# Presentation: 303617

## Energy Performance Financing

**August 9, 2005**

**Pittsburgh Energy Conference**
**Duquesne University **

**Notes:**
Currently 2, 023

## Overview

**Options for Contracting**

**Overview**

**How HUD Can Help**

**Financial Needs  **

**Success Stories  **

**The HUD Review Process**

## Building Condition Assessments

**Heating Systems**
**Ventilation Systems**
**Air Conditioning**
**Plumbing/Drainage**
**Building Controls**
**Fire Prevention**

***ELECTRICAL***
**Power & Distribution**
**Interior Lighting**
**Exterior Lighting**
**Emergency Power**
**Fire Alarm System**
**Comm / IT systems**
**Security Systems**
**Clock Systems**

***ARCHITECTURAL/ STRUCTURAL***
**Roofing, Windows, Ext. Doors**
**Foundation & Exterior Walls**
**Flooring & Ceilings**
**Interior Walls/Doors/Millwork**
**Painting & Window Coverings**
**Accessories & Equipment**

***PROPERTY / SITE***
**Roadways / Driveways**
**Paving & Walkways**
**Retaining Walls**
**Landscaping **
**Fencing**
**Underground utilities**

**Building Condition Assessments**

- Courtesy – Ameresco Inc.

## Age Profile

**Age Profile**

**Construction Year**

**Area Constructed  (square feet)**

- Courtesy – Ameresco Inc.

## Cumulative Cost vs. Funding

**Cumulative Cost vs. Funding**

- Courtesy – Ameresco Inc.

## Courtesy – Ameresco Inc.

## Courtesy – Ameresco Inc.

## Courtesy – Ameresco Inc.

## Courtesy – Ameresco Inc.

## Overview

**Options for Contracting**

**Overview**

**How HUD Can Help**

**Financial Needs  **

**Success Stories  **

**The HUD Review Process**

## Regulations

**24 CFR 85.36 – Procurement Requirements**
**24 CFR 990 – Annual Contributions for Operating Subsidy:**
**24 CFR 990.107(f) – Incentives for energy conservation improvements**
**24 CFR 990.110 – Adjustments**
**24 CFR 965.308 – Energy Performance Contracts**
**24 CFR 943 – Consortiums / Collaborations.**

## HUD Operating  Funding System

**CFR 990.107(f) imposes two requirements for funding energy conservation improvements.**

**1.  Energy conservation measures MUST be  financed by an entity other than the Secretary.   ****[ Private Loan]**

**Energy cost savings MUST be sufficient to pay the loan within 12 years.**

## HUD Performance Funding System

**Federal Regulations 24 CFR 990.107(f) provide     two options for funding energy conservation improvements.**

## HUD Performance Funding System

**Option 1: Freeze the Rolling Base Incentive**

**PHA **
**Energy **
**Usage**
**Before**
**Improvements**
**Per Year**

**Yearly Energy **
**Usage**
**After**
**Improvements**

**HUD**
**Energy**
**Payment**

**Frozen Base Line**

**Energy  Savings**

**Cost Benefit To PHA**

** **

**Minimum of 51% (75%) of the savings MUST be used to for loan repayment**

## HUD Performance Funding System

**Option 1: Freeze the Rolling Base Incentive**

**Energy Savings**

## HUD Performance Funding System

**HUD **
**Energy**
**Payment**

**Energy  Cost **
**Savings- PFS**

**HUD Performance Funding System**

**Option 2: Add-On Subsidy  Incentive**

**PHA **
**Energy **
**Usage**
**Before**
**Improvements**
**Per Year**

**Yearly Energy **
**Usage**
**After**
**Improvements**

**Base Line – NOT Frozen**

## HUD Performance Funding System

**HUD Performance Funding System**

## Option 2: Add-On Subsidy  Incentive

## HUD Performance Funding System

**Energy Service Company (ESCO)**
** ****Developed**

**Options Available**

**PHA Developed**
**PHA functions as their own ESCO**

## New Requirements

**New Requirements**
**HUD Field Office Review Procedure  **

**PHA Developed**
**PHA functions as their own ESCO**

**By Statute, the housing authority is required to have a qualified third party to assist in its energy finance program.  The authority is required to use a licensed engineer familiar with performance contracting, financing, commissioning, and measurement and verification.  Procurement will follow 24 CFR 85.36**

## HUD Performance Funding System

**ESCO Developed**
**Freezing The **
**Rolling Base**

**ESCO Developed**
**Add-On **
**Subsidy**

**PHA Developed**
**Add-On **
**Subsidy**

**Options Available**

**PHA Developed**
**Freezing The **
**Rolling Base**

## HUD Performance Funding System

_**PHA Cost Risk**_
**Both incentives, freezing the rolling base**
** ****and the add-on subsidy incentive, **
**are effected by yearly **
**Congressional budget cuts.**

## Overview

**Options for Contracting**

**Overview**

**How HUD Can Help**

**Financial Needs  **

**Success Stories  **

**The HUD Review Process**

## Rochester Housing Authority
Ithaca Housing Authority
Chattanooga Housing Authority
Binghamton Housing Authority 
Batavia Housing Authority {in process}
Lackawanna Housing Authority {in process}
Buffalo Housing Authority – Phase 
New Britain Housing Authority

- Ithaca Housing Authority
- Chattanooga Housing Authority
- Binghamton Housing Authority
- Batavia Housing Authority {in process}
- Lackawanna Housing Authority {in process}
- Buffalo Housing Authority – Phase
- New Britain Housing Authority

**Success Stories**

## Batavia  Housing Authority

***Pending approval***

**PHA Size:****  ****	****	****198 dwelling units.**
**EPC Approach:****  ****	****PHA Developed – NYSERDA AMP Program**
**Contract Cost:**** ****	**** ****	****$868,063  { estimate}**
**Energy Savings:****	**** $77,979 / year; $1935,748 over 12 years.**
**PHA Cost Benefit:****	**
**	****Energy:****	****	****	****$175,452  ****(PFS cost benefit)**
**	****Cost Avoidance:****	****	****$352,694  ****(Window Replacement)**
**PHA Infrastructure Cost Contribution: ****{currently**** ****unknown}**
**HUD Incentive:****  ****	****	****	****Add-On Subsidy**
**Metering / Verification Method:****	****Type  C (Actual)**
**Other Grants:****	****	****NYSERDA :****	****$ 98,511****	****	****	**

## Binghamton  Housing Authority

**Binghamton  Housing Authority**

**PHA Size:****  ****	****	****641 dwelling units.**
**EPC Approach:****  ****	****PHA Developed – NYSERDA AMP Program**
**Contract Cost:**** ****	**** ****	****$2,034,170**
**Energy Savings:****	**** $112,024 / year; $1,344,408 over 12 years.**
**HUD Incentive:  ****	****	****Add-On Subsidy**
**PHA Cost Benefit:****	**
**	****Energy:****	****	****	****$252,054     ****(PFS cost benefit)**
**	****Cost Avoidance:****	****	****$1,036,095  ****(Heating System Replacement)**
**	****	****	****	****$501,552     ****(****less**** PHA cost contribution)**
**	****Total Cost Benefit****	****$785,472**
**Metering / Verification Method:****	****Type  C (Actual)**
**Other Grants:****	****	****NYSERDA :****	****$122,552**
**	****	****	****Weatherization:****	****$295,000**

## Buffalo  Housing Authority

***Phase I ***

**PHA Size:****  ****	****	****3,500 dwelling units.**
**EPC Approach:****  ****	****ESCO - Siemens**
**Contract Cost:**** ****	**** ****	****$16,668,005 + $57,059 yearly monitoring fee.**
**Energy Savings:****	**** $900,516 / year; $10,806,191 over 12 years.**
**HUD Incentive:  ****	****	****Freezing The Rolling Base**
**PHA Cost Benefit:****	**
**	****Energy:****	****	****	****$1,907,560  ****(  over 12 years )**
**	****Cost Avoidance:****	****	****$18,000,000  ****(Heating System Replacement)**
**	****	****	****	****$6,468,264   (****less PHA cost contribution)**
**	****Total Cost Benefit:****	****$13,439,296**
**Metering / Verification Method:****	****Type A  & C (Actual)**
**Other Grants:****	****	****NYSERDA :****	**** $3,329,445**

## Chattanooga  Housing Authority

**Chattanooga  Housing Authority**

**PHA Size:****  ****	****	****3,109 dwelling units.**
**EPC Approach:****  ****	****ESCO - Honeywell**
**Contract Cost:**** ****	**** ****	****$9,997,234 + $47,478 yearly monitoring fee.**
**Energy Savings:****	**** $1,384,798 / year; $16,617,576 over 12 years.**
**HUD Incentive:  ****	****	****Add-On Subsidy**
**PHA Cost Benefit:****	**
**	****Energy:****	****	****	****$3,115,795  ****(PFS cost benefit)**
**	****Cost Avoidance:****	****	****$6,539,847  ****(Heat Pumps)**
**	****	****	****	****$0.00  ****	****      (****less PHA cost contribution)**
**	****Total Cost Benefit:****	****$9,655,842.**
**Metering / Verification Method:****	****Type A  & C (Actual)****	**

## Ithaca  Housing Authority

**Ithaca  Housing Authority**

**PHA Size:****  ****	****	****341 dwelling units.**
**EPC Approach:****  ****	****PHA Developed – NYSERDA AMP Program**
**Contract Cost:**** ****	**** ****	****$330,069.**
**Energy Savings:****	**** $31,185 / year;****	**** $374,220 over 12 years.**
**HUD Incentive:  ****	****	****Add-On Subsidy**
**PHA Cost Benefit:****	**
**	****Energy:****	****	****	****$70,165  ****(PFS cost benefit)****	****	**
**	****Cost Avoidance:****	****	****$0.00**
**	****	****	****	****$0.00  ****	****      (****less PHA cost contribution)**
**	****Total Cost Benefit:****	****$70,165..**
**Metering / Verification Method:****	****Type C (Actual)**
**Other Grants:****	****	****NYSERDA :****	****$24,020**
**	****	****	****Weatherization:****	****$79,300****	**

## Rochester  Housing Authority

**PHA Size:****  ****	****	****3,200 dwelling units.**
**EPC Approach:****  ****	****ESCO – Siemens**
**Contract Cost:**** ****	**** ****	****$6,318,657. + $98,388. yearly monitoring fee.**
**Energy Savings:****	**** $631,220. / year;****	****  $7,574,640. over 12 years.**
**HUD Incentive:****  ****	****	****Freezing The Rolling Base**
**PHA Cost Benefit:****	**
**	****Energy:****	****	****	****$422,000. total + rate escalation****	**
**	****Cost Avoidance:****	****	****$2,204,000. **
**Elevator Upgrades & Smoke Detectors.**
**	****	****	****	****$0.00  ****	****      (****less PHA cost contribution)**
**	****Total Cost Benefit:****	****$2,626,000.**
**Metering / Verification Method:****	****Type C (Actual)****	**

## New Britain 

**New Britain **
**Housing Authority**

**PHA Size:****  ****	****	****1,300 dwelling units.**
**EPC Approach:****  ****	****ESCO – Ameresco**
**Contract Cost:**** ****	**** ****	****$3,140,983. + 14,000. yearly monitoring fee.**
**Energy Savings:****	**** $333,697. / year;****	****  $4,004,364. over 12 years.**
**HUD Incentive:****  ****	****	****Freezing The Rolling Base**
**PHA Cost Benefit:****	**
**	****Energy:****	****	****	****$750,828.     ****(PFS cost benefit)**
**	****Cost Avoidance:****	****	****$1,100,000****.  (Heating System)**
**	****	****	****	****$500,000      (****less PHA cost contribution)**
**	****Total Cost Benefit:****	****$1,350,828.**
**Metering / Verification Method:****	****Type C (Actual)****	**

## Overview

**Options for Contracting**

**Overview**

**How HUD Can Help**

**Financial Needs  **

**Success Stories  **

**The HUD Review Process**

## HUD Performance Funding System

**Energy Service Company (ESCO)**
** ****Developed**

**Options Available**

**PHA Developed**
**PHA functions as their own ESCO**

**and **
**Maintenance**

**Options for Contracting**

**ESCOs offer turnkey proposals for all steps in a performance contract and guarantee savings.**

**Energy **
**Assessment**

**Financing**** **

**Installation**
**Construction**
**Management**

**Annual**
**Monitoring **
**and **
**Certification**

**ESCOs generally not interested in PHAs < 500 units**** **

**  **

## Options for Contracting

**PHAs<500 units may be able to contract with an ESCO jointly with another PHA.**

**HUD allows aggregation of PHAs for a**
** ****performance contract**

## Options for Contracting

**PHAs can contract independently for energy assessment, installation, and monitoring.**

**Energy **
**Assessment**

**Hire A/E**
**Bid Process**
**Contract Award**
**Financing**
**HUD Approvals**

- Thrid Party Licensed Professional Engineer Required

## Overview

**Options for Contracting**

**Overview**

**How HUD Can Help**

**Financial Needs  **

**Success Stories  **

**The HUD Review Process**

## How HUD Can Help 

**Field Office Assistance**

## HUD Field Office Review Procedure
Energy Performance Contracting
July 1, 2004

http://www.hud.gov/offices/pih/programs/ph/phecc/

**Energy Performance Contracting**
**July 1, 2004**
***http://www.hud.gov/offices/pih/programs/ph/phecc/***

**How HUD Can Help **
**Resources**

## HUD’s Green Book, “Energy Performance Contracting for Public and Indian Housing: A Guide for Participants”, February 1992, http://www.huduser.org/Publications/pdf/energy.pdf
HUD’s Energy Efficient Rehab Advisor, 2003, http://rehabadvisor.pahthnet.org/index.asp
HUD’s “Energy Conservation for Housing - A Workbook”, January 1998, http://www.abtassoc.com/reports/D19980034.pdf
HUD’s “Utility Allowance Guidebook,” 1998
DOE, International Performance Measurement and Verification Protocols (IPMVP), 2001, http://www.ipmvp.org

**HUD’s Energy Efficient Rehab Advisor, 2003,** _http://rehabadvisor.pahthnet.org/index.asp_
**HUD’s “Energy Conservation for Housing - A Workbook”, January 1998,** _[http://www.abtassoc.com/reports/D19980034.pdf](http://www.abtassoc.com/reports/D19980034.pdf)_
**HUD’s “Utility Allowance Guidebook,” 1998**
**DOE, International Performance Measurement and Verification Protocols (IPMVP), 2001,** _http://www.ipmvp.org_

**How HUD Can Help **
**Resources**

## John H. Miller, P.E., Senior Engineer, HUD PIH 
at 202-708-0614 x4237 or  John_H._Miller@hud.gov
Ken O’Connor, General Engineer, HUD PIH Buffalo
 at 716-551-5755, x5403 or Kenneth_O’Connor@hud.gov
HUD Field Office Review Procedure – Pending
PIH Notice - Pending

- at 202-708-0614 x4237 or  _[John_H._Miller@hud.gov](mailto:John_H._Miller@hud.gov)_
- Ken O’Connor, General Engineer, HUD PIH Buffalo
-  at 716-551-5755, x5403 or _Kenneth_O’Connor@hud.gov_
**HUD Field Office Review Procedure – ****Pending**
**PIH Notice - ****Pending**

**How HUD Can Help **
**Resources**

## Public Housing Energy Conservation Clearinghouse
http://www.hud.gov/offices/pih/programs/ph/phecc/
PHECC Newsletter
http://www.hud.gov/offices/pih/programs/ph/phecc/newsletter/mar05.pdf
Energy Performance Contracting
http://www.hud.gov/offices/pih/programs/ph/phecc/eperformance.cfm
Energy Star
http://www.hud.gov/offices/pih/programs/ph/phecc/federal.cfm

***http://www.hud.gov/offices/pih/programs/ph/phecc/***
**PHECC Newsletter**
***http://www.hud.gov/offices/pih/programs/ph/phecc/newsletter/mar05.pdf***
**Energy Performance Contracting**
***http://www.hud.gov/offices/pih/programs/ph/phecc/eperformance.cfm***
**Energy Star**
***http://www.hud.gov/offices/pih/programs/ph/phecc/federal.cfm***

**How HUD Can Help **
**Public Housing Energy Initiatives**

## Overview

**Options for Contracting**

**Overview**

**How HUD Can Help**

**Financial Needs  **

**Success Stories  **

**The HUD Review Process**

## HUD Field Office – Review Process

**ESCO Approach**

**PHA Approach**

**Reference – **
**HUD Field Office Review Procedure,**** **
**July 1, 2005**

## HUD Field Office – Review Process

**ESCO Approach**

**PHA Approach**

**8 hrs**
**80 hrs**
**8 hrs.**

## HUD Field Office – Review Process

**HUD Field Office – Review Process**

**PHA Approach**

**	****6 month period  -**
**conference calls every  two weeks -**
** ****40 hours**

## HUD Field Office – Review Process

**ESCO Approach**
**Initial Review**

**24 CFR 85.36**
**Competitive Proposal Method of Procurement**
**Qualifications & Cost**
**Factors / Relative Importance**
**Evaluation Process**
**Evaluate**
**Select**
**Negotiate**
**Award**

## HUD Field Office – Review Process

**ESCO Approach**
**Initial Review**

**24 CFR 990**
**Energy Conservation Measures**
**Baseline Data**
**Cost Reasonableness**
**Financial**
**Resident Paid Utilities**
**Measurement & Verification  Methodology**

## EPC  – HUD Checklist

**Energy Conservation Measures (ECM)**
**A spreadsheet is provided that lists each ECM measure by project including:**
**Energy savings, consumption and  ECM cost,**
**Current method of metering (master metered, check-metered, retail metered).**
**Verification Methodology - Reference the International Performance Measurement and Verification Protocol (IPMVP) website at www.IPMVP.org**

## EPC  – HUD Checklist

**EPC  – HUD Checklist**

**Baseline Data**
**Baseline utility consumptions are clearly defined by utility, by month, for three years showing utility consumption and utility cost by project.**
**The PHA has reviewed and verified that the baseline data is correct.**
**The HUD Field Office has reviewed and verified that the baseline data correlates to the financial data as found on form HUD-52722-A.**
**Documentation has been provided to support that all “escalated” rates are reasonable.**

## EPC  – HUD Checklist

**Cost Reasonableness**
**ECM **
**	****The ESCO can demonstrate competitive cost competition of each ECM.  Recommend that three costs be obtained for each ECM and that the ESCO document their selection based upon “best value”;**
** ****- or -**

## EPC  – HUD Checklist

**Cost Reasonableness**
**A detailed cost breakdown is provided for each ECM.  The cost breakdown shall comply with Federal Cost principles (similar to RS Means) and shall include:**
**Direct Costs.**
**Indirect Costs. **
**Profit.**
**The PHA has reviewed and certified that the costs appear reasonable.**

## EPC  – HUD Checklist

**Cost Reasonableness**
**Other Costs**
**All ESCO costs are “full and open”.  A cost breakdown has been provided that defines:**
**Total Direct ECM Costs**
**Audit Costs**
**Design & Engineering**
**Construction Management**
**Resident Education**
**Monitoring and Verification**
**Overhead**
**Profit**

## EPC  – HUD Checklist

**Financial –**
**An amortization schedule has been provided.**
**A cash flow analysis has been provided to document a positive cash flow.**
**Documentation has been provided to support that all “escalated” rates are reasonable.  Note:  If rates are escalated, then the ESCO guarantee should also be escalated.**
**Any PHA contributing cost has been reviewed and is in compliance with 24 CFR 990 requirements.  The HUD Engineer shall provide a written memo justifying the use of these funds as non-energy related components.**

## EPC  – HUD Checklist

**Resident Paid Utilities**
**Waiver request has been received from the Authority.**
**Waiver request has been submitted to HUD Washington.   ****New procedure will allow Field Office to approve.**
**Existing utility allowances have been reviewed in accordance with 24 CFR 965 and determined accurate.**
**Does the contract involve the ESCO in the yearly review of the new utility allowances, ref. 24 CFR 965?**

## EPC  – HUD Checklist

**Verification Methodology – **
**Any verification methodology other than “actual” (IPMVP, Option C) has been reviewed and approved by HUD.  **
**International Performance Measurement & Verification Protocol (**_[www.IPMVP.org](http://www.ipmvp.org/)__)_
**Option A – Partially Measured Retrofit Isolation – Requires HUD Approval**
**Option B – Retrofit Isolation  - Required HUD Approval**
**Option C – Whole Facility – Whole Facility – Recommend Approach**
**Option D – Calibration Simulation – Not Allowed.**

## EPC  – HUD Checklist

**Heating Degree Day adjustments – **
**HUD has approved the heating degree day adjustment methodology.  Note:  This adjustment is subject to HUD approval.  **
**Regression analysis – **
**Heating adjustment**
**  **
**Cooling adjustment**
**Vacancy adjustment**
**Usage adjustment**

## Highlights - HUD Field Office Review Procedures

**Investment Grade Audit – Required**
**Maximum Self Life – 2 years**
**Contract Term – May go to 20 years in “Energy Bill”**
**Floor Rate – PHA Risk**
**Capital Funds –**
** ****Non-Energy – Allowed**
** ****Energy – Allowed – Savings are subtracted.**
**Full and Open competition including soft costs.**
**Measurement & Verification – IPMVP – Option C, Option A & B with HUD Approval.**
**Third Party Requirement for PHA Managed Contracts.**
**Required format – Input forms.**
**Risk - PHA**