Bill Text: MI HB6584 | 2009-2010 | 95th Legislature | Introduced
Bill Title: Energy; conservation; energy conservation improvements to government facilities; establish. Creates new act.
Spectrum: Moderate Partisan Bill (Democrat 4-1)
Status: (Introduced - Dead) 2010-12-02 - Printed Bill Filed 12/02/2010 [HB6584 Detail]
Download: Michigan-2009-HB6584-Introduced.html
HOUSE BILL No. 6584
December 1, 2010, Introduced by Reps. Gonzales, Spade, Polidori, Huckleberry and Ball and referred to the Committee on Energy and Technology.
A bill to require state and local governmental entities to
undertake energy audits of their facilities and implement energy
conservation measures; to provide for energy service contracts and
the financing thereof; and to provide for the powers and duties of
certain state and local governmental officers and entities.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 1. As used in this act:
(a) "Cost-effective" means that the present value to a
governmental unit of the energy reasonably expected to be saved or
produced by a facility, activity, measure, or equipment 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, or
equipment over its useful life, if discounted at the cost of public
borrowing.
(b) "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 and operating costs or increase 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:
(i) Replacement or modification of lighting components,
fixtures, or systems.
(ii) Renewable energy and alternate energy systems.
(iii) Cogeneration systems that produce steam or forms of
energy, such as heat or electricity, for use primarily within a
building or complex of buildings.
(iv) Devices that reduce water consumption or sewer charges,
including all of the following:
(A) Water-conserving fixtures, appliances, and equipment,
including water-conserving landscape irrigation equipment, or the
substitution of non-water-using fixtures, appliances, and
equipment.
(B) 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.
(C) Equipment for recycling or reuse of water originating on
the premises or from other sources, including treated municipal
effluent.
(D) Equipment to capture water from nonconventional, alternate
sources, including air conditioning condensate or graywater, for
nonpotable uses.
(E) Metering equipment to segregate water use in order to
identify water conservation opportunities or verify water savings.
(v) Changes in operation and maintenance practices.
(vi) Indoor air quality improvements that conform to applicable
building code requirements.
(vii) Daylighting systems.
(viii) Insulating the building structure or systems in the
building.
(ix) 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.
(x) Automated or computerized energy control systems.
(xi) Heating, ventilation, or air conditioning system
modifications or replacements.
(xii) Energy recovery systems.
(xiii) Steam trap improvement programs that reduce operating
costs.
(xiv) 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.
(xv) Any life safety measures that provide long-term operating
cost reductions and are in compliance with state and local codes.
(xvi) Any life safety measures related to compliance with the
Americans with disabilities act, Public Law 101-336, that provide
long-term operating cost reductions and are in compliance with
state and local codes.
(xvii) 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.
(xviii) Services to reduce utility costs by identifying utility
errors and optimizing existing rate schedules under which service
is provided.
(xix) 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.
(c) "DELEG" means the department of energy, labor, and
economic growth.
(d) "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.
(e) "Governmental unit" means any agency, authority, or
political subdivision of this state or a local unit of government,
including, but not limited to, county, city, township, village,
local school district, and institution of higher education, state-
supported institution, or any combination of these.
(f) "Guaranteed energy savings contract" means a contract that
includes all of the following:
(i) The design and installation of equipment.
(ii) If applicable, operation and maintenance of any of the
measures implemented.
(iii) 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.
(g) "Investment grade audit" means a study by the qualified
energy services provider selected for a particular energy
performance contract project which 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.
(h) "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.
(i) "Person" means an individual, partnership, corporation,
association, governmental entity, or other legal entity.
(j) "Public building" means any structure, building, or
facility, including its equipment, furnishings, or appliances, that
is owned or operated by a governmental unit.
(k) "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.
(l) "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.
(m) "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. 3. (1) 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. Each
governmental unit shall undertake an energy audits and implement
cost-savings measures by January 1, 2011, January 1, 2012, and
January 1, 2013.
(2) Energy performance contracts shall be 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 20 years from the date of installation.
Sec. 5. (1) The department shall be the lead agency for the
development and promotion of a program of energy performance
contracts in governmental units. DELEG shall coordinate its
activities for this program with the department of technology,
management, and budget. DELEG shall do all of the following with
respect to this program:
(a) Assist the department of technology, management, and
budget to 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) A request for proposals.
(iii) An investment grade audit contract.
(iv) An energy services agreement, including the form of the
project savings guarantee, and project financing agreement.
(c) Promote the energy performance contract program to all
governmental units.
(d) Establish guidelines and an approval process for awarding
energy performance contracts. The guidelines shall require that the
cost savings projected by a qualified provider be reviewed by a
licensed professional engineer who has at least 3 years of
experience in energy calculation and review, is not an officer or
employee of a qualified provider for the contract under review, and
is not otherwise associated with the contract. In conducting the
review, the engineer shall focus primarily on the proposed
improvements from an engineering perspective, the methodology and
calculations related to cost savings, increases in revenue, and, if
applicable, efficiency or accuracy of metering equipment. An
engineer who reviews a contract under this subdivision shall
maintain the confidentiality of any proprietary information the
engineer acquires while reviewing the contract.
(2) The governor is encouraged to develop and submit to the
legislature a regular or supplemental budget request for the
additional funds and staffing required by DELEG to fulfill these
duties.
(3) DELEG shall assist governmental units in identifying,
evaluating, and implementing at their facilities cost-savings
measures. 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.
(4) DELEG may charge reasonable fees, not to exceed 2% of the
total cost of the energy performance contract project, for any
administrative support and resources or other services provided by
DELEG 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. 7. (1) The state process of implementing energy
performance contracts for governmental units shall include a
request for qualifications and a request for proposals.
(2) The department of technology, management, and budget may
compile a list of qualified energy service providers. The
department of technology, management, and budget shall attempt to
use objective criteria in the selection process. The criteria for
evaluation shall include 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) Postinstallation 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) Other factors determined by the governmental unit to be
relevant and appropriate and relate to the ability to perform the
project.
(3) Before entering into an energy performance contract under
this section, a governmental unit shall issue a request for
proposals from not more than 3 selected qualified energy service
providers. A governmental unit may thereafter award the energy
performance contract to the qualified energy service provider that
best meets the needs of the governmental unit, which need not be
the lowest cost provided. Each response to the request for
proposals shall include a cost-effective feasibility analysis. The
feasibility analysis shall serve as the selection document for
purposes of selecting a qualified energy service provider to engage
in final contract negotiations. The governmental agency shall
consider at least all of the following factors in choosing 1 of the
selected energy service providers with which to negotiate an energy
performance contract:
(a) Contract terms.
(b) Comprehensiveness of the proposal.
(c) Comprehensiveness of cost-savings measures.
(d) Experience.
(e) Quality of technical approach.
(f) Overall benefits to the governmental unit.
Sec. 9. (1) The qualified energy service provider chosen as a
result of the process set forth in section 7(3) 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.
(2) If, after preparation of the investment grade energy
audit, the governmental unit decides not to execute an energy
services agreement, and the costs and benefits described in the
investment grade energy audit are not materially different from
those described in the feasibility study submitted in response to
the request for proposals, then the costs incurred in preparing the
investment grade energy audit shall be paid to the qualified energy
service provider by the governmental unit. Otherwise the costs of
the investment grade energy audit shall be considered part of the
costs of the energy performance contract.
Sec. 11. (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. 13. Each energy performance contract shall provide both
of the following:
(a) That all payments between 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 utility
cost savings and operation and maintenance cost savings.
Sec. 15. (1) An energy performance contract, and payments
provided thereunder, may extend beyond the fiscal year in which the
energy performance contract became effective, subject to
appropriation of money, if required by law, for costs incurred in
future fiscal years.
(2) The term of an energy performance contract shall not
exceed 25 years. The term of an energy performance contract may
also reflect the useful life of the cost-savings measures.
(3) 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. Subject to appropriations under sections 9 and 11,
each governmental unit shall allocate sufficient money for each
fiscal year to make payment of any amounts payable by the
governmental unit under performance contracts during that fiscal
year.
Sec. 19. (1) A governmental unit that enters an energy
performance contract shall retain the savings achieved as a result
of the energy performance contract. The governmental unit shall not
utilize the savings to supplant otherwise appropriated funds for
the governmental unit.
(2) Subject to subsection (3), 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. If the reconciliation reveals a shortfall in
annual energy cost savings, the qualified provider is liable for
such shortfall. 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.
(3) 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.
Sec. 21. (1) During the term of each energy performance
contract, 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.
(2) The qualified energy service provider and governmental
unit may agree to make modifications in calculating savings based
on any of the following occurrences:
(a) Subsequent material change to the baseline energy
consumption identified at the beginning of the energy performance
contract.
(b) Changes in utility rates.
(c) Changes in the number of days in the utility billing
cycle.
(d) Changes in the total square footage of a building.
(e) Changes in the operational schedule of a facility.
(f) Changes in facility temperature.
(g) Material change in the weather.
(h) Material changes in the amount of equipment or lighting
used at a facility.
(i) Any other change which reasonably would be expected to
modify energy use or energy costs.
(3) For all projects carried out under this act, the
governmental unit shall identify the project, the investment on the
project, and the expected energy savings to DELEG and shall file
with DELEG a copy of all reports delivered pursuant to subsection
(1). DELEG may report energy savings from these projects to the
United States department of energy, energy information
administration under section 1605(b) of the energy policy act of
1992, 42 USC 13385(b).
Sec. 23. An energy performance contract shall include
contingency provisions in the event that actual savings do not meet
predicted savings.
Sec. 25. Governmental units may direct savings realized under
an energy performance contract to contract payment and other
expenses. Governmental units are encouraged to reinvest savings
whenever practical into cost-savings measures, if the governmental
unit is satisfying all obligations under the performance contract.
