Energy Saving Improvement Programs aka: ESIP; ESCO; P.L. 2009, c. 4

1. Introducing… Energy Saving Improvement Programsaka: ESIP; ESCO; P.L. 2009, c. 4 Gordon Ball, Senior Procurement Specialist Division of Local Government Services

2. What ESIP is All About • Retrofitting public facilities with Energy Conservation Measures (ECM) without new capital investment • Savings from reduced energy use pays for the improvements = No New Money! • Applies to all government contracting units • Capital Referendums or ESIP? NJ Division of Local Government Services

3. ECM Categories: • Distributed generation (solar, wind, geo, bio…) • Major HVAC (capital) and minor HVAC (non-capital) • Energy efficiency, demand response equipment (C. 83) • Non-energy savings related (building envelope) • Future capital replacements • Standalone lighting improvements • New energy related capital improvements, i.e., new air conditioning installation in un-air conditioned facility • Must be funded separately from non-operating (i.e., capital improvement) funds • Water savings, i.e., low flow fixtures NJ Division of Local Government Services

4. Two Contracting Models: • Plan A - Agency hire an ESCO • ESCO is a single contractor that develops and manage the process – and can guarantee savings • Use public bidding or competitive contracting process to award a contract to a firm – an “Energy Services Company” to develop & manage construction of improvements. • Contract award is for “most advantageous, price and other factors considered process” or “lowest responsible bidder” NJ Division of Local Government Services

5. Plan B – Do-It-Yourself • Hire an energy consultant to develop your Energy Savings Plan • Develop your own specs and bid the job… • …Or hire professionals to do that work • Rely on built-in verification process to assure savings NJ Division of Local Government Services

6. Conditions for Success • Regardless of which model is chosen, the success of the project and accrual of savings depends on: • A solid, well-thought out plan • Competent construction and installation • Ongoing maintenance • If any are skimped, the public loses and cost and energy savings lost! NJ Division of Local Government Services

7. Develop the ESIP • Step 1 – Perform independent audit • Third party, not the ESCO • Step 2 – Hire ESCO or manager to prepare Energy Savings Plan • If competitive process, use the audit as basis for proposals • DLGS Model RFP available • Carefully choose appropriate evaluation criteria • Notify State Comptroller given potential value of ESCO contract (over $2M or $10M) • Owner must select the projects they think they want to undertake • ESCO must agree to provide an optional energy savings guarantee NJ Division of Local Government Services

8. Step 3 – Develop Energy Savings Plan • Identify the Energy Conservation Measures and projected energy savings • Conduct “investment grade” or ASHRAE “Level 3” audit to calculate accurate paybacks • Savings based on BPU adopted standards NJ Division of Local Government Services

9. Continuing On… • Step 4 - 3rd party verification of plan • Ensures calculations were done properly • Savings calculations does not include Energy Audit & Energy Savings Plan verification costs • Costs can be added to financing package • Initial auditor can do verification • Step 5 – Make decisions, approve plan and file with BPU NJ Division of Local Government Services

10. Step 6 – Design and Bid • ESCO or Engineer designs and prepares specs • Notify State Comptroller given potential value of construction contract (over $2M or $10M) • ESCO or Owner advertises and receives formal bids per the agency’s contracting laws: i.e., Local Public/Public Schools Contracting Law, plus • Bid security, Bonding, Prevailing Wages, Public Work Contractor Registration, Prompt Payment, and all related laws for owners and their contractors • Subsidiaries owned by Contractor cannot bid on work • Specifications affecting State or national codes prepared by individuals properly licensed or certified • All contractors and professionals must be DPMC listed or classified – this is new for LPCL agencies. NJ Division of Local Government Services

11. Step 7 – Construction • Contracts awarded by owner or ESCO • Construction Management • ESCO or separate CM to manage and oversee project schedules, installations, performance, quality and approves payment to subcontractors • All administrative and fiscal procedures are managed pursuant to public works construction laws NJ Division of Local Government Services

12. Step 8 - Completion of Work • Commissioning after construction to get it operating property • Initial auditor or ESP verifier can do verification • 3rd party verification required to validate projected savings after commissioning • Required to do financing • Implementation of any energy savings guarantee • As part of maintenance, require periodic “tune-ups” to make sure standards are being met NJ Division of Local Government Services

13. Got Questions? • DLGS ESIP Site:www.nj.gov/dca/lgs/lpcl/esip.htm • BPU Site: www.njcleanenergy.com/commercial-industrial/programs/energy-savings-improvement-plan+ • Email: lpcl@dca.state.nj.us • Gordon Ball: 609-633-6152 NJ Division of Local Government Services