Senate Study Bill 1296 SENATE FILE BY (PROPOSED COMMITTEE ON GOVERNMENT OVERSIGHT BILL BY CO=CHAIRPERSONS COURTNEY AND LUNDBY) Passed Senate, Date Passed House, Date Vote: Ayes Nays Vote: Ayes Nays Approved A BILL FOR 1 An Act providing for energy performance=based contracts for 2 certain public entities and public educational facilities. 3 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 4 TLSB 2098XC 81 5 rn/gg/14 PAG LIN 1 1 Section 1. NEW SECTION. 297A.l STATE POLICY. 1 2 The general assembly finds that investment in energy 1 3 conservation measures by public facilities can reduce the 1 4 amount of energy consumed by the facilities and produce both 1 5 immediate and long=term cost savings. It is the policy of 1 6 this state to encourage school districts, area education 1 7 agencies, community colleges, public universities, 1 8 municipalities, counties, and state institutions to invest in 1 9 facility technology infrastructure upgrades and energy 1 10 conservation measures that reduce energy consumption, produce 1 11 a cost savings, or improve the quality of indoor air, or when 1 12 economically feasible, to build, operate, maintain, or 1 13 renovate public facilities in a manner which will minimize 1 14 energy consumption or maximize energy savings. It is 1 15 additionally the policy of this state to encourage 1 16 reinvestment of energy savings resulting from energy 1 17 conservation measures and facility technology infrastructure 1 18 upgrades into additional and continued energy conservation 1 19 efforts. The department of natural resources, in consultation 1 20 with the department of education, shall adopt rules pursuant 1 21 to chapter 17A for the administration of this chapter. 1 22 Sec. 2. NEW SECTION. 297A.2 DEFINITIONS. 1 23 As used in this chapter, unless the context otherwise 1 24 requires: 1 25 1. "Energy conservation measure or facility technology 1 26 infrastructure upgrade" means a training program, facility 1 27 alteration, or equipment to be used in new construction, 1 28 including an addition to an existing facility, that reduces 1 29 energy costs and includes, but is not limited to, any of the 1 30 following: 1 31 a. Insulation of the facility structure or systems within 1 32 the facility. 1 33 b. Storm windows or doors, caulking or weather stripping, 1 34 multiple=glazed windows or doors, heat=absorbing or heat= 1 35 reflective glazed and coated window or door systems, 2 1 additional glazing, reductions in glass area, or other window 2 2 and door system modifications that reduce energy consumption. 2 3 c. Automated or computerized energy control systems 2 4 including related software=required network communication 2 5 wiring, computer devices, wiring and support services for 2 6 building maintenance or delivery of energy conservation 2 7 services. Such energy control system technology 2 8 infrastructure may be used, as applicable, for other public 2 9 corporation technology needs. Other technology infrastructure 2 10 improvements may be implemented if the cost is supported by 2 11 the energy savings generated by other energy conservation 2 12 measures or facility technology infrastructure upgrades. 2 13 d. Heating, ventilating, or air conditioning system 2 14 modifications or replacements. 2 15 e. Replacement or modification of lighting fixtures to 2 16 increase the energy efficiency of the lighting system which, 2 17 at a minimum, shall conform to the applicable state or local 2 18 building code. 2 19 f. Energy recovery systems. 2 20 g. Renewable energy systems, such as solar, biomass, and 2 21 wind. 2 22 h. Devices that reduce water consumption or sewer charges. 2 23 i. Any measure not otherwise defined that produces energy 2 24 cost savings or British thermal unit reductions. 2 25 2. "Energy cost savings" means a measured reduction in 2 26 fuel, energy, or operation and maintenance cost savings 2 27 created from the implementation of one or more energy 2 28 conservation measures or facility technology infrastructure 2 29 upgrades when compared with an established baseline for 2 30 previous fuel, energy, or operation and maintenance costs. 2 31 3. "Energy performance=based contract" means a contract 2 32 for the recommendation and implementation of energy 2 33 conservation measures or facility technology infrastructure 2 34 upgrades which includes, at a minimum, all of the following: 2 35 a. The design and installation of equipment to implement 3 1 one or more energy conservation measures or facility 3 2 technology infrastructure upgrades, and, if applicable, 3 3 operation and maintenance of such measures or upgrades. 3 4 b. The amount of any actual annual energy and operational 3 5 cost savings. The amount shall be guaranteed in the contract 3 6 by the qualified provider and verified by a professional 3 7 engineer or registered architect who is not employed or has 3 8 contracted with the qualified provider. The verification 3 9 shall occur using a process established by the department of 3 10 natural resources. 3 11 4. "Energy performance=based evaluation" means performance 3 12 of an energy audit, data collection, or other related analyses 3 13 preliminary to the undertaking of energy conservation measures 3 14 or facility technology infrastructure upgrades, and 3 15 maintenance of project monitoring and data collection to 3 16 verify postinstallation energy consumption and energy=related 3 17 operating costs. The department of natural resources shall 3 18 establish performance guidelines that consider federal energy 3 19 management program guidelines. Any cost for support services 3 20 for building maintenance or delivery of energy conservation 3 21 services that will continue beyond the length of an energy 3 22 performance=based contract shall be identified specifically in 3 23 the energy performance=based evaluation. 3 24 5. "Maintenance cost savings" means auditable operating 3 25 expenses eliminated and future capital replacement 3 26 expenditures avoided as a result of new equipment installed or 3 27 services performed by the qualified provider. 3 28 6. "Public corporation" means a school district as 3 29 described in chapter 274, a community college as defined in 3 30 chapter 260C, a public university, city, county, or state 3 31 agency. 3 32 7. "Qualified provider" means a business or person that 3 33 has been qualified by the department of natural resources. 3 34 The department of natural resources shall adopt rules pursuant 3 35 to chapter 17A to establish a qualifications process. The 4 1 process shall consider accreditation by the national 4 2 association of energy service companies, certification by the 4 3 association of energy engineers, or professional licensure as 4 4 an engineer or registered architect in Iowa. A business or 4 5 person accredited by the national association of energy 4 6 service companies shall be qualified in Iowa. 4 7 Sec. 3. NEW SECTION. 297A.3 REQUESTS FOR PROPOSALS 4 8 EVALUATION. 4 9 1. Prior to entering into an energy performance=based 4 10 contract as provided in section 297A.4, a public corporation 4 11 shall announce a request for proposals. A request for 4 12 proposals shall be advertised for public bidding and let 4 13 publicly. The model request for proposals format developed by 4 14 the department of natural resources shall be made available 4 15 for use by public corporations. A public corporation shall 4 16 administer the public bidding and letting, requesting 4 17 innovative solutions and proposals for energy conservation 4 18 measures and facility technology infrastructure upgrades. 4 19 Proposals submitted shall be sealed. If the model request for 4 20 proposals format is not used, the request for proposals shall 4 21 include, at a minimum, all of the following: 4 22 a. Name and address of the public corporation. 4 23 b. Name, address, title, and telephone number of a contact 4 24 person for the public corporation. 4 25 c. Notice indicating that the public corporation is 4 26 requesting qualified providers to propose energy conservation 4 27 measures and facility technology infrastructure upgrades to be 4 28 provided pursuant to an energy performance=based contract. 4 29 d. Date, time, and place where proposals must be received. 4 30 e. Evaluation criteria for assessing the proposals. 4 31 f. Any other stipulations and clarifications the public 4 32 corporation may require. 4 33 2. The public corporation shall evaluate any sealed 4 34 proposal from a qualified provider. Sealed proposals shall be 4 35 opened by a designated member or employee of the governing 5 1 body of the public corporation at a public meeting during 5 2 which the contents of the proposals shall be announced. Each 5 3 person submitting a sealed proposal must receive at least ten 5 4 days' notice of the time and place of the public meeting at 5 5 which the public corporation proposes to award an energy 5 6 performance=based contract. The public corporation shall 5 7 analyze each qualified provider's estimate of the cost of 5 8 design, engineering, installation, maintenance, repairs, debt 5 9 service, conversions to a different energy or fuel source, and 5 10 postinstallation project monitoring, data collection, and 5 11 reporting. The evaluation shall include a detailed analysis 5 12 of whether the energy consumed or the operating costs, or 5 13 both, will be reduced. Selection of the qualified provider 5 14 shall, through either a request for proposals process or other 5 15 purchasing method, constitute selection of the best value 5 16 based on life cycle cost analysis of the component parts and 5 17 systems to the public corporation. The public corporation 5 18 shall enter into an energy performance=based contract. 5 19 Sec. 4. NEW SECTION. 297A.4 AWARD OF GUARANTEED ENERGY 5 20 COST SAVINGS CONTRACT. 5 21 1. A public corporation shall select a qualified provider 5 22 that best meets the needs of the public corporation based on 5 23 life cycle cost analysis. After completing its evaluation of 5 24 the proposals received pursuant to section 297A.3, the public 5 25 corporation shall provide public notice of the public meeting 5 26 at which it proposes to award an energy performance=based 5 27 contract. The public notice shall contain the names of the 5 28 parties to the proposed contract and the purpose of the 5 29 contract. The public notice shall be published at least ten 5 30 days prior to the public meeting. A public corporation may 5 31 enter into an energy performance=based contract with a 5 32 qualified provider if it finds, after evaluating the proposal 5 33 pursuant to section 297A.3, that the total amount the public 5 34 corporation would spend on the design, implementation, 5 35 financing, and performance management of the energy 6 1 conservation measures or facility technology infrastructure 6 2 upgrades and modernization measures recommended in the 6 3 proposal would not exceed the amount to be saved in either 6 4 energy or operational costs, or both, within a twenty=year 6 5 period from the date of installation of such measures or 6 6 upgrades, based on life=cycle costing calculations, if the 6 7 recommendations in the proposal are followed. 6 8 2. A public corporation may enter into a financing 6 9 agreement as provided in sections 473.19, 473.20, and 473.20A, 6 10 for the purchase and installation of energy conservation 6 11 measures or facility technology infrastructure upgrades and 6 12 modernization measures. Energy performance=based contracts 6 13 may extend beyond the fiscal year in which they become 6 14 effective, and may be automatically renewed annually for up to 6 15 twenty years. 6 16 3. A qualified provider shall be responsible for the 6 17 measurement and verification of the savings generated by the 6 18 energy conservation measures or facility technology 6 19 infrastructure upgrades and modernization measures. The 6 20 process to be used for the measurement and verification shall 6 21 follow the guidelines of the federal energy management 6 22 program. A public corporation shall have these savings 6 23 verified by a qualified independent third party on an annual 6 24 basis. The verification shall also include an annual 6 25 reconciliation of the guaranteed energy cost savings for the 6 26 life of any financing agreement obligations or until the 6 27 project is repaid from energy savings. The cost of this 6 28 verification shall be a part of the contract with the 6 29 qualified provider. The department of natural resources shall 6 30 establish the qualifications necessary for a business or 6 31 person to become a qualified independent third party. A 6 32 business or person accredited by the national association of 6 33 energy service companies shall be qualified in Iowa. 6 34 4. A selected qualified provider shall provide a one 6 35 hundred percent performance guarantee bond to the public 7 1 corporation for the installation and faithful performance of 7 2 the installed energy conservation measures or facility 7 3 technology infrastructure upgrades as outlined in the energy 7 4 performance=based contract. 7 5 5. A public corporation has the right to terminate an 7 6 energy performance=based contract at any time provided that 7 7 written notice to the qualified provider is provided at least 7 8 thirty days prior to termination. All qualified providers 7 9 shall include clear statements and requirements regarding 7 10 contract termination as part of the contract documentation. 7 11 The documentation shall clearly state the options of the 7 12 public corporation to satisfy the contract early and include 7 13 all associated costs. The documentation shall also state the 7 14 rights of a public corporation under a contract for 7 15 terminating the contract due to nonperformance, for exercising 7 16 rights pursuant to the performance guarantee bond, and for 7 17 listing all costs and responsibilities for payment of any 7 18 remaining debt associated with energy and operational savings 7 19 projects already implemented. The information and associated 7 20 costs described in this subsection shall be provided to a 7 21 public corporation before an energy performance=based contract 7 22 is approved. 7 23 6. An energy performance=based contract shall include a 7 24 written guarantee by a qualified provider that the amount of 7 25 any actual energy and operational savings shall be guaranteed. 7 26 The amount must also meet or exceed the total annual contract 7 27 payments, including financing charges, made by the public 7 28 corporation over the life of the contract. A qualified 7 29 provider shall reimburse a public corporation for any 7 30 shortfall of guaranteed energy cost savings projected in the 7 31 contract. Actual savings documentation shall be reconciled on 7 32 an annual basis as provided in the contract. Any savings 7 33 shortfall shall be made whole by the qualified provider within 7 34 sixty days. Excess documented and mutually agreed upon 7 35 savings may be carried over to future years. A qualified 8 1 provider shall provide the public corporation with a one 8 2 hundred percent performance guarantee bond for installation 8 3 and retrofit projects. A qualified provider shall guarantee 8 4 the savings for the length of the contract and shall also 8 5 provide the guaranteed performance bonds on an annual basis 8 6 renewed each year for the term of the contract. An energy 8 7 performance=based contract may provide for payments over a 8 8 period of time, not to exceed twenty years. 8 9 7. A public corporation shall not have any state financial 8 10 assistance or any appropriations or reimbursements reduced as 8 11 a result of energy and operational savings realized from an 8 12 energy performance=based contract for the installation of 8 13 energy conservation measures or facility technology 8 14 infrastructure upgrades. 8 15 EXPLANATION 8 16 This bill allows public corporations, through a request for 8 17 proposals process, to enter into energy performance=based 8 18 contracts with qualified providers for purposes of undertaking 8 19 one or more energy conservation measures or facility 8 20 technology infrastructure upgrades. The bill provides that a 8 21 public corporation may enter into an energy performance=based 8 22 contract with a qualified provider if it finds, after 8 23 evaluating the proposal, that the total amount it would spend 8 24 on the design, implementation, financing, and performance 8 25 management of the energy conservation measures or facility 8 26 technology infrastructure upgrades recommended in the proposal 8 27 would not exceed the amount to be saved in either energy or 8 28 operational costs, or both, within a 20=year period from the 8 29 date of installation, based on life=cycle costing 8 30 calculations, if the recommendations in the proposal are 8 31 followed. The bill provides that a qualified provider shall 8 32 be responsible for the measurement and verification of the 8 33 savings generated by the energy conservation measures or 8 34 facility technology infrastructure upgrades. The bill 8 35 provides that a public corporation shall have these savings 9 1 verified by a qualified independent third party. The bill 9 2 provides that a public corporation has the right to terminate 9 3 an energy performance=based contract at any time provided that 9 4 written notice to the qualified provider is provided at least 9 5 30 days prior to termination. 9 6 The bill provides that an energy performance=based contract 9 7 shall include a written guarantee by a qualified provider of 9 8 the amount of any actual energy and operational savings. The 9 9 bill provides that a qualified provider shall reimburse a 9 10 public corporation for any shortfall of guaranteed energy cost 9 11 performance or payment projected in the contract and that 9 12 actual savings documentation shall be reconciled on an annual 9 13 basis as provided in the contract. The bill provides that a 9 14 qualified provider shall guarantee the savings for the length 9 15 of the contract and shall also provide guaranteed performance 9 16 bonds on an annual basis renewed each year for the term of the 9 17 contract. The bill provides that a public corporation shall 9 18 not have any state financial assistance or any appropriations 9 19 or reimbursements reduced as a result of energy and 9 20 operational savings realized from an energy performance=based 9 21 contract for the installation of energy conservation measures 9 22 or facility technology infrastructure upgrades. 9 23 LSB 2098XC 81 9 24 rn:rj/gg/14