ENERGY PERFORMANCE CONTRACTING (EPC)

GOVERNOR’S EXECUTIVE ORDER 31 SIGNED OCTOBER 16, % REDUCTION BY 2017 USING BASE STRONGLY ENCOURAGED TO USE EPC AND AT A MINIMUM PERFORM THE BOE 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

OVERVIEW OF EPC ENERGY PERFORMANCE CONTRACT (EPC) –DGS CONTRACT # DEB 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, –5 PHASES BOE TEA/IGA CONTRACT/FINANCING CONSTRUCTION M&V

OVERVIEW OF 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.” –OPERATIONAL $ –MAINTENANCE RESERVE –OUT OF POCKET –CAPITAL $ *USE OF $ TO BUY DOWN EPC PROJECTS IS BEING REVIEWED BY DPB AND THEY WILL BE ISSUING GUIDELINES IN THE NEAR FUTURE

OVERVIEW OF 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

OVERVIEW OF EPC DEFINE YOUR PROJECT –WHAT ARE YOUR GREATEST NEEDS? OLD, INEFFICIENT CHILLER 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

OVERVIEW OF EPC 5 PHASES –“BACK OF THE ENVELOPE” (BOE) –TECHNICAL ENERGY AUDIT/INVESTMENT GRADE AUDIT (TEA/IGA) –CONTRACT/SPECIAL TERMS & CONDTIONS & FINANCING –CONSTRUCTION –MEASUREMENT & VERIFICATION (M&V)

OVERVIEW OF EPC BOE PHASE SELECTING A PARTNER, NOT A PROJECT BOE IS PERFORMED AT NO COST 3 TO 6 MONTH TIMELINE OR LONGER DEPENDING UPON THE SCOPE SELECT FACILITES FOR THE BOE NEED TO PROVIDE THE ESCo's INFORMATION ON FACILITIES SELECTED FOR THE BOE –FACILITY DATA –UTILITY DATA (3 YEARS OF ACTUAL BILLS) –MAINTENANCE HISTORY

OVERVIEW OF EPC TEA/IGA PHASE –MEMORANDUM OF UNDERSTANING (MOU) IS NEGOTIATED AND SIGNED –ESCo PERFORMS THE AUDIT –AUDIT IS A DELIVERABLE –PROJECT IS DEVELOPED FROM THE RESULTS OF THE AUDIT –IF PROJECT MOVES FORWARD THE AUDIT FEE IS ROLLED INTO THE COST OF THE PROJECT –IF PROJECT DOES NOT MOVE FORWARD THE ESCo IS PAID THE NEGOTIATED AUDIT FEE –BCOM REVIEW OF FINAL SCOPE BEFORE GOING TO CONTRACT $2K TO $5K 21 DAY TURN AROUND

OVERVIEW OF EPC CONSIDER YOUR FINANCING OPTIONS –STATE GOVERNMENT: TREASURY (TRS) LINE OF CREDIT ESTABLISHED FOR EPC ESTABLISHED PROCEDURE AT TRS –PUBLIC BODIES: TAX EXEMPT LEASE PURCHASE VIRGINIA RESOURCES AUTHORITY (VRA) BONDS THROUGH GOVERNING AUTHORITY THIRD PARTY FINANCING OUTRIGHT PURCHASE

OVERVIEW OF EPC CONTRACT –CO7DB –CO9DB –SPECIAL TERMS AND CONDTIONS –OAG/LEGAL REVIEW –DMME REVIEW OF FINAL SCOPE & APPROVAL LETTER TO TREASURY –SAME REVIEW AND LETTER FOR PUBLIC BODIES –ESCO PROVIDES PERFORMANCE BONDS –CONTRACT IS SIGNED

OVERVIEW OF EPC CONSTRUCTION –6 TO 18 MONTHS DEPENDING ON SCOPE –ESCo OBTAINS REQUIRED PERMITS & BEGINS CONSTRUCTION –FINAL BCOM REVIEW OF SCOPE REQUIRING ENGINEERED DRAWINGS, ETC. ESCO OBTAINS REQUIRED PERMITS FOR THIS WORK –BECOMES CONSTRUCTION PROJECT –PROGRESS MEETINGS –ESCo IS PAID THROUGH SCHEDULE OF VALUES –SUBSTANTIAL COMPLETION M&V NORMALLY BEGINS THE FIRST OF THE MONTH FOLLOWING SUBSTANTIAL COMPLETION

OVERVIEW OF EPC MEASUREMENT & 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. –GUARANTEED ENERGY SAVINGS BOND PROVIDED EACH YEAR FOR ENERGY SAVINGS, NO O&M SAVINGS –YEARLY RECONCILIATION REQUIRED BY CODE –DMME SUPPORT/REVIEW

OVERVIEW OF EPC DOCUMENTS/TEMPLATES –GENERIC INVITATION –GENERIC BOE AGENDA –REQUEST FOR THE BOE FORM –FACILITY DATA FORM –SAMPLE EVALUATION CRITERIA –SAMPLE SCORING –MOU FOR TEA/IGA –CONTRACT/SPECIAL TERMS AND CONDITIONS –TREASURY FORMS –APPROVAL THRESHOLDS/GUIDELINES –ADD OTHER DOCUMENTS IF NEEDED

EXISTING PROJECTS OVER 66 AGENCIES/PUBLIC BODIES HAVE DONE AN EPC, MANY WITH MULTIPLE PHASES TOTALS RUN OVER $687 MILLION THROUGH 2014

PITFALLS EARLY SUPPORT TOP TO BOTTOM UNDERSTAND GUARANTEE IS IN UNITS OF ENERGY NOT $ ESCALATION RATES 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 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 EO 31 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