1. 2012 P UBLIC H OUSING E NERGY C ONVENING : M OVING EPC S F ORWARD Energy Performance Contracting Policy Updates

2. A GENDA Public Housing Priorities Recently Addressed Policy Issues New Policy Guidance Policy Items Currently In Process How Do We Move EPCs Forward?

3. C URRENT P RIORITIES Preserve the Portfolio of Affordable Units Preserve the Portfolio of Affordable Units  More than 60,000 units are offline or uninhabitable due to backlog of capital needs Increase the Number of Families Served Increase the Number of Families Served  High Priority Performance Goal 2 Increase the Supply of Energy Efficient PH Units Increase the Supply of Energy Efficient PH Units  High Priority Performance Goal 4 3

4. C URRENT C APITAL N EEDS $26 billion capital needs backlog $26 billion capital needs backlog $4 billion Related to Energy $4 billion Related to Energy $3.4 billion annual accrual $3.4 billion annual accrual Challenges: Challenges: Insufficient Appropriations Insufficient Appropriations 4

5. C OMMITMENT TO SUSTAINABILITY Strategic Plan (2010-2015) High Priority Performance Goal 4 The EPC program is a major player in green retrofit activity across HUD’s programs Expanding access of EPC incentives to more agencies

6. EPC A CTIVITY 1987 - 2012

7. EPC I NVESTMENTS ( YEARLY AVERAGE PER - UNIT )

8. S TRENGTHENING THE P ARTNERSHIP Improve HUD’s Responsiveness General policy questions can be directed to: PIH_ EPC_ Policy@hud.gov Communicating Policy Updates Building a Defensible/Auditable Program

9. R ECENT P OLICY U PDATES Section 30 Refinancing EPCs Rate Reduction Incentives

10. S ECTION 30 APPROVAL PROCESS Necessary when there’s a security interest or other encumbrance on public housing property and Ownership resides with the PHA Improved Internal Coordination Section 30 Approval NLT 5 days from EPC approval Ensure Declarations of Trust are in place and updated early in the process to minimize delays

11. R EFINANCING EXISTING EPC S Historically low interest rates Potential Benefits may include: Greatest financial reward under the Frozen Rolling Base and Resident-Paid Utility incentives Ability to modify contract and/or add an additional phase Caveats 75% Rule for FRB/RPU still applies, so before refinancing an EPC PHAs need to weight options between adding a 2 nd phase or shortening the term of their EPC

12. RRI S WITH R EVERSE A UCTIONS & PPA S In deregulated environments, competitive procurement required Special and significant efforts that achieve discounts may qualify, examples: Reverse Auctioning Systems for procuring utilities may result in an RRI - PHA must show that the rates achieved represent a discount over that of a typical customer Power Purchasing Agreement for installation of on-site renewable/clean energy systems when a discounted utility rate is part of the contract PHAs should work with their Field Office and HQ to document savings

13. N EW P OLICY C LARIFICATIONS PHAS and EPC Debt EPC Extensions Marginal Rates

14. EPC D EBT AND PHAS PHAs deterred from new EPCs Parity with Capital Fund Financing Program debt There are 3 Financial Indicators Quick Ratio (QR) Sub-indicator Affected no current asset to offset current liability PHAs may appeal if it would impact their overall PHAS designation Objectively Verifiable Error Pursuing a permanent solution

15. C LARIFYING EPC EXTENSIONS PHAs that currently have an EPC with a HUD incentive term of less than 20 years can extend with new ECMs Noncompetitive extensions with a current ESCo - December 26, 2007 PHAs using competitive procurement processes can switch ESCos PHAs can always switch from ESCo-partnered to self- managed while extending

16. U SE OF MARGINAL RATES Two Approaches for estimating cost savings Average / Effective / Blended Rate Calculation Simple to calculate but can overestimate partially due to peak hours, inclusion of flat rates, and other factors Marginal Rate Calculation More complicated – takes into consideration more granular data including variance in rates over time Currently PHAs submit both calculations Increased IG scrutiny and properly estimating savings Seeking your Input as we examine the issue internally

17. P OLICY I SSUES FOR F EEDBACK Cross-Subsidized Incentives Baseline Adjustments

18. C ROSS -S UBSIDIZED I NCENTIVES PHAs are encouraged to maximize their EPC project Must address and provide technical guidance for how low payback ECMs are subsidized by high payback activities associated with a different EPC Incentive This “cross-incentive” pairing can create complex scenarios essential to maximizing your projects Next priority for providing viable policy and review solution

19. B ASELINE A DJUSTMENTS HUD allows baseline adjustments for changes in: weather (Heating Degree Days); occupancy; unit count or configuration; building usage; errors in PHA reported data to HUD; other corrections. PHAs work with local Field Offices to adjust baselines in existing EPCs Does this process work well? Are there hiccups? Should policy changes to what is allowed or not be considered?

20. M OVING EPC S F ORWARD How do we go green in EPCs?

21. C OUNTING R ENEWABLE / C LEAN E NERGY More PHAs are using on-site renewable / clean energy HUD 52722 captures energy consumption from these sources PHAs can receive Operating Fund Benefit, Rate Reduction Incentive, or EPC Incentive for use of on-site renewable / clean energy technology How else can HUD help encourage and document achievements in the area of on-site renewable / clean energy generation?

22. E NCOURAGING G REEN R ETROFIT A CTIVITIES ECMs are Physical Improvements that directly impact energy and water consumption Improvements that don’t decrease consumption but improve resident health, protect the environment, or enhance community prosperity (i.e. “green retrofit activities”) are being What green retrofit activities should be eligible within the scope of an EPC?

23. D EVELOPING T OOLS FOR D EEP G REEN R ETROFITS Deep energy & water retrofits (>35% savings) are a growing trend within other EPC programs Broaden retrofits to include other green retrofit activities (health, environment, prosperity) One tool that is being considered for PH is a Deep Green Retrofit RFP Template Other opportunities to help Public Housing go Deep Green?

24. Q UESTIONS & F EEDBACK