Court Opinion

ID: 3457894
Source: CourtListenerOpinion
Date Created: 2016-07-05 20:26:22.866244+00
Date Added: 2024-06-11T14:04:16.694267
License: Public Domain

Dear Mr. Monica:
You have requested the opinion of this office on whether a proposed Parish project that would replace all existing Parish owned water meters would qualify as "Performance-based energy efficiency contract" pursuant to La. R.S. 39:1484 and La. R.S.33:4547.1 et seq. According to the opinion request the existing Parish owned water meters will be replaced with new water meters that will contain leak detection equipment and will have automatic reading technology that will result in an increase in billable usage of water and will reduce future labor and capital replacement costs.
R.S. 39:1484A(14) defines a "Performance-based energy efficiency contract" as:
      "a contract for energy efficiency services and equipment in which the payment obligation for each year of the contract is either: (a) Set as a percentage of the annual energy cost savings attributable to the services or equipment under the contract, or (b) Guaranteed by the person under contract to be less than the annual energy cost savings attributable to the services or equipment under the contract."
R.S. 33:4547.1 provides:
      A. Any political subdivision may enter into a performance-based energy efficiency contract for services and equipment. Such a contract shall be considered a contract for services and shall be exempt from the provisions of R.S. 38:2212 but shall be subject to the provisions of this Chapter.
      B. For the purposes of this Chapter, a performance-based energy efficiency contract shall be defined as a contract for energy efficiency services and equipment in which the payment obligation for each year of the contract is either:
      (1) Set as a percentage of the annual energy cost savings attributable to the services or equipment under the contract; or (2) Guaranteed by the person under contract to be less than the annual energy cost savings attributable to the services or equipment under the contract.
The provisions of R.S. 33:4547.2 require performance-based energy efficiency contracts be entered pursuant to a defined request for proposals process. R.S. 33:4547.3A addresses the term of such contracts and further provides that all such contracts "shall contain a guarantee of energy savings." This means that the gross amount of energy consumed will be reduced as a result of the performance of the contract.
R.S. 33:4547.3B makes it clear that "maintenance savings" must be included in any calculation of annual energy cost savings attributable to the services or equipment provided under the contract. "Maintenance savings" are defined as "operation expenses eliminated and future capital replacement expenditures avoided as a result of new equipment installed or services performed by the performance contractor." However, maintenance savings alone will not support such a contract. AG Op No. 99-280.
Taken together, these provisions require that maintenance savings and energy savings be factored into the contract in calculating the fee due pursuant to R.S. 33:4547.1B. This would require that the contract result in direct reductions in energy consumption as well as the elimination of operating expenses. The result must be a gross savings in energy related expenses, from which contract fees are to be paid.
The proposed contract involves the replacement of all existing Parish owned water meters with new meters that contain leak detection equipment and automatic reading technology. The current maintenance schedule indicates that the Parish replaces approximately 150 meters per year. The proposed contract will require a 10 year guarantee or warranty on each new meter that will eliminate or significantly reduce short term future capital replacement costs and eliminate some operating expenses.
It does not appear that the proposed contract will result in any direct reduction in energy consumption. Such a reduction is a necessary requirement to qualify for a performance-based energy efficiency contract pursuant to R.S. 33:4547.1. The proposed contract will not have a set percentage of annual energy cost savings attributable to the services or equipment provided under the contract. Nor will the proposed contract guarantee an annual energy cost savings that will be less annual contract payment.
While the leak detection equipment will result in an increase in billable usage of water such an increase will not used to calculate the required guaranteed energy cost savings. Installing a more efficient system that tracks water usage does not reduce energy consumption. While the proposed contract will include a guarantee of savings the guarantee is related to an increase in billable water usage and a savings in maintenance costs rather than savings due to the direct reduction of energy consumption. As stated above maintenance saving alone cannot qualify a project for a performance-based energy efficiency contract. The proposed contract will not result in any direct reductions in energy consumption as required by the statute to qualify the project from a performance-based energy efficiency contract.
Given this result, it is the opinion of this office that the proposed contract will not result in the direct reduction of energy consumption as required by R.S. 33:4547.1 et seq. and therefore would not qualify for a performance-based energy efficiency contract.
I trust that this answers your inquiry. Please let me know if we may be of further assistance in this matter.
Yours very truly,
  CHARLES C. FOTI, JR. Attorney General
  BY: RICHARD L. McGIMSEY Assistant Attorney General