Let the utility companies pay for your next energy saving retrofit

by Judith Zopp
Glenview Park District

The Illinois Department of Energy and Natural Resources (ENR) will help agencies select a retrofit company to install energy-saving components that will save districts a certain amount of utility costs. The capital costs for the retrofits are paid from the savings. It's guaranteed.

Energy Performance Contracting Program

Illinois ENR provides staff to assist governmental institutions with technical and legal expertise to investigate the feasibility of energy saving potential for your facilities. The technical staff of ENR will meet with you, tour your facilities and discuss whether or not there seems to be energy savings potential. If the potential exists, the concept of performance contracting is developed.

Performance contracting provides clients with energy savings as well as upgraded and updated equipment. In most cases, all project costs are recovered from the savings generated by the retrofits. The installing company also assumes responsibility for managing the energy savings because its fees are dependent upon the savings generated. That's why it has been named "performance contracting."

Request for qualifications

Illinois ENR assists you in the preparation of a document called the Request For Qualifications (RFQ). This document is sent to numerous energery service companies asking them to

submit its qualifications and interest in designing, financing, installing, and maintaining energy improvements on a performance basis. This RFQ can be customized to meet your own unique ideas and needs. This document will also include all of the technical data regarding each facility in the proposal.

The RFQs are received by you within 60 days and provides information regarding each company's financial, legal and technical approach to the energy proposals. It also provides the company's qualifications including personnel, past and current projects and references to contact. Project history data and company background are also included. A sample contract is included in the RFQ package along with site specific information. This is a brief review of the proposed energy retrofits and potential projected savings for each facility in your RFQ. It also provides a sample audit for information and comparison purposes only.

Evaluation of the RFQs

This is perhaps the most time consuming portion of the process. It is intended to match your needs with the best energy company suited to meet those needs. At least two people in the district will be assigned to evaluate each company's RFQ. Read the RFQ and list any pertinent questions. Complete a written, formal evaluation sheet for each company. The evaluation sheets are provided by ENR.

Call at least four references on each company from prior project experiences and complete the formal client reference evaluation sheets. In the meantime, personnel from ENR will also be participating in this evaluation process so as to remove prejudices or biases. Eventually all of the evaluation sheets are tabulated on the computer at ENR and various graphic composite weighting charges are produced. Based on the composite evaluations, the top two or three energy retrofit companies are chosen for interviews.

The interview process

Each of the chosen companies are asked to bring in its top personnel for an interview. Personnel from the district, as well as personnel from ENR, have a series of preset and open-ended questions to clarify the qualifications, experience, abilities, and compatibilities of each of the companies. Once again, evaluation sheets are completed for each company and the results are computerized by ENR.

At the end of the detailed and exhaustive process, your district can weigh all of the results.

Audit agreement

This phase involves entering into an agreement with your chosen company to proceed with a detailed audit of the various energy consumption components within your facilities as well as past consumption records. The end result centers around three key factors.

First, the production of a detailed energy audit which will provide a plan for energy retrofits and the projected guaranteed annual utility savings. Second, if the audit does not produce certain guaranteed savings, then no further action is required and no money exchanges hands. Third, if the audit provides information regarding retrofit recommendations and you wish to take this information and proceed on your own, a prearranged fee is paid and the audit and recommendations are yours to proceed with as you wish.

A district can decide whether or not to proceed with the project without any further commitment. What other guaranteed savings programs allows this many decision-making levels?

Energy Service Agreement (ESA)

One of the final steps to negotiate is an agreement with the chosen company to proceed with the recommended retrofits on the following basis: all debt payments for the capital costs, regardless of how financed, will be guaranteed to be paid with dollars saved by lowered utility bills. If this monthly debt amount is not saved, the energy company will pay the difference between the savings and debt payment; savings, after the retrofit capital debt payments are paid, are split between the company and the district. This means positive cash flow to the district. This fee is called the contingent service fee and also covers all maintenance fees for newly installed equipment.

Lest we get too complicated at this point, there are various packages and options which can be discussed, negotiated or varied depending on individual circumstances. The primary factors are: debt payments are guaranteed to be paid out of the utility savings; maintenance and monitoring of the newly installed equipment is paid out of any additional savings after the debt is satisfied; the options for financing the capital portion of the retrofits are varied. The energy company can finance the capital costs. You can choose a third party lender or the district can finance the capital costs in-house. Each option offers varied interest rates. Generally, the debt is calculated over a 10-year period or less so as to provide manageable debt payments for the guaranteed portion of the Energy Service Agreement (ESA). Most importantly, all options of the ESA are negotiable.

ENR also provides a "grant'' of money for the processing as it has been delineated. This grant can be used to subsidize legal reviews, engineering reviews or to offset staff costs throughout the process.

The final phases

Nearing the end of the process, the ESA is negotiated and agreed upon and work commences. Eventually the work is completed, the warranty period ends, and savings calculations begin and the debt for energy retrofits are paid out of the utility savings. It's guaranteed. Now what can be better than that?

About the author

Judith Zopp is the assistant general superintendent of the Glenview Park District with administrative responsibilities for the golf course, tennis club, ice center, pools, business and personnel departments. She has been active with the facility management section since 1976 and most recently as past section director. Zopp has an undergraduate degree in public administration and a master's degree in marketing.