MPower Oregon Multifamily Energy Efficiency

1. MPower Oregon Multifamily Energy Efficiency HUD Region X Going Green/ Energy Conference August 2, 2012 July 19, 2012

2. Overview • New energy efficiency (EE) delivery model for affordable multifamily sector • Combines EE services with on-bill payment collection • Designed to provide immediate utility bill savings • Developed through multi-stakeholder collaborative process, with strong organizational partnerships • Phased, incremental, and iterative process • Pilot initiative, testing multiple ambitious goals • Expect course correction and change

3. Evolution • Designed in response to expressed needs of multifamily affordable housing industry: • Rapidly rising energy and water utility cost • Threat to industry’s long-term viability • Lack of capacity and resources • Difficulty accessing financing (cash flow & covenants) • Split-incentive challenge (who pays, who benefits)

4. Key Partners Management Team: • Network for Oregon Affordable Housing – Fund manager • Blue Tree Strategies – Program design and support • Green For All – Social equity standards and national replication Delivery Team: • Enterprise Community Partners – Service delivery • Energy Trust of Oregon – Funder and technical assistance • Craft3 – Utility collection partner • Walsh Construction – General contractor Building Owners: Housing authorities and non-profit CDCs

5. Problem Statement EE Retrofit Market Failure: • Energy Services Companies (ESCO) success in: • Industrial/commercial (I/C) • Municipal/university/school/hospital (MUSH) markets • Limited inroads into multifamily market due to cost, scale, and complexity barriers • Uncoordinated and fragmented incentives and technical assistance • Predominantly asset-backed financing models

6. Delivery Model • One-stop-shop, EE services model • No owner out-of-pocket costs (MPower fully funds projects) • On-utility bill EE service charge, based on deemed energy savings (no performance guarantee): • Sized to deliver immediate utility bill savings (net-positive cash flow) • Covers ~52% of EE retrofit (48% leveraged investment)

7. Service Description • Building EE Retrofit Services: • Upfront investment-grade energy and water audits • Coordination and delivery of retrofit improvements from predevelopment through construction • Available retrofit measures – lighting, air sealing, DHW, HVAC upgrades, appliances, controls (≥ 20% energy savings). • Long-term Energy Management Services • Resident Engagement and Education • Operations and maintenance protocols development & support • Measurement & verification of energy savings

8. Payment Stream Customers: • Pay for EE services through fixed monthly EE service charge on their utility bill • Enter into a 10-year EE services agreement with MPower, and an EE tariff agreement with utility EE Tariff: • Runs with utility meter • Survives change in building ownership or occupancy Leverages long-term, low-cost financing: • Low payment default risk of on-utility bill/tariff structure • Funded cash flow liquidity reserves

9. Pilot Overview • 30+ buildings, 2,500+ units • Timeframe: 24 months – July 2012 to June 2014 • Phased strategy: • Phase I: Launch – master-metered • Phase II: Scale Up – master-metered • Phase III: Commercialization – sub -metered • Total EE retrofit investment: $7.9M in projects (~$3K/unit) • Phased introduction of water efficiency and individually metered buildings • Identifying high-potential communities for replication

10. Key Funders • U.S. Dept. of Housing and Urban Development • Energy Trust of Oregon • Clean Energy Works Oregon • Craft3 • Enterprise Community Partners • Green for All • City of Portland Bureau of Planning and Sustainability

11. Transaction Structure HUD Foundation Craft3 ETO CEWO 5 3 6 1 2 4 NOAH Coop agreement Grant agreements Loan agreements Loan agreement Grant, utility sector incentives, and government capital consolidated by NOAH 3 6 1 2 4 5 Incentive agreement Grant agreement Investment by NOAH

12. Transaction Structure MPower LLC acts as a revolving energy retrofit fund Investment from NOAH MPower Energy services agreement 6 5 5 EE on-bill repayment On-bill operating agreement 1 2 4 3 6 1 2 3 4 Payment/High Roads Agreement Craft3 Construction contract General Contractor Utility - PGE Building Owners

13. How it works for owners 5 PROJECT APPROVAL 1 Marketing & Outreach 3 Contract pricing 4 EE Charge & Final Project Diligence 6 Construction 1 2 3 3 Project pre-screen Audits Final Scope & Design Draft Project Scope 6 Resident Engagement 7 Measurement & Verification 7 Operations & Maintenance 6 Post Completion Inspection 7 Resident Engagement 7 Program Reporting and Evaluation

14. How it works for owners Step 1: Identify potential projects • Owner characteristics: • Strong interest in greening the housing portfolio • Strong organizational track record • Experience with green retrofits • Eligible projects: • Master-metered buildings (to start) • High energy usage and utility costs • Positive project cash flow • Buildings 10 or more years old • In need of $200,000 to $500,000 in energy and water efficiency improvements

15. How it works for owners Step 2: Conduct Audit • Pre-screen for potential projects • If the project passes a pre-screen, it will be scheduled for an energy and water audit • Manage process on behalf of the owners • Audit results are reviewed by the MPower, ECP, Energy Trust, and Walsh Construction • MPower presents final audit results to building owner • Generate draft scope of work and initial cost estimates

16. How it works for owners Typical measures: Generally not Included are new windows, major insulation, structural upgrades, seismic work (these require full rehabilitation and re-capitalization)

17. How it works for owners Step 3:Scoping • Use audit to develop draft scope • Collaborative process • Finalize project scope approved by owner • Identify projected energy savings based on project scope • Conduct design and engineering work as needed • General contractor to price work

18. How it works for owners Step 4: Calculating the Energy Efficiency Tariff (conceptual) Actual pre-retrofit utility bill Projected post-retrofit utility bill $3 of savings go to utility customer TOTAL: $100 TOTAL: $97 ENERGY COST RETROFIT On-Bill Repmt $100 $17 (fixed) ENERGY COST $80 If more energy is saved, utility customer benefits

19. How it works for owners • Lowers exposure to future energy cost escalation • After EE tariff ends, all savings benefit customer

20. How it works for owners Step 5: Project Approval, Closing and Funding • Complete due diligence • Execute contracts: • 10-year service agreement between owners and MPower • 10-year tariff agreement between owners and PGE • Construction contract between owners and Walsh • Approve projects for construction • Finance projects

21. How it works for owners Step 6: Construction • Construction expected to be less than 4 weeks total • Displacement of tenants less than 1 day total • Owner’s representative manages the construction contract • MPower provides standard oversight for construction funding draws • Resident education activities and events commence before construction

22. How it works for owners Step 7: Post-Construction Activities • Final walk-through and close out • Quality control and corrective measures • Long-term energy management services: • Resident education and engagement activities • Development of operations and maintenance protocols • 10 years of Measurement and Verification • Goal is exceed projected energy savings • Commitment by fund to work with owners to achieve energy savings • Owners responsible for taking corrective action with support from MPower

23. How it works for owners Owner responsibilities • Maintenance and upkeep of buildings and improvements • Supporting ongoing resident engagement and education • Following operations and maintenance protocols • Reviewing measurement and verification data • Maintain project as affordable housing

24. How it works for owners Community Workforce and Diversity Standards • Committed to family wages and social equity • Developing Community Workforce Agreement • Mirrors MWESB contracting goals and process at City of Portland: • % of labor hours for minorities and women • % of contract dollars to MWESB firms • Apprenticeship hiring requirements • Local labor sourcing requirements

25. Status and Timeline • Close funding commitments • Finalize transactional agreements • Gain approval from Oregon Public Utilities Commission • Generate deal pipeline and complete audits • Launch first project in 3rd Quarter, 2012

26. Next Steps • Convene working groups to tackle outstanding questions: • Tenant rights/ green lease agreement templates • Resident engagement and education • Convene national working group • Cross-sector stakeholders • Research & Advocacy • Identify high potential communities • Develop replication manual

27. Contact Info Bill Van Vliet, Network for Oregon Affordable Housing billv@noah-housing.org 503.501.5680 Kimberly Pray, Blue Tree Strategies kimberly@bluetreestrategies.com 503.866.0242 Amanda Saul, Enterprise Community Partners asaul@enterprisecommunity.org 503.553.5646