GUARANTEED ENERGY SAVINGS CONTRACTS Energy Savings Contracting: How to Increase Transparency and Reduce Costs

GUARANTEED ENERGY SAVINGS PRICE CONTRACT What is the Product of a Performance Contract? An Energy Services Company (ESCO) proposes a project that will save $100,000 per year for an initial investment of $1 million dollars. The $100,000 annual savings is guaranteed by the ESCO. The ESCO will implement various Energy Conservation Measures (ECMs) to accomplish this savings. The ESCO will allow you to finance the initial $1 million investment by financing $100,000 payments for 10 years. After that the savings are yours to keep.

GUARANTEED ENERGY SAVINGS PRICE CONTRACT What is the Product? The product that you are buying is the $100,000 per year energy savings You are now spending $100,000 per year to create efficiency as opposed to spending it on electricity and other utilities. But…

GUARANTEED ENERGY SAVINGS PRICE CONTRACT …what if? What if the ESCO can save the district $100,000 per year with a one time investment of $50,000 to implement building automation controls? Now the ESCO has met its contractual obligations, saved you $100,000 per year on your utility spend, collected $1 million from you, only invested $50,000, and reaped a profit of $950,000.

Key Difference Between Statute and the KPC Process GUARANTEED ENERGY SAVINGS PRICE CONTRACT Key Difference Between Statute and the KPC Process

GOALS FOR QUALIFIED PROVIDERS Reduce operating costs for Kentucky K-12 school districts Improve classroom environmental conditions Improve maintenance and operation of facilities Reduce carbon footprint and negative environmental factors Manage and complete the project within defined time schedule, approved budget and quality goals. To represent the best interests of the Owner

Ability to successfully implement the project SCHOOL DISTRICT PROPOSAL SCORING CRITERIA Ability to successfully implement the project Past performance with K-12 schools as evidenced by project results in last 10 years Technical Approach Level of detailed design being offered with a strong preference toward more detailed designs and equipment lists.

Pricing Approach SCHOOL DISTRICT PROPOSAL SCORING CRITERIA The willingness to follow OPEN BOOK PRICING approach without exception Fees for various services Overhead and profit level Willingness to guarantee “no change orders” within agreed to scope of work

Implementation Approach SCHOOL DISTRICT PROPOSAL SCORING CRITERIA Implementation Approach The reasonableness and effectiveness of the installation approach based on past customer experience. Support Approach The effectiveness of the on-going support and training being offered with preference given to timely support at a low cost.

Construction Cost Comparison (HVAC) Traditional Plan & Spec Process School District Price 63% overall price increase Architect Fees & Allowances (10%) $2,853,238 final price to School General Contractor markup (9%) $2,593,8531 price to School before Arch fees Mechanical Contractor markup (18%) $2,379,681 price to General Contractor Temperature Controls markup (15%) $2,016,679 price to Mech. Contractor Controls Installation Controls Equipment $1,753,634 cost – R S Means Data

Construction Cost Comparison (HVAC) Traditional ESCO Process KPC ESCO Process School Corporation Price ??% overall price increase School District Price 5% Profit Specific Scope with exact price to School prior to award. Fees are Fixed $???? final price to School ESCO OH & Profit (??%) ESCO Self performs professional tasks–eng, PM, controls5 $?? price to School Is ballpark without defined scope ESCO Selected without defined scope or price $1,753,634$1,753,634 cost $??? price to ESCO All Install Contractors All Equipment Mechanical Contractor markup (??%) Temperature Controls & Electrical markup (??%) $?? price to Mech. Contractor Controls Elect Install Controls Elec Equip $ cost

GUARANTEED ENERGY SAVINGS CONTRACTS Questions?

Sam Atkins Mark Ryles, AIA GUARANTEED ENERGY SAVINGS CONTRACTS Sam Atkins Mark Ryles, AIA sam.atkins@kedc.org mryles@ovec.org (606) 465-6572 Cell: (859) 227-4720 Kentucky Educational Development Corporation 904 Rose Road Ashland, KY 41102 (800) 737-0205 Ohio Valley Educational Cooperative P. O. Box 1249 100 Alpine Drive Shelbyville, Kentucky 40066 (502) 647-3533