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Navigating the Prop 39 Maze Part 2 February 6, 2014 Presented by: Rick Brown, President TerraVerde Renewable Partners, LLC Tyler B. Dockins, Attorney at Law Lozano Smith. Table of Contents. Proposition 39: Current Status Energy Project Scoping Issues Prop 39 Sole Source Prohibition Q & A.

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  1. Navigating the Prop 39 MazePart 2February 6, 2014Presented by: Rick Brown, PresidentTerraVerde Renewable Partners, LLCTyler B. Dockins, Attorney at LawLozano Smith

  2. Table of Contents • Proposition 39: Current Status • Energy Project Scoping Issues • Prop 39 Sole Source Prohibition • Q & A

  3. Proposition 39 Update Funding • Allocation of funding – the 2013-14 State Budget allocated $381 M in Prop 39 funds to K-12 School Districts. Funds are being distributed to Districts on a per-student basis plus a weighting for Free and Reduced Price Meals ADA, with small school minimum guarantees. Annual allocations through FY 2018-19 are yet to be determined; Prop 39 funds count towards the State’s Prop 98 requirement. • Rollover – Schools will be able to roll over their allocation year to year in order to pay for larger projects.  The smallest LEAs will be able to bundle funding in years one and two. • Planning Allocations-Districts were eligible to apply for “planning dollars” as of November 1; second round in January 31st; third round later in the spring. • Energy Project Loans--Allocates $28 million to State Energy Conservation Account at CEC for low interest and no-interest loans for eligible projects and technical assistance. • Workforce Development--Provides $3 million for competitive grants to community based organizations for job training and workforce development.   • Energy Audit--Allocates $5 million to Conservation Corps for workforce training and development. “Entitlements”: http://www.cde.ca.gov/fg/fo/r14/prop39cceja13result.asp

  4. Proposition 39 Update Process • Application Guidelines--Required California Energy Commission (CEC), in consultation with the California Dept. of Education (CDE) and the California Public Utilities Commission (CPUC), to develop guidelines for project expenditures and applications, including energy benefit estimates, energy savings cost assumptions, benchmarks, energy surveys and audits, and cost-effectiveness determination. • Draft Guidelines were released Sept 28th • Final Guidelines were released Nov. 19th • CEC approved final guidelines Dec. 19th • Application Materials released Jan. 31st • Accountability – Schools will be subject to front-end project verification and back-end reporting. Required Prop 39 Deliverables • Expenditure Plan and Application • Expenditure Plan General Form A: a financial summary of how the District intends to spend its Proposition 39 award funds  • Expenditure Plan Project Summary Form B(s): the eligible energy project(s) proposed at each of the District’s schools or sites • Utility Data Release Authorization form(s) • Back-up documentation: additional information providing justification for the Expenditure Plan • Project Expenditures Report

  5. Prop 39 Funding and Project Development Process • Project Scoping: TerraVerde Energy Report Card • Conduct on all sites and systems: energy benchmarking, usage, and cost analyses • Determine the highest potential energy and cost savings opportunities Prop 39 Project Development Planning Construction • Targeted Investment Grade Audit • Present a detailed cost-benefit analysis for each of the highest potential energy savings opportunities • Competitive Bid • Conduct a competitive bid process • Identify best options for project installation, procurement, and financing; support contracting • Application & Project Verification • Develop Prop 39 Expenditure Plan and Applicationbased on a prioritization of projects that meet the District’s objectives and requirements and conform with the Prop 39 guidelines • Installation • Oversee on-site installation and commissioning of the projects • Project Asset Management • Monitor and analyze performance data • Conduct necessary O&M and warranty management • Complete Prop 39 Project Expenditures Report

  6. Prop 39 Eligible Project Examples • HVAC/Mechanical Efficiency Measures: • Replace incandescent light with compact fluorescent (CFL) • Replace old packaged/split HVAC unit with high‐efficiency HVAC • Replace old heat pump with high‐efficiency heat pump • Replace boiler or furnace with high efficiency condensing type • Seal existing leaky duct • Install premium efficiency motors • Install variable speed drive for pumps and fans • Install new programmable/set back thermostat • Replace storage water heater with instantaneous water heater • Plug‐Load Efficiency Measures: • Install smart strip/PC management to control computers/printers • Install vending machine occupancy control. • Simple PV Self‐Generation Project: • School‐owned Solar PV system • Solar PPA Lighting Energy Efficiency Measures: • Replace incandescent light with compact fluorescent (CFL) • Replace incandescent/down light/flood with light‐emitting diode (LED) light • Replace incandescent Exit Sign to LED Exit sign • Replace CFL Exit Sign to LED Exit sign • Convert T12 fluorescent lamps to T8 with electronic ballast • Convert T12 or T8 fluorescent lights to linear LED lamps • Replace 32 Watt T8 lamps with 28 Watt T8 Lamps • Replace exterior mercury vapor lights with induction or LED lights • Replace exterior high pressure sodium lights with induction or LED lights • Install occupancy control for intermittently occupied rooms

  7. Application and Expenditure Plan • There were no  big surprises; the application requirements did not vary in an meaningful way from what was described in the Guidelines adopted by the CEC in December. • However, the application requirements are sufficiently detailed that completion will take a good bit of focused effort. • Good news: there are more online calculators provided than were anticipated, narrowing the scope of what is needed from an energy audit to get your application approved. • More good news: one important new clarification included in the materials is that Bond proceeds or any local capital funds (e.g. developer fees) that don’t require some form of payback can be considered “grant” funding for the purposes of reducing the denominator in the Savings to Investment Ratio. This could help bring up the SIR of energy conservation measures that might otherwise not meet the required 1.05 threshold.

  8. Benchmarking • Measuring and comparing the “energy use intensity” of buildings per square foot • kBTU = Thousand British Thermal Units • Combination of … • kWH: thousand watt hours of electricity and • Therms: units of energy for natural gas, propane, fuel oil.

  9. Benchmarking Example

  10. Strategic Audit Scoping

  11. Online Calculators Lighting Energy Efficiency Measures:  ECM 1   Replace incandescent light with compact fluorescent   ECM 2  Replace incandescent light with light‐emitting diode (LED) light  ECM 3 & 4  Convert incandescent/CFL exit sign to LED exit sign  ECM 5 & 6  Convert T12 fluorescent to T8 with electronic ballast or LED lamps   ECM 7  Replace 32 watt T8 lamps with 28 watt T8 lamps  ECM 8 & 9  Replace exterior mercury vapor/HPS with LED/induction lights  ECM 10  Install occupancy control for intermittently occupied rooms  HVAC/Mechanical Efficiency Measures:  ECM 11  Replace old packaged/split HVAC unit (up to 65 kBTU) with high‐efficiency  HVAC  ECM 12  Replace old heat pump (up to 65 kBTU) with high‐efficiency heat pump  ECM 13A  Replace boiler with high‐efficiency condensing boiler  ECM 13B Replace furnace with high‐efficiency condensing furnace ECM 14  Seal existing leaky duct  ECM 15  Install variable speed drive for pumps and fans  ECM 16  Replace manual thermostat with programmable thermostat  ECM 17  Replace old motor with premium efficiency motor  ECM 18  Replace storage water heater with gas‐fired tankless water heater Plug‐Load Efficiency Measures:  ECM 19  Install smart strip/PC management to control computers/printers   ECM 20  Install vending machine occupancy control  Simple Photovoltaic (PV) Self‐Generation Project  ECM 21  Install PV System

  12. Prop 39 S.I.R. Formula • SIR (Savings to Investment Ratio) is defined as follows: Energy Cost Savings + Maintenance Savings SIR = (Project Cost) – (Rebates) – (Other Grants) – (Non Energy Benefits) • Non Energy Benefits are to be calculated as 5% of project cost. • Rebates and other grants will vary by utility company and technology. • This calculation will need to be done for each individual Energy Conservation or Clean Energy Measure and again for the combined Project or Portfolio. • An SIR of 1.05 is the threshold a project or portfolio must meet to receive approve in your “Expenditure Plan”

  13. S.I.R. Portfolio Estimate Example

  14. The Energy Project Challenge How does a School District… • Achieve actual cost savings results that match expectations? • Conduct a transparent procurement process that gets the benefits of competitive bidding without a lot of administrative hassle? • Achieve net positive cash flow savings without upfront expense; minimize balance sheet impact?

  15. Q & A If you have any questions, please ask using the Questions pane as shown below.

  16. Contact Information Rick Brown, President TerraVerde Renewable Partners, LLC 1100 Larkspur Landing Circle, Suite155 Larkspur, CA 94939 T: 707.953.2885 Rick.Brown@TVRPLLC.com www.TVRPLLC.com Tyler B. Dockins, Attorney at LawLozano Smith4 Lower Ragsdale Drive, Ste. 200 Monterey, CA 93940T: 831.646.1501 | F:  831.646.1801TDockins@lozanosmith.com www.lozanosmith.com

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