PA Act 57 Energy Solutions PA Department of Public Welfare Introduction to Performance Contracting and Commonwealth Of Pennsylvania

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PA Act 57 Energy Solutions PA Department of
Public Welfare Introduction to Performance
Contracting and Commonwealth Of Pennsylvanias
Guaranteed Energy Savings ProgramJanuary 15,
2004Larry F. Myers, PE, CEMPenn State
Facilities Engineering Institute
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Point of Contact

• DGS Bureau of Engineering Architecture
• Tom Rados, PE
• Assistant Director
• Provides Authorization for a facility to
  administer a GESA project. Oversees the program
  on behalf of DGS.
• Penn State Facilities Engineering Institute
• Larry F. Myers, PE, CEM
• Energy Management Consultant
• Assist the Executive Agencies of the Commonwealth
  of Pennsylvania with energy procurement and the
  Guaranteed Energy Savings Program.

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Importance of GESA to Commonwealth of Pennsylvania
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Cost Savings Potential For Guaranteed Energy
Savings Projects

• Current Annual Utility Expenditures
• 90,000,000 / year
• Assume 20 Savings
• 18 million / year
• 10-Year Cumulative Dollar Savings
• 180 million
• Note This is simple Go No Go test that an
  ESCO will use to determine their interest in your
  project.
• For Example
• Office Building has 1,000,000 Annual Utilities
• 20 Savings 200,000 over 10 years
  2,000,000 Project

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WHAT IS AN ESCO?

• An ESCO, or Energy Service Company, is a business
  that develops, installs, and finances projects
  designed to improve the energy efficiency and
  maintenance costs for facilities over a ?10 year
  time period. ESCOs generally act as project
  developers for a wide range of tasks and assume
  the technical and performance risk associated
  with the project. Typically, they offer the
  following services
• These services are bundled into the project's
  cost and are repaid through the dollar savings
  generated.

• develop, design, and finance energy efficiency
  projects
• install and maintain the energy efficient
  equipment involved
• measure, monitor, and verify the project's energy
  savings and
• assume the risk that the project will save the
  amount of energy guaranteed.

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WHY USE PERFORMANCE CONTRACTING

• Excessive utility costs
• Strong potential for significant savings
• Typical Causes Lighting (hardware operation),
  Oversized or Inefficient Motors, Excessive Air
  Infiltration, Lack of Efficient Operations (Night
  Setback, Occupancy Sensors)
• Limited access to capital resources
• Lengthy project funding cycles
• Competition with other capital and service needs
• Inadequate, aged, or faulty equipment
• Frequent repairs required / growing backlog of
  deferred maintenance
• Persistent complaints concerning comfort /
  lighting
• Underfunded maintenance budget / high costs
• Limited staff resources/expertise
• Limited staff to bid and manage all phases of
  project
• Inadequately trained, high turnover, excessive
  overtime

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BENEFITS OF USING PERFORMANCE CONTRACTING

• More budget dollars available for core business
• Decreased repairs and lower maintenance costs
• Improved operational efficiency reduced energy
  costs
• Performance guarantees / persistent long-term
  energy savings
• Improved building comfort conditions
• Improved health of occupants
• Less absences and loss time illnesses
• Better environment gtgt more productivity
• Financing can be made available quickly
• ESCOs package all services in single contract /
  single source of accountability
• Technical Operational training opportunities
• Local subcontractors are utilized benefiting the
  businesses in the local community

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Other Considerations
           
 

• Not a Low Bid (first cost) procurement process
• Can get quality products
• Lowest life-cycle costs
• Incentive is on quality performance
• Reduced Risk
• Known cash-flow over contract term
• Improved compatibility through integrated
  analysis, design construction
• Guarantee reduces the risk of savings erosion
  over time
• Current training for facilities staff
• Comprehensive capital improvements that addresses
  IAQ unique to high density populations
• Reduced bacteria, allergens, or contaminants
  through better IAQ
• Reduced potential for liability problems
• Reduced deterioration of books, paper records,
  and electronic equipment
• Support for environmental initiatives
• Optimum lighting for visual performance
• Low noise levels optimized operation, improved
  air distribution systems
• Control of temperature and humidity levels
• Access to the natural environment day lighting
  and air exchange
• Control of system commissioning, material
  out-gassing, and chemical exposure

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ESCO Physical Plant Experience

• Air Distribution
• Boilers
• Chillers
• Cogeneration
• Control Systems
• Distributed Generation Technologies
• Distribution Transformers
• Energy Management Systems
• HVAC Products and Services
• Lighting Controls
• Lighting and Electronic Ballasts

• Measurement and Monitoring
• Motors
• Power Monitoring
• Power Quality Products
• Recycling
• Reflectors
• Software Services
• Thermal Storage Systems
• Variable Speed Drives
• Water Conservation Programs
• Windows, Doors, and Insulation

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Typical ESCO Services

• Building Certification
• Commodity Risk Management
• Commodity Procurement
• District Heating and Cooling
• Electric Power and Gas Marketing and Brokering
• Energy Consumption Reduction
• Financing
• Hazardous Waste DisposalIndoor Air Quality
  Assessment and Amelioration

InstallationMeasurement and Verification of
Energy Consumption and Efficiency MeasuresNew
Energy SupplyOperations and MaintenancePower
Quality AssuranceTotal Facility and Asset
ManagementTraining and ConsultingWater and
Sewage Management
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Projects IncludeMaintenance
Most performance-based energy efficiency projects
include the maintenance of all or some portion of
the new equipment over the life of the contract.
Customer has reduced maintenance costs Customer
enjoys reduced energy costs Maintenance Staff
receives specialized training Cost is folded into
the financing
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Projects IncludeRemoval and Disposal of
Hazardous Materials
Included in the ancillary services provided in a
typical performance-based energy efficiency
contract are the removal and disposal of
hazardous materials from the customer's facility.

Magnetic ballasts with PCBs Fluorescent light
tubes that contain traces of mercury Heating,
air conditioning, and ventilation systems may
involve the removal of asbestos
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Projects IncludeWork for local contractors
vendors
New jobs are created, not only within the ESCOs,
but through the use of contractors and through
the many firms involved directly and indirectly
in supporting energy efficiency projects.
Customer has input in the selection of
subcontractors Customer has input into the
materials supplied
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STANDARD ESCO SERVICES

• Investment grade energy audit
• Structure pay from savings program
• Sources of project financing
• Project design engineering services
• Equipment bidding/acquisition
• Construction management and equipment
  installation
• Project commissioning

• Guaranteed performance for life of contract
• Ongoing equipment maintenance services
• Savings measurement and verification and project
  monitoring
• Extensive training for facility personnel
• Rate negotiation technical assistance
• Access to available incentive programs

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GUARANTEED ENERGY SAVINGS ACTExample of Work
Performed

• Defined ECMs (Energy Conservation Measures)
• Insulation
• Storm windows and doors
• Energy control systems
• HVAC system replacements or modifications
• Lighting
• Energy recovery systems
• Cogeneration systems
• Measures reducing operating costs based on life
  cycle cost analyses

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KEY PROVISIONS OF THE GUARANTEED ENERGY SAVINGS
ACT

• Procurement Process Competitive sealed proposal
  (RFP)
• Contract Provisions
• Amount of savings in any year shall be guaranteed
  to the extent necessary to make payments under
  the contract during that year
• Written guarantee that annual energy cost savings
  will meet or exceed the cost of energy
  conservation measures

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KEY PROVISIONS OF THE GUARANTEED ENERGY SAVINGS
ACT (continued)

• Contract Provisions (continued)
• Payments may be made over a period of time not to
  exceed ten years
• Must provide for termination due to
  non-appropriations (a governmental requirement).
• Allows use of operating, utilities, or capital
  expenditure funds
• Allows installment payments

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GESA Standard Process Flow
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Commonwealth of PA Qualified ESCOsSee contact
information on next slide

• Abacus Engineered Systems
• Alliant Energy Integrated Services
• Ameresco Energy Services
• Building Controls and Services
• CLT Efficient Technologies Group
• CMS Viron Energy Services
• Custom Energy
• Energy Systems Group
• First Energy Solutions

• Honeywell
• Johnson Controls
• Noresco
• PPL Energy Services
• Sempra Energy Solutions
• Siemens Building Technologies
• The Trane Company
• Vestar

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Mark Webb, P.E., CEM Abacus Engineered Systems, Inc. 4431 North Front Street Suite 100 Harrisburg, PA 17110-1709PHONE [phone] ext. 27 FAX [phone] (toll free) maw_at_abacus-engr.com Richard Kohrs Ameresco Energy Services 50 Front Street Suite 201 Newburgh, NY 12550 PHONE [phone] FAX [phone] rkohrs_at_ameresco.com Kenneth J. Swan Building Controls and Services, Inc. 4 Peuquet Parkway Tonawanda, NY 14150 PHONE [phone] FAX kswan_at_bcsco.com
Troy Geanopulos CLT Efficient Technologies Group, LLC 61 Arch Street Suite 102 Carnegie, PA 15106 PHONE [phone] FAX troyg_at_cltetg.com Gene Dassing CMS Viron Energy Services 14 Hatfield Street Caldwell, NJ 07006 PHONE [phone] FAX [phone] gdassing_at_viron.com Tom Hawes Cogenex Corporation 2003 Renaissance Boulevard King of Prussia, PA 19406 PHONE [phone] FAX [phone] thawes_at_alliantenergyisco.com
Joe Hudak Custom Energy 9 Quail Court Export, PA 15632 PHONE [phone]FAX [phone] joeh_at_customenergy.com Doug Tischbein Energy Systems Group 5420 W Southern Avenue Suite 407 Indianapolis, IN 46241 PHONE [phone] FAX [phone] dtischbein_at_energysg.com Scott Ferguson FirstEnergy Solutions 1115 Limekiln Pike Ambler, PA 19002 PHONE [phone] FAX [phone] fergusonsc_at_firstenergycorp.com
Keith G. Altemare, C.E.M. Honeywell 1005 South Bee Street Pittsburgh, PA 15220-3406 PHONE [phone] FAX [phone] keith.altemare_at_honeywell.com Cheryl Desmond Johnson Controls, Inc. 3909 Hartzdale Drive Suite 902 Camp Hill, PA 17011 PHONE [phone] FAX [phone] Cheryl.a.desmond_at_jci.com Randall R. Clark Noresco 4 Allegheny Center 9th Floor Pittsburgh, PA 15212 PHONE [phone] FAX [phone] rclark_at_noresco.com
Linda S. Miller PPL Energy Services Holdings, LLC c/o McClure Company PO Box 1579 Harrisburg, PA 17105-1579 PHONE [phone] FAX [phone] lsmiller_at_pplweb.com Jim Curnyn Sempra Energy 581 Main Street 8th Floor Woodbridge, NJ 07095 PHONE [phone] FAX [phone] jcurnyn_at_semprasolutions.com Richard Madeira Siemens Bldg. Technologies 5060 C Ritter Road Suite 8 Mechanicsburg, PA 17055 PHONE [phone] Ext. 133 FAX [phone] richard.madeira_at_siemens.com
Barb Johnson The Trane Company -AMS 4831 White Bear Parkway St. Paul, MN 55110 PHONE [phone] FAX [phone] bjohnson_at_trane.com David Robb VESTAR Park West Two, Suite 400 2000 Cliff Mine Road Pittsburgh, PA 15275-1008 PHONE [phone] ext. 207 FAX [phone] drobb_at_vestar.net
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GESA Small ESCO Process Flow
Total Annual Utilities lt 175,000
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General Procurement Procedures

• Agency selects project site(s)
• Agency requests DGS approval to issue RFP
• Agency issues Request for LOIs to pool of
  qualified ESCOs
• Facilitator available for questions
• Project site data provided
• Agency receives LOIs from interested ESCOs
• Agency reviews qualifications and LOIs of
  interested ESCOs
• Written AFQ submissions
• Client references
• LOI Submission
• Agency evaluates ESCOs and selects 3 ESCOs to
  receive the RFP

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General Procurement Procedures (continued)

• Agency issues RFP to the 3 selected ESCOs
• Conduct site visits
• Agency receives RFP responses
• Agency conducts evaluation
• Written proposals
• Client references
• Oral interviews
• Agency compiles and generates evaluation rankings
• Agency selects Project ESCO
• (Note No costs have been incurred by the agency
  to this point)
• Agency enters into Investment Grade Audit
  contract with Project ESCO
• Upon acceptance of the IGA, the agency negotiates
  and executes an Energy Performance Contract with
  the Project ESCO

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Letters of Interest (LOI)Response to Request for
Letters of Interest

• Introduces project to all Qualified ESCOs
• Attachment A Technical Facility Profile
• General Facility Data
• Operating Data
• Physical Data
• Energy Systems Data
• Possible Improvement Opportunities
• Energy and Water Consumption Data
• Is Project consistent with the ESCOs business
  plan?
• Interested ESCOs should
• Display an interest in the project
• Address the Technical Facility Profile
• Describe experience with similar facilities
• Describe experience with similar scope of work
• Describe other value-added services

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THE RFPObtain a proposal from the 3 best
qualified ESCOs

• Defines the scope of the project
• Describes how the procurement process will be
  conducted

• Establishes the project schedule
• Defines the evaluation criteria
• Experience, Management, Technical, Financial
• Highlights special project terms and conditions
• Technical Contractual

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The Proposal Response to RFP

• KEY INFORMATION REQUESTED
• PRELIMINARY TECHNICAL PROPOSAL
• Qualifications Project Team Members
• Project Work Plan and Milestones
• Specific Training Provisions
• Proposed Project Financing
• Annual Report

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The Proposal Response to RFP(continued)

• Preliminary Technical Site Assessment
• Energy Baseline Calculation Methodology
• Projectspecific Commissioning Plan
• Procedure for Calculating Energy and Cost
  Savings
• Equipment Maintenance Plan

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The Proposal Response to RFP (continued)

• Subcontractor Information
• Corporate Background
• Technical Qualifications
• Financial References
• Project-specific Savings Measurement and
  Verification Plan

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The Proposal Response to RFP (continued)

• PRELIMINARY TECHNICAL AUDIT REPORT
• Identification of Preliminary ECMs
• Technical data and assumptions used in this
  analysis
• Methods used to develop baseline consumption
• Detailed energy and operational cost savings
  calculations
• Projected unit energy savings
• Methods for calculating and documenting
  operational cost savings

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The Proposal Response to RFP (continued)

• PRELIMINARY COST PROPOSAL
• ESCO Fees as a Percentage of Hard Costs
• Investment Grade Energy Audit
• Design Engineering Fees
• Construction Management
• System Commissioning
• First-year Training Fees
• Annual Service Fees
• Construction Financing
• Contingency Costs

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The Proposal Response to RFP (continued)

• PRELIMINARY COST PROPOSAL (continued)
• ESCO Preliminary Project Cash Flow Analysis
• Financed Project Costs and Term
• Annual Interest Rate
• Construction Months
• Utility/Fuel Escalation Rate
• Annual Fees Escalation Rate
• ESCO Fees
• Total Cost Savings (utility/fuel, operational)
• Guaranteed Cost Savings
• Financing Payment
• Net Savings

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PSFEI Assistance

• PSFEI offers the following help
• Host a discussion / presentation of the GESA
  procurement process
• Assist with the development of project goals and
  objectives
• Assistance with the understanding and preparation
  of standard DGS documents
• Aid the project facilitator with the process
  steps
• Assist with the preliminary assessment of the
  interested ESCOs
• Assist with the evaluation of submitted proposals
• Review Investment Grade Audits
• Maintain performance history of completed projects

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Web Based Assistance

• Penn State Facilities Engineering Institute
• Standard documents for executive agencies
• List of active projects in executive agencies
• Links to energy related web sites
• https//fei.psu.edu/ESCO/
• Department of General Services
• http//www.dgs.state.pa.us/dgs/cwp/view.asp?a3Q
  113676dgsNav5054
• Governors Green Government Council (GGGC)
• Guaranteed Energy Savings Performance Contracting
  for School Districts, Local Government Agencies,
  and Other Political Subdivisions
• http//www.gggc.state.pa.us/building/mainrenovar.h
  tm
• National Association of Energy Service Companies
  (NAESCO)
• http//www.naesco.org/
• University of Buffalos UB Green Web Site
• http//wings.buffalo.edu/ubgreen/

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Review of Proposal Forms

• Proposal Submission Documents
• Attachment A
• 1.0.1 ESCOs ECM Summary Form
• 1.0.2 ESCOs Projected Annual Energy Savings Data
  Form
• 1.0.3 ESCOs Projected Annual Energy Savings Data
  Form in MMBtus
• 1.1 ESCOs Team Member Qualification Form
• 1.6 ESCO Project History and Client Reference
  Form
• Attachment A-1
• A-1 Subcontractors Qualifications Form
• Attachment B
• B-1 ESCOs Proposed Project Cost Form
• B-2 ESCOs Preliminary Annual Cash Flow Analysis
  Form

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Commonwealth Technical Assistance Resources

• https//fei.psu.edu/ESCO/GESA_Home.asp
• GESA Information
• DGS Web Site
• Program Description
• Standard Documents
• Active Projects
• ESCO Industry Links

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http//www.naesco.org/
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Project Status

• Delegated
• DGS has assigned project to agency
• Request for LOI
• Agency notifies all ESCOs
• LOI Review
• Agency reviews ESCO Letters of Interest
• RFP Pending
• Agency has selected 3 ESCOs to work with. RFP
  not available.
• RFP Issued
• RFP has been sent to the 3 ESCOs

• Proposal Review
• Proposals have been received from selected ESCOs.
• IGA Pending
• One ESCO has been selected to perform an
  Investment Grade Audit.
• Contracting
• Investment Grade Audit has been performed. The
  agency is negotiating the completion of the
  project.
• Construction
• Project is being performed.
• Repayment
• Project is complete and Guaranteed Savings are
  being accumulated.

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• Question Answer Session