Bill Text: MI HB5727 | 2011-2012 | 96th Legislature | Introduced
Bill Title: State financing and management; purchasing; energy-based performance contracting for governmental energy use; require. Creates new act.
Spectrum: Bipartisan Bill
Status: (Passed) 2012-12-31 - Assigned Pa 625'12 2012 Addenda [HB5727 Detail]
Download: Michigan-2011-HB5727-Introduced.html
HOUSE BILL No. 5727
June 6, 2012, Introduced by Reps. Haveman, Geiss, Horn, Roy Schmidt, Walsh, Kandrevas, Kowall, Crawford, Dillon, Bumstead, Byrum and Wayne Schmidt and referred to the Committee on Energy and Technology.
A bill to require governmental units to implement cost-
effective energy conservation improvements to minimize energy
consumption and reduce operating costs; to require energy audits;
to specify procedures for obtaining contracts to reduce energy
consumption; to prescribe payment methods for energy conservation
contracts; and to prescribe duties for certain state governmental
officers and entities.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 1. This act shall be known and may be cited as the "cost-
effective governmental energy use act".
Sec. 2. "Cost-effective" means that the present value to a
governmental unit of the energy, utility, capital cost avoidance,
capital improvement, and operational costs and revenues reasonably
expected to be saved or produced by a facility, activity, measure,
equipment, or system over its useful life, including any
compensation received from a utility, is greater than the net
present value of the costs of implementing, maintaining, and
operating such facility, activity, measure, equipment, or system
over its useful life, if discounted at the cost of public
borrowing.
Sec. 3. (1) "Cost-savings measure" means any facility
improvement, repair, or alteration of, or any equipment, fixture,
or furnishing to be added or used in, any facility that is designed
to reduce energy consumption, utility costs, capital avoidance
costs, capital improvement costs, maintenance costs, and operating
costs or increase revenue or the operating efficiency of the
facility for its appointed functions and that is cost-effective.
Cost-savings measure includes, but is not limited to, all of the
following:
(a) Replacement or modification of lighting components,
fixtures, or systems.
(b) Renewable energy and alternate energy systems.
(c) Cogeneration systems that produce steam or forms of
energy, such as heat or electricity, for use primarily within a
building or complex of buildings.
(d) Devices that reduce water consumption or sewer charges,
including all of the following:
(i) Water-conserving fixtures, appliances, and equipment,
including water-conserving landscape irrigation equipment, or the
substitution of non-water-using fixtures, appliances, and
equipment.
(ii) Landscaping measures that reduce watering demands and
capture and hold applied water and rainfall, including landscape
contouring, such as the use of berms, swales, and terraces, the use
of soil amendments, such as compost, that increase the water-
holding capacity of the soil, rainwater harvesting equipment, and
equipment to make use of water collected as part of a storm water
system installed for water quality control.
(iii) Equipment for recycling or reuse of water originating on
the premises or from other sources, including treated municipal
effluent.
(iv) Equipment to capture water from nonconventional, alternate
sources, including air conditioning condensate or graywater, for
nonpotable uses.
(v) Metering equipment to segregate water use in order to
identify water conservation opportunities or verify water savings.
(vi) Changes in operation and maintenance practices.
(vii) Indoor air quality improvements that conform to
applicable building code requirements.
(viii) Daylighting systems.
(ix) Insulating the building structure or systems in the
building.
(x) Storm windows or doors, caulking or weather stripping,
multiglazed windows or door systems, heat-absorbing or heat
reflective glazed and coated window and door systems, additional
glazing, reductions in glass area, or other window and door system
modifications that reduce energy consumption.
(xi) Automated or computerized energy control systems.
(xii) Heating, ventilation, or air conditioning system
modifications or replacements.
(xiii) Energy recovery systems.
(xiv) Steam trap improvement programs that reduce operating
costs.
(xv) Building operation programs that reduce utility and
operating costs including, but not limited to, computerized energy
management and consumption tracking programs, staff and occupant
training, and other similar activities.
(xvi) Any life safety measures that provide long-term operating
cost reductions and are in compliance with state and local codes.
(xvii) Any life safety measures related to compliance with the
Americans with disabilities act that provide long-term operating
cost reductions and are in compliance with state and local codes.
(xviii) A program to reduce energy costs through rate
adjustments, load shifting to reduce peak demand, or use of
alternative energy suppliers, such as, but not limited to:
(A) Changes to more favorable rate schedules.
(B) Negotiation of lower rates, with the same supplier or a
new supplier, if applicable.
(C) Auditing of energy service billing and meters.
(xix) Services to reduce utility costs by identifying utility
errors and optimizing existing rate schedules under which service
is provided.
(xx) Any other installation, modification of installation, or
remodeling of building infrastructure improvements that produce
utility or operational cost savings for their appointed functions
in compliance with applicable state and local building codes.
(2) "Department" means the department of technology,
management, and budget.
Sec. 4. (1) "Energy performance contract" means a contract
between a governmental unit and a qualified energy service provider
for evaluation, recommendation, and implementation of 1 or more
cost-savings measures. A performance contract may be structured as
either a guaranteed energy savings contract or a shared energy
savings contract.
(2) "Governmental unit" means any agency, authority, or
political subdivision of this state.
(3) "Guaranteed energy savings contract" means a contract that
includes all of the following:
(a) The design and installation of equipment.
(b) If applicable, operation and maintenance of any of the
measures implemented.
(c) Guaranteed annual savings from reduced energy consumption
and operating costs or increased operating efficiency that meet or
exceed the total annual contract payments made by the governmental
unit for the contract, including financing charges to be incurred
by the governmental unit over the life of the contract.
(4) "Investment grade audit" means a study by the qualified
energy services provider selected for a particular energy
performance contract project that includes detailed descriptions of
the improvements recommended for the project, the estimated costs
of the improvements, and the operations and maintenance cost
savings and utility cost savings projected to result from the
recommended improvements.
(5) "Operation and maintenance cost savings" means a
measurable decrease in operation and maintenance costs or future
replacement expenditures that is a direct result of the
implementation of 1 or more utility cost-savings measures.
Operation and maintenance cost savings shall be calculated in
comparison with an established baseline of operation and
maintenance costs.
Sec. 5. (1) "Person" means an individual, partnership,
corporation, association, governmental entity, or other legal
entity.
(2) "Public building" means any structure, building, or
facility, including its equipment, furnishings, or appliances, that
is owned or operated by a governmental unit.
(3) "Qualified energy service provider" means a person with a
record of successful energy performance contract projects or a
person who is experienced in the design, implementation, and
installation of energy efficiency and facility improvement
measures, the technical capabilities to ensure such measures
generate energy and operational cost savings, and the ability to
secure the financing necessary to support energy savings guarantees
and accredited by the national association of energy service
companies (NAESCO), prequalified for work through the United States
department of energy for federal facilities and the United States
department of defense.
(4) "Shared energy savings contract" means a contract under
which the rate of payments is based upon energy and operational
cost savings and a stipulated maximum energy consumption level over
the life of the contract.
(5) "Utility cost savings" means any utility expenses that are
eliminated or avoided on a long-term basis as a result of equipment
installed or modified, or services performed by a qualified energy
service provider. Utility cost savings do not include merely
shifting personnel costs or similar short-term cost savings.
Sec. 6. Each governmental unit shall implement cost-effective
energy conservation improvements and maintain efficient operation
of its facilities to minimize energy consumption and related
environmental impacts and reduce operating costs.
Sec. 7. Energy performance contracts are the preferred method
for completing energy audits and implementing cost-savings
measures. Any governmental unit may enter into an energy
performance contract with a qualified energy services provider to
produce utility cost savings or operation and maintenance cost
savings. Cost-savings measures implemented under an energy
performance contract shall comply with state or local building
codes. Any governmental unit may implement other capital
improvements in conjunction with an energy performance contract if
the measures that are being implemented to achieve energy and
operation and maintenance cost savings are a significant portion of
an overall project. A governmental unit shall not enter into an
energy savings performance contract for a period of more than 1
year unless the governmental unit finds that the amount the
governmental unit would spend on the cost-savings measures will not
exceed the amount to be saved in energy, water, wastewater, and
operating costs over 25 years from the date of installation.
Sec. 8. The department is the lead agency for the development
and promotion of a program of energy performance contracts in
governmental units. The department shall do all of the following
with respect to this program:
(a) Assemble a list of qualified energy service providers and
to negotiate with such qualified energy service providers master
service contracts and pricing schedules.
(b) Develop a standardized energy performance contract process
and standard energy performance contract documents, including all
of the following:
(i) A request for qualifications.
(ii) An investment grade audit and energy services contract.
(iii) Guidelines and an approval process for awarding energy
performance contracts that allow the governmental unit to contract
with a qualified energy services company for an investment grade
audit to be performed at any building, structure, or facility.
Under the contract, the energy services company shall prepare a
report containing a description of the physical modifications to be
performed to the building, structure, or facility that are required
to effect specific future energy savings within a specified period
and a determination of the minimum savings in energy usage that
will be realized by the governmental unit from making these
modifications within that period. After review of the investment
grade audit report and subject to approval, the governmental unit
may contract with the qualified energy services company for
construction work to be performed at the building, structure, or
facility for the purpose of realizing potential savings of future
energy costs identified in the audit if the department determines
that the anticipated savings to the governmental unit after
completion of the work will enable recovery of the costs of the
work within a maximum of 15 years.
(c) Promote the energy performance contract program to all
governmental units.
Sec. 9. The department shall develop an annual report of total
facility capital liability and total dollar amount of completed and
substantially completed energy performance contract work. Prior to
December 31 of each calendar year, the department shall present
this report to the members of the house appropriations committee
and the senate appropriations committee.
Sec. 10. The department shall assist governmental units in
identifying, evaluating, and implementing cost-savings measures at
their facilities. The assistance shall include notifying
governmental units of their responsibilities under this act;
apprising governmental units of opportunities to develop and
finance energy performance contract projects; providing technical
and analytical support, including procuring energy performance
contract services; reviewing verification procedures for energy
savings; and assisting in the structuring and arranging of
financing for energy performance contract projects.
Sec. 11. The department may charge reasonable fees, not to
exceed the lesser of $300,000.00 or 2% of the total cost of the
energy performance contract project, for any administrative support
and resources or other services provided by the department under
this section from the governmental units that use its technical
support services. A governmental unit may add the costs of these
fees to the total cost of an energy performance contract.
Sec. 12. The department shall use a request for qualifications
process to compile a list of no more than 5 qualified energy
service providers. The criteria used for evaluation by the
department shall include, but not be limited to, all of the
following substantive factors to assess the capability of the
qualified energy service provider in the areas of design,
engineering, installation, maintenance, and repairs associated with
energy performance contracts:
(a) Experience in conversions to a different energy or fuel
source associated with a comprehensive energy efficiency retrofit.
(b) Experience and capabilities in post-installation project
monitoring, data collection, and reporting of savings.
(c) Overall project experience and qualifications.
(d) Management capability.
(e) Ability to access long-term financing.
(f) Experience with projects of similar size and scope.
(g) The financial ability to cover energy guarantees, the
procurement of bonds or insurance, and the financial ability to
cover energy guarantees as demonstrated by audited financial
statements.
(h) Other factors proposed by a governmental unit and
determined by the department of technology, management, and budget
to be relevant, appropriate, and related to the ability to perform
the project.
Sec. 13. The qualified energy service provider chosen as a
result of the process set forth in this section shall prepare an
investment grade energy audit, which, upon acceptance, shall be
part of the final energy performance contract. The investment grade
energy audit shall include estimates of the amounts by which
utility cost savings and operation and maintenance cost savings
would increase and itemized estimates of all costs of such utility
cost-savings measures or energy-savings measures, including, but
not limited to, all of the following:
(a) Design.
(b) Engineering
(c) Equipment.
(d) Materials.
(e) Installation.
(f) Maintenance.
(g) Repairs.
(h) Debt service.
Sec. 14. (1) A governmental unit may use designated funds,
bonds, or master lease for any energy performance contract,
including purchases using installment payment contracts or lease
purchase agreements, if that use is consistent with the purpose of
the appropriation.
(2) Unless otherwise provided by law or ordinance, a
governmental unit may use funds designated for operating and
capital expenditures or utilities for any energy performance
contract.
(3) A guaranteed energy savings contract may provide for
financing, including tax-exempt financing, by a third party. The
contract for third-party financing may be separate from the
guaranteed energy savings contract. A separate contract for third-
party financing shall include a provision that the third-party
financier will not be granted rights or privileges that exceed the
rights and privileges available to the contractor under the
guaranteed energy savings contract.
Sec. 15. (1) Each energy performance contract shall provide
both of the following:
(a) All payments between the parties, except obligations on
termination of the contract before its expiration, shall be made
over time.
(b) The objective of the energy performance contract is
implementation of cost-savings measures and achievement of both
utility cost savings and operation and maintenance cost savings.
(2) An energy performance contract and payments under that
contract may extend beyond the fiscal year in which the energy
performance contract becomes effective, subject to appropriation of
money, if required by law, for costs incurred in future fiscal
years.
(3) The term of an energy performance contract shall not
exceed 15 years. The term of an energy performance contract may
also reflect the useful life of the cost-savings measures.
(4) An energy performance contract may provide for payments
over a period of time not to exceed deadlines specified in the
energy performance contract from the date of the final installation
of the cost-savings measures.
Sec. 17. (1) Subject to subsection (2), an energy performance
contract shall require the qualified energy service provider to
provide to the governmental unit an annual reconciliation of the
guaranteed energy cost savings. The contract shall provide that the
qualified provider is liable for any shortfall if the
reconciliation reveals a shortfall in annual energy cost savings.
If the reconciliation reveals an excess in annual energy cost
savings, the excess savings may be used to cover potential energy
cost-savings shortages in subsequent contract years.
(2) An energy performance contract may provide that
reconciliation of the amounts owed under an energy performance
contract shall occur less frequently than annually, with final
reconciliation occurring within the term of the energy performance
contract.
(3) During the term of each energy performance contract,
except for stipulated savings that are both analyzed in accordance
with industry standards and engineering standards and agreed to by
the parties, the qualified energy service provider shall monitor
the reductions in energy consumption and the cost savings
attributable to the cost-savings measures installed pursuant to the
performance contract, and shall, at least annually, provide a
report to the governmental unit documenting the performance of the
cost-savings measures to the governmental unit. The report shall
comply with the international protocol for measurement and
verification as set forth by the federal energy management program.
