Ken Robinette, CEO South Central Community Action Partnership &

1. South Carolina WAP Fee For Service Training Columbia, South Carolina February 1, 2012 Establishing a Social Enterprise Non-Profit to For-Profit Working Together Ken Robinette, CEO South Central Community Action Partnership & General Manager, Home Energy Management

2. Twin Falls IdahoShoshone Falls,Niagara of the West

3. Perrine Bridge & Snake RiverTwin Falls, Idaho Base Jumper

4. Sun Valley, Id

5. Handouts~ CD • Power Point Presentation (2) • Copy of 10 CFR 600’s Amended version 12/5/06 • Resolution & Start up minutes • Business Plan • Operating Agreement & Office Lease Agreement • Equipment Cost Comparisons/Reimbursements • Policy Manual, Deployment Plan • Credit Card Policy • HEM Financial Procedures, • Actual Jobs ~ Bids, Invoices, Cost Breakdowns • Salary Cost Charts • HEM Articles of Organization form • HEM Time sheet (sample) & Travel Sheet • Material Tracking Worksheet

6. Setting up “FEE FOR SERVICES” • Why Fee for Service • Agency Assessment • Board Approval – Staff Buy In • Competition & Market (Public Perception & Exposure) • Business Plan • Legal & Financial Steps • Promoting & Advertising • Bids, Profits & Benefits

7. Why We Set Up A “Fee For Service” Company • Uncertainty of Federal Funds & ARRA Ending • DOE Weatherization Plus~ Leveraging • Elimination of Program Income Requirements • Additional Resources for WZ Program • Staff/Contractor Retention (skill sets & certifications) • Lead Renovation Certification • New Partnerships – Existing Partners Expanded • Utility DSM programs and incentives • Provide Energy Conservation to Middle and Upper Income Homeowners/Business

8. Lawrence Berkley National Laboratories Delivering Energy Efficiency to Middle Income Households report.  This paper provides insights for program administrators, policymakers and other stakeholders on barriers and opportunities to delivering energy improvements at scale to the middle third of the country by income

9. Weatherization Fee-For-Service As Recovery Act funds wind down, some non-profit WAP providers are considering fee-for-service business models to help fund their low-income weatherization activities. These WAP providers have residential energy efficiency expertise and staffing to provide these services, but many face the likelihood of significant layoffs without additional income streams. A range of fee-for-service models can be developed to target different markets, from comprehensive energy improvements to lighter weatherization measures that provide a low-cost option for middle income households. While WAP delivery agents are experienced in home performance, many may lack the complementary skills necessary to sell energy improvements and operate successful businesses. However, a few examples of this new model working, including Idaho’s South Central Community Action Partnership which has demonstrated that fee-for-service offerings can complement – and support – a Community Action Agency’s low income offerings

10. In 2008 and 2009, middle income households spent $42.5 billion on home improvements.

11. “Save Money by Reducing Energy Bills” While high energy bills are not a priority issue for some, many middle income households face significant housing affordability challenges, and reducing their energy bills may help to increase their financial stability (EPC 2007). Recent evaluations of household motivations for participating in Wisconsin’s Targeted HPwES program and the perceived benefits of energy upgrades among middle income participants provide valuable insight into the power of framing energy efficiency as an opportunity to save money and solve existing problems (Duerst et al 2010). Participants were primarily attracted to the program for one of two reasons – 1) because it provided them an opportunity to make home improvements they knew they needed (40 percent of respondents) or 2) because it offered a way to reduce their energy bills or save energy (40 percent of respondents). After participating in the program, almost two thirds of respondents noted that the primary program benefit was a reduction in their utility costs which made it easier for them to save money or pay bills. The other third of participants said a healthier and more comfortable home was the primary energy efficiency benefit.

12. [1] The states listed for each policy represent the states for which that policy informed development of spending and savings projections; it does not necessarily represent a comprehensive list of all states with that particular supporting policy. South Carolina

13. A Report by the South Carolina Energy Office State Budget and Control Board ________________________

14. Utility Demand Side Management Demand-side management (DSM) refers to the use of cost-effective conservation, efficiency, and load management programs that help to reduce the demand for and cost of energy services. Demand-side management is a resource option that complements power supply. It not only saves the customer money, but also helps the utility achieve less pollution and avoid more costly supply-side investments.

15. Categories of Electricity Demand-Side Management Programs Conservation Conservation programs are designed to entice consumers to use less electricity through changes in working and living habits, thereby reducing their need for electricity. Included in this category are public education and awareness programs that promote energy-reducing activities such as maintaining conservative thermostat settings, turning off appliances when not in use, and installing low-flow showerheads. It is difficult to quantify the results of any one program, but many electric suppliers continue to conduct energy awareness advertising campaigns, demonstrations and seminars for various classes of customers. Energy Efficiency Energy efficiency programs reduce energy consumption by encouraging consumers to use energy more efficiently. There are many programs available, and each program is intended for a specific group of electricity users. Some of the targeted groups are newly built residences, existing residences, industry, commercial buildings, and agricultural users. These programs promote the use of more effective building insulation, high efficiency industrial equipment, appliances, air conditioning equipment and lighting. Incentives consist of more favorable rate schedules, cash rebates, low interest loans, and technical assistance.

16. Duke Energy Carolina’s 2010 Integrated Resource Plan Residential Energy Efficiency Programs Residential Energy Star rate for new construction~ Independent 3rd Party Inspectors Residential Energy Assessments ~ assists residential customers in assessing their energy usage and provides recommendations for energy efficiency Low income Energy Efficiency & Weatherization Program ~ Energy kits or assistance in cost of weatherization measures Programs being Considered Direct Install Low Income Program (targets low-income neighborhoods) Home Retrofit (helps off-set cost of residential efficiency improvements) Tune & Seal (helps off-set cost of duct sealing)

17. Progress Energy Carolina’s Inc. 2010 Integrated Resource Plan Residential Energy Efficiency Programs Residential Home Energy Improvement Program ~ offers energy efficiency conservation measures with financial incentives : Duct Testing & Repair, Insulation Upgrades/Attic Sealing, Window Replacement Since July 31,2010 there has been 25,746 participants Residential Home Advantage (New Construction) ~ offers builders & developers to meet Energy Star Standards (Single family, Manufactured Housing & Multi-Family) Since July 31,2010 there has been 1,608 participants Residential Neighborhood Energy Saver (Low-Income ) Program ~ assist low-income residential customers to implement energy conservation measures Since July 31,2010 2,936 homes have had measures installed

18. For Profit Weatherization ServicesAgency Self Assessment • Does the organization have the skills needed to run a for profit project? • Has the organization identified what help they will need and where to get the help? • Do the staff have the time required to learn the things that they need to know? • Does the organization have the money to hire the staff and/or consultants needed? (DOE Leveraging)

19. For Profit Weatherization ServicesAgency Self Assessment (cont.) • Is there sufficient customer demand for the goods/services offered by the project? • Will the organization be able to compete competitively? (run with the big dogs or stay under the radar) • Has BOD & Admin identified Risk Factors? • Is your State Grantee Office Informed & Supportive • Has the organization developed a comprehensive business plan?

20. Agency History and Experience • South Central Community Action Partnership’s (SCCAP) WZ Program started 1978 • Provided Energy Conservation to 6,000 + Homes • Trained/Certified Staff avg. 25+ Yrs Service • Built & Rehab Homes w/Grants & Low-Interest Loans (USDA/Rural Development & HUD) • In early 1990’s WZ’d Homes for Utility Company creating Program Income (10 CFR Part 600.124)

21. Sec.600.124 Program Income (a) The standards set forth in this section shall be used to account for program income related to projects financed in whole or in part with DOE funds. (b) Except as provided in paragraph (h) of this section, program income earned during the project period shall be retained by the recipient and, in accordance with program regulations or the terms and conditions of the award, shall be used in one or more of the following ways (1) Added to funds committed to the project and used to further eligible project objectives. (2) Used to finance the non-DOE share of the project. (3) Deducted from the total project allowable cost in determining the net allowable cost which the cost is based.

22. Sec.600.124 Program Income (cont.) (c) When DOE authorizes the disposition of program income as described in paragraphs (b)(1) or (b)(2) of this section, program income in access of any limits stipulated shall be used in accordance with paragraph (b)(3) of this section. (d) In the event that the program regulations or terms and conditions of the award do not specify how program income is to be used, paragraph (b)(3) of this section shall apply automatically to all projects or programs except research. (b) Except as provided in paragraph (h) of this section, program income earned during the project period shall be retained by the recipient and, in accordance with program regulations or the terms and conditions of the award, shall be used in one or more of the following ways (3) Deducted from the total project allowable cost in determining the net allowable cost which the cost is based.

23. Sec. 600.134 Equipment (a) Title to equipment acquired by a recipient with Federal funds shall vest in the recipients, subject to conditions of this section (b) The recipient shall not use equipment acquired with Federal funds to provide services to non-Federal outside organizations for a fee thatis less than private companies charge for equivalent services, unless specifically authorized by Federal statue, for as long as the Federal Government retains an interest in the equipment. (g) When the recipient no longer needs the equipment, the equipment may be used for other activities in accordance with following standards. Equipment with a current per-unit fair market value of less than $5000 may be retained, sold or otherwise disposed of with no further obligation to the awarding agency. ( over $5000 is more restrictive)

24. Sec.600.135 Supplies & Other Expendable Property (b) The recipient shall not use supplies acquired with Federal funds to provide services to non-Federal outside organizations for a fee that is less thanprivate companies charge for equivalent services, unless specifically authorized by Federal statue as long as the Federal Government retains an interest in the supplies. Fee for Service can be done using DOE equipment and supplies however, extreme caution should be exercised and check your contracts for allowable use. Follow the 10 CFR 600’s For those purposes SCCAP chose to create our own LLC. called: Home Energy Management Then along came ARRA $5 billion for Weatherization

26. WEATHERIZATION PROGRAM NOTICE 12-3 EFFECTIVE DATE: October 14, 2011 SUBJECT: CLOSEOUT PROCEDURES FOR RECOVERY ACT GRANTS UNDER THE WEATHERIZATION ASSISTANCE PROGRAM PURPOSE: To issue guidance to Grantees for closeout of grants funded under the American Recovery and Reinvestment Act of 2009 (Recovery Act) in the Department of Energy’s (DOE) Weatherization Assistance Program (WAP).

27. 2.0 WEATHERIZATION INVENTORY OF VEHICLES, EQUIPMENT, AND MATERIALS Grantees and Subgrantees must follow the terms and conditions of the award, state procurement requirements and the appropriate section(s) of 10 CFR Part 600, the DOE Financial Regulations regarding the disposition of vehicles, equipment, and materials in order to properly closeout the grants. Please refer to the FAQs posted on the WAPTAC and DOE web sites for specific citations contained in 10CFR 600 related to disposition regulations.

28. WAPTAC WWW.WAPTAC.ORG WEATHERIZATION ASSISTANCE PROGRAM CLOSEOUT FREQUENTLY ASKED QUESTIONS EQUIPMENT and VEHICLES 1. How do Grantees and Subgrantees dispose of vehicles and equipment purchased with Recovery Act funds? A: Vehicles and equipment purchased under the Recovery Act grant may be transferred to the annual appropriated grant and used by the Grantee or Subgrantee for its intended purpose, performance of weatherization activities. If the vehicles and equipment are no longer needed for their original project or program, then the Grantee or Subgrantee may use them for other federally-supported activities or programs. If there is no need then they must be disposed of in accordance with the financial assistance regulations in 10 CFR 600. Grantees and Subgrantees must look at the value of the item in order to determine the appropriate disposition method. Subgrantees must refer to the respective sections in 10 CFR for disposition depending on the type of entity they are; non-profit Subgrantees refer to 600.134 and for-profit subgrantees refer to 600.321. 10 CFR 600.232 (b)-(e)

29. WEATHERIZATION ASSISTANCE PROGRAM CLOSEOUT FREQUENTLY ASKED QUESTIONS 4. Q: What is the guidance governing the disposition of vehicles and capital equipment (less than $5,000) that were purchased with Recovery Act funds? A: For Grantees, vehicles and equipment with a current per-unit fair market value of less than $5,000 may be retained, sold or otherwise disposed of with no further obligation to the awarding agency (i.e. DOE). Subgrantees shall follow their respective Grantee property policies and procedures and those contained in 10 CFR 600.

30. Setting up “FEE FOR SERVICES” Knew we wanted to expand our resources Knew what we were good at Knew there was a need in our communities Knew there was legal & administrative steps So where to start first!

31. Setting up “FEE FOR SERVICES” • Board Support and Approval • Meet the Mission of Organization • WZ Staff/ Administration Staff Buy In • Idaho Department of Health & Welfare Support • Created a Business Plan (with help)

32. Setting up “FEE FOR SERVICES” Help available to Develop Plan • SCORE (Senior Corp Of Retired Executives) is a non-profit association providing free counseling and low-cost workshops to small businesses throughout the United States. • SCORE provides entrepreneurs with free, confidential face-to-face and email business counseling. • The website hosts a “Business Toolbox” and on-line learning center that brings together the expertise of successful business owners. http://www.score.org

33. Setting up “FEE FOR SERVICES” Help available to Develop Plan • Small Business Administration Marketing Research http://www.sba.gov/starting_business/marketing/research.html • Competitive Analysis http://www.sba.gov/starting_business/marketing/analysis.html • Office of Advocacy – Economic Statistics and Research The SBA Office of Advocacy provides a wide variety of free searchable databases, working papers, quarterly indicators relevant to small businesses and geographic-specific business information http://www.sba.gov/advo/research/

34. Four Phases of Business Planning • Developing a Marketing Plan • Performing a Preliminary Feasibility Study • Preparing a Business Plan • Securing Financing

35. Before You Begin • Evaluate each of the following areas • Business Planning (past experience staff/board) • Financial Needs (cash on hand, take out loan) • Location (offsite vs. CAP site /walk-ins or phone app.) • Market (energy only, residential, commercial, sector) • Customer Payment (cash, check, credit card or monthly payments) • Organization’s Accounting Capabilities

36. Developing a Marketing Plan

37. Introduction • Developing a Marketing Plan will help: • Enhance the product or service description, • Target the most profitable market segments, • Identify reliable sources of market information, • Formulate effective pricing strategies, • Generate sales through effective promotions, • Evaluate critical factors in site selection and • Develop a comprehensive marketing plan.

38. What Market Factors Determine “Business Feasibility”? • The ability of a business to sell products or services - at competitive prices - and realize sufficient revenues to: • Cover its operating costs, • Repay its debts, • Sustain its growth, and • Support the organization.

39. What Market Factors Determine “Business Feasibility”? To answer important questions like these: • Who needs your products/services? • How much will they pay? • How will you compete for their business? • What share of the “market” can you capture in $ALES REVENUES?

40. What Should You Consider in Pricing a Product or Service? • PRICING considerations: • Your cost (to produce, operate, and sell) • Your competitors’ prices • Your customers’ perceptions of/reactions to allthe prices offered. • Remember that customers relate price to value • Is your product/service a “good bargain” or “top of the line”?

41. Guide to Performing A Feasibility Study

42. Performing a Feasibility Study Identify the technical and managerial resources needed to start and operate your planned enterprise; Estimate the “capitalization requirements” of your planned business – the funds required to purchase essential assets and cover initial operating cost Prepare “forecasted financial statements” that predict the financial condition and performance of your planned business; Assess the relative degree of risk inherent in your business venture

43. Financial Considerations That Affect Business Feasibility Capitalization requirements include: • Pre-business planning and development • Equipment, facilities, tools, vehicles, and other start-up “assets” • Employees, inventories, and supplies for business operation • Cash (“working capital”) to cover inventories, payrolls, and operating costs until profits accumulate

44. Forecasted Financial Statements Prepared • NET SALES • (COST OF GOODS SOLD) • GROSS OPERATING PROFIT • OPERATING EXPENSES: • Advertising & Promotion • Insurance • Interest • Legal & Professional • Maintenance & Repairs • Office & Other Supplies • Payroll w/Taxes & Insurances • Telephone & Utilities • Travel • SUBTOTAL OPERATING EXPENSES • NET PROFIT (before taxes) Statement of Operations

45. Break-even Analysis • What volume of sales will allow you to cover all cash costs exactly and thus “break even”? • How do your realistically projected sales compare to the break-even sales? • How risky is the business—is there a “margin of safety” between realistically projected sales and break-even sales?

46. Break-even Analysis • Algebraic formula for calculating annualBreak-Even Sales: • BES = VC + FC • BES = Break-Even Sales, • VC = Variable Costs (as % of Sales) • FC = Fixed Costs (in dollar amounts)

47. Guide to Preparing A Business Plan

48. Introduction Preparing a Business Planwill help the organization: • Make a clear and concise written statement of the business concept and goals; • Summarize the key market factors based upon which the business sales have been projected realistically; • Identify the production-related resources available to the business; • Itemize the capitalization requirements of the business; • Demonstrate the economic feasibility of your business using well-reasoned financial forecasts • Describe the managerial strengths of key personnel who will operate the business

49. What Are the Essential Components of a Business Plan? • Cover Sheet • Statement of Purpose (of the plan) • Table of Contents • Executive Summary • Description of Business • Market Analysis • Organization and Management • Financial Analysis • Supporting Documents

50. What Are the Essential Components of the Description of the Business? • Business Concept (type, status, form) • Product/Service Description (brief) • Key Production Factors • Location and Physical Facilities • Status of Current Operations(pre-business, new, or expanding/history) • Local/Regional Benefits(jobs created, contracts/purchases, & tax payments)