1. Are You Asking the Hard Questions about Performance Contracting?
OSFMA Conference 2003
OSFMA Conference 2003
April 9, 2003

2. Today’s Agenda Introductions Brief Overview 10 FAQ’s YOUR QUESTIONS!
OSFMA Conference 2003
April 9, 2003

3. ESPC Overview
ESPC is an innovative method to purchase energy efficiency improvements in buildings
A single procurement is used to purchase a complete package of services
Project financing of the entire projects so there are no up front costs
OSFMA Conference 2003
April 9, 2003

4. ESPC Overview
Projects are paid for from savings, and funds are provided by the District, Utility Rebates (PPF), BETC and/or SELP Loan Program.
How does it work?
ESCO guarantees that savings will meet or exceed annual payment to cover project costs
OSFMA Conference 2003
April 9, 2003

5. Benefits of ESPC
It allows energy project completion with little or no funding or experience
Streamlines the procurement process
Provides continuity
Projects are commissioned
Guaranteed savings
Shifts the risk from the owner to the ESCO
OSFMA Conference 2003
April 9, 2003

6. Basics of Performance Contracting
Energy Service Company (ESCO):
Identify and evaluate energy savings opportunities
Develop engineering design and specifications
Manage the project from design to installation
Arrange for financing
Train staff
Guarantee project cost, performance & savings
OSFMA Conference 2003
April 9, 2003

7. 10 Frequently Asked Questions
OSFMA Conference 2003
April 9, 2003

8. Why use the ESPC Program?
Most difficult question to answer
Reasons typically given for not using ESPC:
We have all the funding we need.
We have done or are doing everything.
ESPC must be more expensive.
We do not need an ESCO.
We do not want to borrow any funds.
OSFMA Conference 2003
April 9, 2003

9. What makes an ESPC Attractive to a School District?
Guarantees for Performance. Savings, Costs, etc.
Multiple Financing Options – Treat Projects as Investments
Everything is Negotiable – Custom Fit for each District’s Needs
Open Book Pricing
100% of Construction Savings Returned to School District
Proven, Successful Practice
OSFMA Conference 2003
April 9, 2003

10. How do I know if I am a Good Candidate?
High Energy Use Index or Cost per Square Ft.
Aged Equipment and Systems
Energy using equipment ready for replacement
Deferred maintenance problems or high maintenance costs
IAQ issues
Comfort problems
No funds to implement needed upgrades
No remodels for 5-10 years
OSFMA Conference 2003
April 9, 2003

11. What type of projects can be done?
Have an energy or efficiency component
Holistic approach that aggregates projects
Impact to energy use and/or client comfort
Projects include:
Lighting
HVAC
Water Conservation
Controls
Windows
Building Envelope
OSFMA Conference 2003
April 9, 2003

12. What type of projects can be done?
Salem Keizer Public School’s Projects
HVAC
Controls
Thermal Shell
Load/Demand Management
OSFMA Conference 2003
April 9, 2003

13. Isn’t Design/Bid/Build Cheaper?
Yes, sometimes D/B/B is cheaper!
Get what you pay for.
ESPC allows you to select based on value and life cycle, and not low bid!
Must compare apples to apples!
ESPC costs are turnkey
Direct comparisons demonstrate that ESPC is very competitive
OSFMA Conference 2003
April 9, 2003

14. What is covered in the project cost?
Construction Costs (including all subs)
Construction Management
ESCO’s Fees (including all engineering)
Payment and Performance Bonds
Turnkey project required to achieve guaranteed savings
OSFMA Conference 2003
April 9, 2003

15. What Services are offered by the ESCO?
Engineering, Design, Estimating, Construction Management, Commissioning, Verification
Single Point of Accountability
Guaranteed Maximum Cost & Savings
Long-term Partnership
OSFMA Conference 2003
April 9, 2003

16. Why do Measurement & Verification?
To determine the effectiveness of measures
Assures savings attributed to the project
What to do:
Must establish a baseline for comparison
Establish a M&V plan
Industry standards (Ashrae, IPMVP)
Measure & track savings & trends
OSFMA Conference 2003
April 9, 2003

17. What Funding Sources Can We Use?
SB1149 Funds
BETC
SELP Loan
Guaranteed Energy Savings
Hard O&M Savings
Mixing of school district funds and borrowed capital is allowed
Planning a bond/levy can be reduced with performance contracting
OSFMA Conference 2003
April 9, 2003

18. Salem-Keizer Public Schools Process
Meet with Purchasing Department
Homework – Workshops, Talk to Contractors, Other Customers
RFP/RFQ – Know What You Want
Interview Finalists
Negotiate Contract with Selected ESCO
Begin the Contract – IGA, Implementation, M&V
OSFMA Conference 2003
April 9, 2003

19. How do we get Started with an ESPC?
Call the Oregon Office of Energy
Or Visit their web site:
Different contract stages (Investment Grade Audit, Implementation and M&V
Template documents available
Pending Legislation SB3476
OSFMA Conference 2003
April 9, 2003

20. Kennewick School District
Fast Track Project (6 months from beginning to end)
Focused on Controls, Lighting and Power Factor Correction in 3 facilities
OSFMA Conference 2003
April 9, 2003

21. Kennewick School District
The Results
Under budget (~5% lower)
Installed before the end of estimated construction period
Higher Utility Rebate than Originally Estimated
KSD where able to select the contractors and equipment
OSFMA Conference 2003
April 9, 2003

22. Kennewick School District
The savings:
679,877 kWh/yr.
24,823 therms/yr.
158 kW/month
Totaling over $63,000 annually
Project is on track to exceed these savings
OSFMA Conference 2003
April 9, 2003

23. YOUR QUESTIONS!
OSFMA Conference 2003
April 9, 2003

24. Other FAQ’s - 1 What Should I Consider When Selecting an ESCO?
How does the District and ESCO work together?
What savings are used to determine cost-effectiveness?
When does a District pay for the Project?
How do savings get established?
What is an Investment Grade Audit?
How do I select and ESCO?
What are the differences between PC’s done before and ones done now?
OSFMA Conference 2003
April 9, 2003

25. Other FAQ’s - 2 What if the Guarantees are not met?
Can a School District use their own Funds?
What can we do under the ESPC Program?
How long does it take to develop a project?
Does the ESCO select the Vendors/Contractors?
How long are the savings monitored and guaranteed?
Why are the typical bid laws not applicable?
Is competitive pricing used?
When does a District pay for engineering fees and construction costs?
OSFMA Conference 2003
April 9, 2003

26. What is Guaranteed? Project Cost are at 100%
Utility Costs are up to 100%
Operations and Maintenance Savings are not typically guaranteed
Equipment Performance
Warranty Issue Resolution
OSFMA Conference 2003
April 9, 2003

27. How does a District Select an ESCO?
Ability to choose your own partners
Select from List or Interview firms based on their qualifications
The State Process meets the Competitive Selection required in 39.35
Once you select an ESCO all bidding requirements are met
OSFMA Conference 2003
April 9, 2003

28. What Should I Consider When Selecting an ESCO?
“ Is the company capable of being a Single-point of Accountability for the Long-Term?”
In-house engineering/design depth
Experience of key individuals assigned to your project
In-house construction/project management depth
In-house construction estimating group
Ability/experience to provide innovative solutions
Ability to provide ongoing support services, when required
Dedication to supporting and providing staff training
“Open-Book” Pricing, and ESCO fee flexibility!
OSFMA Conference 2003
April 9, 2003

29. What savings are used to determine cost-effectiveness?
Utility Cost Savings
Electrical, Water/Sewer, Gas, Waste
Hard Cost Operations and Maintenance Savings (direction of District)
No staff labor savings
Seasonal, Contract, or Overtime Labor can be considered
Avoided hard cost dollars are allowed
OSFMA Conference 2003
April 9, 2003

30. When does a District pay for the Project?
During the investment grade audit no invoices are submitted by ESCO.
Prior to project implementation payment terms are discussed.
District is not obligated to pay until project is complete and energy savings commence
ESCO may add construction period financing
OSFMA Conference 2003
April 9, 2003

31. How do savings get established?
Investment grade audit
Real data measurements and logging
Historical information
Accepted engineering practices
Reviewed by OOE and District
OSFMA Conference 2003
April 9, 2003

32. What if the Guarantees are not met?
Project Costs (Latent conditions)
Savings Guarantee is based on saved units of energy (Therm’s and kWh) not dollars
ESCO must make up the savings short fall typically on an annually basis
OSFMA Conference 2003
April 9, 2003

33. McKinstry / Energy Services Salem Keizer Public Schools
Thank you for your time...
QUESTIONS?
Betty Merrill
Oregon Office of Energy
Cam Hamilton
McKinstry / Energy Services
David Furr
Salem Keizer Public Schools
OSFMA Conference 2003
April 9, 2003