COMPLETION OF IGA YOU DEFINE THE PROJECT FROM THE AUDIT NEGOTIATE THE ENERGY CONTRACT DMME SUPPORT THROUGHOUT THE PROCESS **LOCAL DOLLARS CAN BE APPLIED TO PROJECT

OVERVIEW OF IMPLEMENTING AN EPC SUPPORT FROM ALL LEVELS OF MANAGEMENT CONSIDER YOUR FINANCING OPTIONS INSURE SAVINGS MEET PAYMENT SCHEDULE PUBLIC BODIES: TAX EXEMPT LEASE PURCHASE VA SAVES PROGRAM VIA VRA (LIMITED FUNDS) VIRGINIA RESOURCES AUTHORITY (VRA) BONDS THROUGH GOVERNING AUTHORITY THIRD PARTY FINANCING OUTRIGHT PURCHASE

OVERVIEW OF IMPLEMENTING AN EPC LOCAL $ CAN BE USED TO “BUY DOWN” THE PROJECT, CODE STATES: “Such contract may also provide capital contributions for the purchase and installation of energy conservation and facility and technology infrastructure upgrades and modernization measures that cannot be totally funded by the energy and operational savings.” CIP OUT OF POCKET CAPITAL $

OVERVIEW OF IMPLEMENTING AN EPC OTHER THAN “ENERGY UPGRADES”, CODE STATES: Such contract may also provide capital contributions for the purchase and installation of energy conservation and facility and technology infrastructure upgrades and modernization measures that cannot be totally funded by the energy and operational savings. Security issues Other technological/modernization measures VOIP

IMPLEMENTING AN EPC DEFINE YOUR PROJECT WHAT ARE YOUR GREATEST NEEDS? OLD CHILLER THAT IS INEFFICIENT STEAM LINE LEAKS OR STEAM TRAPS HIGH ENERGY COSTS (ELECTRIC, HEATING FUELS, ETC.) HIGH WATER CONSUMPTION BUILDING ENVELOPE… ROOFS, WINDOWS, ETC. OLD BOILERS OLD HVAC EQUIPMENT FREQUENCY DRIVES LIGHTING CONTROLS

IMPLEMENTING AN EPC AFTER YOU HAVE DEFINED YOUR NEEDS AND GIVEN CONSIDERATION TO HOW YOU WOULD LIKE TO FINANCE YOUR PROJECT… SELECT A MINIMUM OF 4 CONTRACTORS TO PERFORM THE BOE AUDIT. REFER TO CONTRACTOR QUALIFICATIONS AND SELECT BASED ON PROJECT NEEDS. CONTRACT ALLOWS FOR SOLE SOURCE UNDER CERTAIN CONDITIONS CONTROLS

IMPLEMENTING AN EPC SELECT THE FACILTIES TO INCLUDE IN THE BOE SET UP A KICK-OFF MEETING WITH THE SELECTED ESCO’S NEED TO PROVIDE THE ESCO’S CERTAIN INFORMATION ON FACILITIES IN BOE FACILITY DATA UTILITY DATA (3 YEARS OF ACTUAL BILLS) MAINTENANCE HISTORY

IMPLEMENTING AN EPC TEMPLATES GENERIC EMAIL INVITATION GENERIC BOE AGENDA REQUEST FOR THE BOE FORM SAMPLE EVALUATION CRITERIA SAMPLE SCORING SHEET MOU FOR INVESTMENT GRADE AUDIT (IGA) SAMPLE CONTRACT

IMPLEMENTING AN EPC SET A DEADLINE FOR THE BOE, REMEMBER THE MORE TIME YOU ALLOW THE BETTER THE INFORMATION (TYP 8-12 WEEKS) ESCO’S WILL SCHEDULE INDEPENDENT VISITS TO YOUR SITE FORM A SELECTION COMMITTEE WHEN YOU RECEIVE THE BOE’S ALLOW TIME FOR THE COMMITTEE TO REVIEW THEM AND SET UP YOUR INTERVIEWS DMME SUPPORT BOE PROCESS IS AT NO COST

IMPLEMENTING AN EPC NEGOTIATE WITH 1 OR MORE ESCO’S & SELECT A PARTNER BASED ON ABILITIES, APPROACH, LONGTERM PARTNERSHIP, HISTORY, ETC IMPORTANT TO REMEMBER YOU ARE SELECTING A PARTNER AT THE BOE, NOT THE FINAL PROJECT SET UP A KICK OFF MEETING TO DISCUSS THE “IGA AND WATER SAVINGS AUDIT” THE COST OF THE IGA CAN BE ROLLED INTO YOUR ENERGY CONTRACT (COST CAN BE NEGOTIATED) ESCO MUST MEET 85% OF SAVINGS/110% OF COST AS SUBMITTED IN BOE (FOR SAME SCOPE)

IMPLEMENTING AN EPC ALLOW TIME FOR YOUR IGA ONCE THE IGA IS COMPLETE, MAKE SURE EVERYONE IS IN AGREEMENT WITH THE APPROACH TO THE PROJECT & PROJECTED COST AVOIDANCE YOU SELECT THE PROJECT FROM THE IGA! INERACTIVE SPREADSHEET WITH ECMS/FIMS IF EVERYONE IS IN AGREEMENT PROCEED WITH THE ENERGY CONTRACT. IF YOU CHOSE NOT TO PROCEED THE ESCO IS PAID FOR THE NEGOTIATED COST OF THE IGA IF THEY MET THE “85%/110%” THRESHOLDS. DMME MUST REVIEW & APPROVE THE PROJECT FOR STATE AGENCIES. SAME REVIEW FOR PUBLIC BODIES AT NO COST DMME SUPPORT THROUGHOUT THE PROCESS

CONSTRUCTION Construction can typically take anywhere from 6 months to 18 months depending upon the complexity of the project. PROJECT MANAGEMENT! Weekly/BIWEEKLY status meetings Safety, security, Documentation, etc There will be “bumps” along the way as with most construction projects ESCo PAID THROUGH SCHEDULE OF VALUES FOR COMPLETED WORK

CONSTRUCTION DMME OFFERS HIGH LEVEL PM SUPPORT Attend progress meetings (weekly, biweekly, monthly) Insure ESCO is meeting project scope Available to review any submittals/changes Available to work with ESCO and owner if disputes arise Some onsite support as availability allows Available for reconciling punch list items Review warranty & project sign off with owner Cannot be “feet on the ground” project manager

CONSTRUCTION Contact info: Walid Daniel, pe, cem walid.Daniel@dmme.Virginia.gov (804) 513-0071

Measurement and Verification (M&V) International Performance Measurement and Verification Protocol (IPMVP) M&v OPTIONS DEPEND UPON THE SCOPE OF WORK MATCH OPTION TO RISK, YOU DO NOT WANT TO PAY $50 TO VERIFY $10 IN AVOIDED COSTS. Yearly reconciliation required by code DMME SUPPORT/REVIEW

EXISTING PROJECTS Over 51 SCHOOL SYSTEMS have done an epc, many with multiple phases Totals run OVER $266 million through 2015 Statewide totals for all contracts total over $785 million through 2015

EXISTING PROJECTS Bedford County Schools Bristol Schools Buena Vista Public Schools Charlotte County Schools Dinwiddie County Public Schools Fairfax County Public Schools Franklin City Schools Frederick County Schools Fredericksburg Public Schools Greene County Public Schools Greensville Public Schools Hopewell Schools Isle of Wight Schools King & Queen County Schools Middlesex County Schools Newport News Public Schools Norfolk Public Schools Norton County Schools Orange County Schools Page County Public Schools Pittsylvania County Schools PC Portsmouth City Public Schools Prince Edward County Public Schools Prince William County Schools Roanoke City Public Schools Shenandoah County Public Schools Southampton County Public Schools Stafford County Public Schools VA Beach Public Schools Warren county public schools Wise county public schools

PITFALLS EARLY SUPPORT TOP TO BOTTOM UNDERSTAND GUARANTEE IS IN UNITS OF ENERGY NOT $ AVOIDED COSTS VS. SAVINGS FULLY VETTED SCOPE MASTERPLAN/RENOVATIONS Analyze buildings scheduled for renovation before including them in project WARRANTIES… WHAT/WHEN IT STARTS/HOW LONG TRAINING COMMISSIONING/RETRO-COMMISSIONING SCHEDULES FOR COMPLETION AND PENALTIES FOR NOT MEETING THEM M&V TO MATCH SCOPE PROPER DOCUMENTATION FOR EVERYTHING! UNDERSTAND YOUR RESPONSIBILTIES VS. THE ESCO’S RESPONSIBLITIES

SUCCESSES ROOFTOP UNITS AHU’s VRF SYSTEMS ROOFS CEILINGS PLUMBING UPGRADES FAN COIL UNITS VFD’S CONTROLS BOILERS/STEAM SYSTEMS/TRAPS CHILLERS WINDOWS SECURITY VOIP HUMIDITY ISSUES/”M” WORD LIGHTING/OCCUPANCY SENSORS OVERALL IMPROVEMENT OF THE WORKING ENVIRONMENT VERY MINIMAL INTTERUPTION TO THE WORKPLACE Epc Projects have led to a decrease in backlog of Maintenance Reserve & Capital Improvement needs

PARTING THOUGHTS FULL, Open book pricing No change orders/FIRM FIXED PRICING AND “TURN KEY PROJECT” If the esco misses something, they pay. No change orders Overhead and profit/audit fees are negotiated You select equipment, no low bid You HELP select subcontractors IF YOU HAVE A VIABLE PROJECT YOU ARE ALREADY PAYING FOR An ESPC BY PAYING THE UTILITY COMPANIES $ THAT COULD BE REALLOCATED TO UPGRADE YOUR FACILITIES. AVOIDED ENERGY COSTS ARE BONDED AND GUARANTEED BY YOUR ESCO IF THE ESCO DOES NOT MEET SAVINGS THE ESCO WRITES A CHECK DMME SUPPORT THROUGHOUT THE PROCESS AT NO COST

Q & A?

CONTACT INFO STATE AGENCIES & PUBLIC BODIES CHARLIE BARKSDALE CEM, CEP, CMVP, CEA, BEP, CSDP, VCCO UTILITIES & PERFORMANCE CONTRACTING MANAGER DEPARTMENT OF MINES, MINERALS & ENERGY CHARLIE.BARKSDALE@DMME.VIRGINIA.GOV 804-840-1689