Bill Text: TX SB1828 | 2023-2024 | 88th Legislature | Introduced


Bill Title: Relating to the procurement by local governments of energy savings performance contracts for certain conservation measures; creating criminal offenses; authorizing a fee.

Spectrum: Partisan Bill (Democrat 1-0)

Status: (Introduced - Dead) 2023-04-18 - Left pending in committee [SB1828 Detail]

Download: Texas-2023-SB1828-Introduced.html
  88R614 MP-D
 
  By: Hinojosa S.B. No. 1828
 
 
 
A BILL TO BE ENTITLED
 
AN ACT
  relating to the procurement by local governments of energy savings
  performance contracts for certain conservation measures; creating
  criminal offenses; authorizing a fee.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  Subtitle C, Title 9, Local Government Code, is
  amended by adding Chapter 302A to read as follows:
  CHAPTER 302A.  ENERGY SAVINGS PERFORMANCE CONTRACTS
  SUBCHAPTER A. GENERAL PROVISIONS
         Sec. 302A.001.  DEFINITIONS.  In this chapter:
               (1)  "Capital cost avoidance savings" means money spent
  by a local government to pay for a conservation measure:
                     (A)  that has been identified as a permanent
  equipment replacement or repair by an investment grade audit of a
  performance contract under Section 302A.108; and
                     (B)  the cost of which has been documented and
  discounted by any additional utility cost savings or any operation
  and maintenance cost savings generated from another conservation
  measure identified in the performance contract when compared with
  an established baseline.
               (2)  "Conservation measure" means the installation or
  implementation of an item, equipment, modification, alteration,
  improvement, or system for, or any employee training program or
  architectural or engineering consulting service related to the
  operation of, a conservation technique in a new or existing
  facility, other than a conservation technique for the design or new
  construction of a water supply project, water plant, wastewater
  plant, water and wastewater distribution or conveyance facility, or
  drainage project.
               (3)  "Conservation technique" means:
                     (A)  the insulation of a building structure or a
  system within the building;
                     (B)  a storm window or door, any caulking or
  weather stripping, a multiglazed window or door, a heat-absorbing
  or heat-reflective glazed and coated window or door system, or
  another window or door system modification that reduces energy
  consumption;
                     (C)  an automatic energy control system,
  including computer software and technical data licenses;
                     (D)  a heating, ventilating, or air-conditioning
  system modification or replacement that reduces energy or water
  consumption;
                     (E)  the replacement or retrofitting of a lighting
  fixture that increases energy efficiency;
                     (F)  an energy recovery system;
                     (G)  an electric system improvement;
                     (H)  a water-conserving fixture, appliance, or
  equipment or the substitution of a non-water-using fixture,
  appliance, or equipment;
                     (I)  a water-conserving landscape irrigation
  equipment;
                     (J)  a landscaping measure that reduces watering
  demands and captures and holds applied water and rainfall,
  including:
                           (i)  landscape contouring, including the use
  of a berm, swale, and terrace; and
                           (ii)  use of a soil amendment that increases
  the water-holding capacity of the soil, including compost;
                     (K)  any rainwater harvesting equipment or
  equipment to make use of water collected as part of a storm-water
  system installed for water quality control;
                     (L)  any equipment for recycling or reusing water
  originating on the premises or from other sources, including
  treated municipal effluent;
                     (M)  any equipment needed to capture water from
  nonconventional, alternate sources, including air-conditioning
  condensate or graywater, for nonpotable uses;
                     (N)  any metering or related equipment or systems
  that:
                           (i)  reduces utility costs;
                           (ii)  increases operation and maintenance
  cost savings; or
                           (iii)  increases in billable revenues
  resulting from increased accuracy of water measurement by
  identifying utility errors, optimizing rate schedules, or
  increasing meter accuracy;
                     (O)  an alternative fuel program resulting in
  energy cost savings and reduced emissions for local government
  vehicles, including fleet vehicles;
                     (P)  a program resulting in utility cost savings
  by reducing utility errors and optimizing existing rate schedules
  under which service is provided; or
                     (Q)  another energy or water conservation-related
  improvement or equipment, including an improvement or equipment
  relating to renewable energy or nonconventional water sources or
  water reuse that produces cost savings or increases in billable
  revenues for their appointed function.
               (4)  "Debt service" means the total amount spent or to
  be spent by a local government from property tax revenues to pay:
                     (A)  the principal of and interest on debts;
                     (B)  another payment required by contract to
  secure debts; and
                     (C)  if the local government is created under
  Section 52, Article III, or Section 59, Article XVI, Texas
  Constitution, a payment on debts that the local government
  anticipates incurring in the next calendar year.
               (5)  "Increase in billable revenues" means a projected
  increase in billable revenues when compared with an established
  baseline of billable revenues.
               (6)  "Increase in meter accuracy" means a guaranteed
  increase in efficiency or accuracy of utility metering or related
  equipment or systems that is calculated or determined in accordance
  with procedures established by the International Performance
  Measurement and Verification Protocol or succeeding standards of
  the United States Department of Energy.
               (7)  "Local government" means a county, municipality,
  school district, or other political subdivision of this state.
               (8)  "Measurement and verification" means a method of
  confirming whether a guaranteed savings increase in billable
  revenues or an increase in meter accuracy resulting from a
  conservation measure is being met as specified under a performance
  contract and this chapter.
               (9)  "Meter guarantee" means a stipulated or agreed to
  increase in billable revenues to result from the guaranteed
  increase in meter accuracy, based on stipulated or agreed to
  components of a billable revenues calculation for a conservation
  measure.
               (10)  "Operation and maintenance cost savings" means a
  measurable reduction in operating or maintenance costs on a
  long-term basis that is a direct result of the installation of new
  equipment or the implementation of a new service in connection with
  one or more conservation measures when compared with an established
  baseline.  The term does not include any savings that are realized
  solely because of a shift in the cost of personnel or other similar
  short-term cost savings related to or generated by outsourcing or
  using contract workers to perform tasks previously performed by
  employees.
               (11)  "Performance contract" means a contract between a
  local government and a qualified provider for the evaluation,
  recommendation, or implementation of a conservation measure in a
  new or existing facility that is identified by an investment grade
  audit performed in accordance with Section 302A.108 and that is
  designed to result in annual savings, an increase in billable
  revenues, or an increase in meter accuracy guaranteed by the
  provider in accordance with Section 302A.052(a) over a specified
  period prescribed by Section 302A.051(a)(1), which includes both
  the construction and repayment phases. The term includes a
  contract related to the pilot program.
               (12)  "Pilot program" means a pilot program operated by
  the Energy Systems Laboratory at the Texas A&M Engineering
  Experiment Station, in consultation with the Texas Facilities
  Commission and the State Energy Conservation Office, that:
                     (A)  establishes and implements energy efficiency
  improvements to state-owned buildings maintained by the
  commission;
                     (B)  generates savings in utility costs resulting
  from the improvements described by Paragraph (A) resulting in at
  least a 30 percent annual return on the costs of the improvements;
                     (C)  provides for the participation of not fewer
  than two companies selected by the commission; and
                     (D)  provides for any money attributable to
  utility cost savings resulting from the pilot program to be
  appropriated only to the commission.
               (13)  "Provider" means an entity or an affiliate of the
  entity that:
                     (A)  has experience in the design, acquisition,
  implementation, installation, and where appropriate, construction,
  engineering, operation, maintenance, and repair of a conservation
  measure;
                     (B)  has the technical capability to verify that
  such conservation measure generates savings, an increase in
  billable revenues, or an increase in meter accuracy; and
                     (C)  has the ability to secure or arrange the
  financing necessary to satisfy the guarantee required by a
  performance contract entered into by the provider.
               (14)  "Request for qualifications" means a competitive
  selection process achieved by a multistep negotiated procurement
  process that involves sequential steps for the evaluation of
  submissions by prospective providers.
               (15)  "Savings" means the reduction in expenditures,
  resulting from the implementation of one or more conservation
  measures under a performance contract that are:
                     (A)  generated from the date the conservation
  measures become fully operational;
                     (B)  calculated in accordance with the terms of
  the performance contract and the requirements of this chapter;
                     (C)  guaranteed by the provider; and
                     (D)  measured and verified in accordance with
  Sections 302A.055, 302A.301, and 302A.302 for each of the following
  categories:
                           (i)  utility cost savings;
                           (ii)  operation and maintenance cost
  savings; and
                           (iii)  capital cost avoidance savings.
               (16)  "Subcontractor" means a person, other than an
  employee of a provider, who contracts with the provider to furnish
  labor or materials to fulfill an obligation to the provider who is
  acting as a general contractor or prime contractor for any of the
  authorized work, including installation, required by a performance
  contract.  The term includes a subcontractor of any tier, supplier,
  vendor, fabricator, or manufacturer.
               (17)  "Third-party engineer" means a professional
  engineer who is selected or designated by a local government under
  Section 302A.004.
               (18)  "Total cost" includes the sum of the costs of a
  conservation measure, investment grade audit, construction,
  financing and debt services, measurement and verification
  services, and maintenance and training during the term of the
  performance contract.  The term does not include any obligations
  that have not been fulfilled on termination of the contract before
  the end of the contract term, provided that those obligations are
  disclosed when the performance contract is executed.
               (19)  "Utility cost savings" means a measured and
  verified reduction in net fuel costs, energy costs, water costs,
  stormwater fees, or other utility costs, on a long-term basis
  resulting from the implementation of one or more conservation
  measures when compared with an established baseline of usage of
  those previous costs. The term does not include an estimated
  reduction due to a decrease in energy rates that is not derived from
  increased conservation or reduced usage.
         Sec. 302A.002.  INAPPLICABILITY OF LAW GOVERNING CONTRACT
  PROCEDURES FOR CONSTRUCTION PROJECTS.  Except as provided by
  Section 302A.106(a)(1), Chapter 2269, Government Code, does not
  apply to this chapter.
         Sec. 302A.003.  CONTRACTS VOIDABLE. A contract entered into
  or an arrangement made in violation of this chapter is voidable as
  against public policy.
         Sec. 302A.004.  THIRD-PARTY ENGINEER.  (a)  A local
  government shall select or designate a third-party engineer to:
               (1)  act as the local government's representative, and
  serve as the local government's consultant, throughout the
  performance contract procurement process and the duration of the
  measurement and verification services;
               (2)  assist the local government in evaluating the
  qualifications, proposals, and change orders of, and related
  presentations by, a provider;
               (3)  provide to the local government written reports
  under Section 302A.103(c) and written opinions under Section
  302A.110 and submit the written reports and written opinions to the
  appropriate state agencies as specified under Section 302A.111;
               (4)  perform the measurement and verification review of
  the meter guarantee under Section 302A.055;
               (5)  monitor the performance of the provider's
  measurement and verification services required under Section
  302A.301; and
               (6)  review measurement and verification reports and
  the provider's annual reconciliation statement under Sections
  302A.301 and 302A.302.
         (b)  The third-party engineer must be a professional
  engineer licensed under Chapter 1001, Occupations Code, and must:
               (1)  have a minimum of three years of specialized
  experience with performance contracts;
               (2)  have demonstrated technical competence in
  relation to, and working knowledge of, the procurement process of
  performance contracts;
               (3)  not be an officer or employee of:
                     (A)  a provider for the performance contract; or
                     (B)  a wholly owned subsidiary, majority-owned
  subsidiary, parent company, or affiliate of the provider for the
  contract; and
               (4)  not be otherwise associated with the performance
  contract.
         (c)  A local government:
               (1)  if the third-party engineer is not a full-time
  employee of the local government, shall procure the third-party
  engineer's services in accordance with the procedures prescribed
  for procuring the professional services of an engineer under
  Section 2254.004, Government Code; and
               (2)  shall pay a third-party engineer described by
  Subdivision (1) a pre-negotiated fee based on the work completed if
  the local government does not enter into a performance contract
  that was reviewed by the third-party engineer under Section
  302A.110.
         (d)  A provider selected to perform an investment grade audit
  and propose a performance contract is prohibited from suggesting,
  recommending, or arranging a third-party engineer.
         (e)  Before the local government selects or designates a
  third-party engineer, the third-party engineer shall certify in
  writing to the local government that the engineer meets the
  qualifications required under Subsection (b) and that there is no
  conflict of interest with regard to the local government and the
  proposals the third-party engineer is to evaluate that result from
  the request for qualifications. 
         (f)  A third-party engineer who reviews a performance
  contract shall maintain the confidentiality of any proprietary
  information the third-party engineer acquires while reviewing the
  contract.
         (g)  A local government may require a provider to include in
  the calculation of the cost of a proposal for a performance contract
  any fees payable by the local government for use of a third-party
  engineer who is not a full-time employee of the local government.  A
  fee charged by a third-party engineer described by this subsection
  may not exceed 2.5 percent of the total value of the performance
  contract at the time that a contract is executed by that provider.
  SUBCHAPTER B. ENERGY SAVINGS PERFORMANCE CONTRACT
         Sec. 302A.051.  PERFORMANCE CONTRACT. (a)  The governing
  body of a local government may enter into a multiyear performance
  contract, structured as an installment payment contract or
  lease-purchase contract, for the implementation of one or more
  conservation measures in accordance with this chapter if:
               (1)  the term of the contract, beginning on the final
  date on which all the conservation measures become fully
  operational, does not exceed the lesser of:
                     (A)  20 years;
                     (B)  the average useful life of the conservation
  measures; or
                     (C)  the term of financing;
               (2)  after review of the investment grade audit report
  prepared in accordance with Section 302A.108, the local government
  determines that the savings, increase in billable revenues, or
  both, that result from the conservation measures which are
  identified by the audit report and guaranteed by the provider will
  equal or exceed the total cost of the contract;
               (3)  the contract includes the provisions required by
  Sections 302A.052(a), (c), and (d); and
               (4)  the local government receives approval for the
  contract from the appropriate state agency under Section 302A.111.
         (b)  Each conservation measure to be installed or
  implemented under the performance contract must comply with current
  local, state, and federal construction, plumbing, and
  environmental codes and regulations.
         (c)  A performance contract may not include an improvement or
  equipment that allows or causes water from any condensing, cooling,
  or industrial process or any system of nonpotable usage over which
  public water supply system officials do not have sanitary control
  to be returned to the potable water supply.
         Sec. 302A.052.  REQUIRED PERFORMANCE CONTRACT PROVISIONS.
  (a)  A performance contract must include a provision that requires
  the provider to:
               (1)  provide a written guarantee or meter guarantee,
  or, if applicable, both, that:
                     (A)  the savings, increase in billable revenues,
  or increase in meter accuracy resulting from the conservation
  measures implemented or installed under the performance contract
  will at least equal the cost of the contract during the term of the
  contract, including both the construction and repayment phases; and
                     (B)  the guaranteed annual savings and increase in
  billable revenues will at least equal the local government's annual
  contractual obligations, including annual measurement and
  verification costs, costs for third-party engineer services,
  annual maintenance costs, repair costs, costs of design and
  engineering services, installation costs, and costs for debt
  service, and any financing charges incurred by the local government
  in any one year period during the term of the contract beginning
  after the final date of installation of all the conservation
  measures; and
               (2)  provide to the local government an annual
  reconciliation statement of the written guarantee under Section
  302A.302.
         (b)  The written guarantee described by Subsection (a)(1)
  must require the provider to pay the local government for any
  shortfall amounts based on the results of the measurement and
  verification review required under Section 302A.055.  If the
  savings, increase in billable revenues, or both, resulting from a
  performance contract fall short of the savings and increase in
  billable revenues projected under the contract and all required
  shortfall payments to the local government have not been made, the
  local government may terminate the contract without incurring any
  additional obligation to the provider.
         (c)  A performance contract and any other contract entered
  into by the local government with a provider under this chapter must
  contain a prohibition against contingent fees as follows: "The
  provider warrants that he or she has not employed or retained any
  company or person, other than a bona fide employee working solely
  for the provider to solicit or secure this agreement and that he or
  she has not paid or agreed to pay any person, company, corporation,
  individual, or firm, other than a bona fide employee working solely
  for the provider any fee, commission, percentage, gift, or other
  consideration contingent upon or resulting from the award or making
  of this agreement."
         (d)  A performance contract and any other contract entered
  into by the local government with a provider must contain the
  following provision: "The provider agrees that through the term of
  the performance contract and contract amendment thereafter the
  provider will maintain a compliance program and internal controls
  designed to detect and deter fraudulent and corrupt conduct
  through, among other things: policies and procedures to create
  redundancy in the subcontractor bid review, bid normalization, bid
  revision, subcontractor selection, and savings and cost review
  processes."
         (e)  The provision required by Subsection (c) cannot be
  waived in a contract.
         (f)  The performance contract must contain a provision
  stating that the contract is not executory until approval is
  obtained under Section 302A.111.
         Sec. 302A.053.  CONTINGENCY CLAUSE FOR RELATED CONTRACT
  REQUIRING SAME PROVIDER TO PERFORM CERTAIN SERVICES. (a)  This
  section applies to a multiyear contract that requires a local
  government to retain the same provider subject to the written
  guarantee to perform annual measurement and verification review
  services under Section 302A.301.
         (b)  A multiyear contract to which this section applies must
  contain the following contingency clause: "The continuation of this
  contract is contingent upon the annual budget and appropriation of
  funds by the local government to fulfill the requirements of the
  contract.  If the local government fails to appropriate sufficient
  money for payments to be continued under the contract, the contract
  shall terminate on the last day of the fiscal year for which funds
  have been allocated.  Such termination shall be without penalty or
  expense to the local government except for payments which have been
  earned prior to the termination date."
         (c)  If a local government fails to allocate sufficient money
  for payments to be continued under a multiyear contract to which
  this section applies, the contract terminates on the last day of the
  fiscal year for which funds have been allocated.  The local
  government may not incur a penalty or be charged an expense as a
  result of a termination of the contract described by this
  subsection except for payments that have been earned before the
  date on which the contract is terminated.
         Sec. 302A.054.  BASELINE CALCULATION. (a)  A provider shall
  calculate the baseline in a performance contract based on:
               (1)  historical costs, revenues, accuracy, or related
  components for the preceding three years for:
                     (A)  an existing facility before the installation
  or implementation of the conservation measures; or
                     (B)  a new facility using a comparative existing
  facility with a similar floor plan and identical uses; or
               (2)  documentation of avoided anticipated costs of a
  capital improvement or an item of equipment the local government
  is:
                     (A)  currently spending at the time of the
  calculation; or
                     (B)  has budgeted to spend in the future.
         (b)  The baseline calculations of a provider may be used for
  determining:
               (1)  the costs for energy or water usage and related net
  operation and maintenance costs;
               (2)  the billable revenues from providing energy,
  water, or other utilities to users; or
               (3)  the efficiency or accuracy of metering or related
  equipment or systems.
         (c)  The provider's baseline calculations:
               (1)  must identify the specific dollar amount and units
  or percentages of consumption that the provider projects will be
  eliminated or avoided on a long-term basis as a result of the
  conservation measures that the local government is implementing;
  and
               (2)  if the calculation is for savings, must use and
  reference as a benchmark the actual demand and energy components of
  the utility rate applicable to the local government in effect at the
  time of an investment grade audit, and may not use and reference a
  blended rate that aggregates, combines, or restates in any manner
  the distinct demand and energy components of the utility rate into a
  single combined or restated utility rate.
         (d)  The local government and provider may agree to make
  modifications to the calculation of utility cost savings based only
  on a subsequent material change to:
               (1)  the baseline consumption of energy or water
  identified at the beginning of the term of the performance
  contract;
               (2)  the utility rates;
               (3)  the number of days in the utility billing cycle;
               (4)  the square footage of the facility;
               (5)  the operational schedule, and any corresponding
  change in the occupancy and indoor temperature, of the facility;
               (6)  the facility temperature;
               (7)  the weather;
               (8)  the amount of equipment or lighting used in the
  facility; or
               (9)  the nature or intensity of energy use such as the
  change of classroom space to laboratory space.
         (e)  Predetermined escalation rates may not be used in a
  baseline calculation.
         Sec. 302A.055.  MEASUREMENT AND VERIFICATION OF GUARANTEE.
  (a)  Any guaranteed savings, increase in billable revenues, and, if
  applicable, efficiency or accuracy of metering equipment must:
               (1)  be consistent with the investment grade audit
  report under Section 302A.108; and
               (2)  be determined using one of the measurement and
  verification methodologies listed in:
                     (A)  the United States Department of Energy's
  Measurement and Verification Guidelines for Energy Savings
  Performance Contracts;
                     (B)  the International Performance Measurement
  and Verification Protocol maintained by the Efficiency Valuation
  Organization; or
                     (C)  Guideline 14-2022 of the American Society of
  Heating, Refrigerating, and Air-Conditioning Engineers.
         (b)  If none of the methodologies described by Subsection
  (a)(2) are sufficient for measuring guaranteed savings due to the
  existence of data limitations or the nonconformance of specific
  project characteristics, the provider shall develop an alternate
  method that is compatible with one of the methodologies described
  by Subsection (a)(2) and mutually agreeable to the local
  government.  The alternate method must be:
               (1)  subject to approval under Section 302A.111; and
               (2)  thoroughly documented and substantiated through
  records showing that the expenses claimed are real.
         Sec. 302A.056.  PAYMENT AND PERFORMANCE BOND. (a)  
  Notwithstanding any other law, before entering into a performance
  contract, the governing body of the local government shall require
  the provider of the conservation measures to file with the
  governing body a payment and performance bond relating to the
  installation of the conservation measures in accordance with
  Chapter 2253, Government Code.
         (b)  In addition to the bond required by Subsection (a), the
  governing body may require the provider to file a separate bond to
  cover the value of the guarantee.
         Sec. 302A.057.  METER GUARANTEES. (a)  This section applies
  to any performance contract that:
               (1)  provides for any metering or related equipment or
  systems; and
               (2)  includes a meter guarantee by the provider,
  regardless of whether the meter guarantee is a part of a broader
  guarantee applicable to other conservation measures.
         (b)  Not later than the fifth anniversary of the effective
  date of a performance contract, the third-party engineer under
  Section 302A.004 shall test a statistically relevant sample of the
  meters installed or implemented under the contract to determine or
  calculate the actual average accuracy and shall compare the actual
  average accuracy to the baseline average accuracy of those tested
  meters.
         (c)  A meter guarantee applies if the third-party engineer
  reports to the local government and the provider that the average
  accuracy of the tested meters as of the testing date is less than
  the baseline average accuracy of the tested meters as of the testing
  date.
         (d)  The amount payable under the meter guarantee, based on
  the results of the third-party engineer's measurement and
  verification report under Section 302A.301, must be determined for
  each year subject to the provider's annual reconciliation statement
  under Section 302A.302 and is equal to the difference between:
               (1)  the agreed increase in billable revenues based on
  the projected accuracy of all of the meters for each year, according
  to the performance contract; and
               (2)  the actual revenues for the same year that would
  result from applying the third-party engineer's reported actual
  average accuracy of the tested meters to all of the meters subject
  to the performance contract, using the same contract components
  that were used to calculate the agreed increase in billable
  revenues for that year, assuming the annual decrease in actual
  average accuracy of all the meters was a pro rata percentage of the
  reported total decrease in actual average accuracy.
         (e)  Notwithstanding Subsection (d), if the meter guarantee
  in the contract is part of a broader guarantee applicable to other
  conservation measures that is greater in value under the contract,
  the amount payable under the meter guarantee for any year during the
  measurement and verification period is subtracted from the
  difference between:
               (1)  the actual sum of the savings and the increase in
  billable revenues resulting from the other conservation measures
  for that year during the measurement and verification period; and
               (2)  the guaranteed amount of the savings and the
  increase in billable revenues from the other conservation measures
  for that year during the measurement and verification period.
         (f)  A test conducted under this section must be performed in
  accordance with the procedures established by the International
  Performance Measurement and Verification Protocol or succeeding
  standards of the United States Department of Energy.
         (g)  A third-party engineer conducting a test under this
  section shall:
               (1)  verify that the tested meters have been properly
  maintained and are operating properly; and
               (2)  comply with Sections 302A.110(b) and 302A.004(d).
         (h)  A provider shall select both old and new meters to test
  when performing an investment grade audit and developing baseline
  average accuracy of existing meters to include in the investment
  grade audit report.  In developing the baseline average accuracy,
  the provider may not include within its guarantee calculation
  meters that were inactive or out of service at the time of the
  investment grade audit.  The meter guarantee may not include an
  escalation factor that assumes water will increase by a certain
  percentage each year.
         Sec. 302A.058.  MAINTENANCE SERVICES. (a)  Subject to
  Subsection (c), a local government may solicit and negotiate
  maintenance services for proposed conservation measures as a
  component of a request for qualifications.
         (b)  Additional maintenance services:
               (1)  are subject to budget appropriations of the local
  government on an annual basis; and
               (2)  may be discontinued at any time over the
  guaranteed period with no negative impact to the performance
  contract.
         (c)  The local government may not be required under the terms
  of a performance contract to purchase a maintenance contract or
  other maintenance agreement from the provider if the local
  government takes appropriate action to budget for its own forces or
  another provider to maintain new systems installed pursuant to and
  existing systems affected by the performance contract.  The
  provider shall provide proper training and a sufficient number of
  operation and maintenance manuals for all equipment replacements or
  upgrades at each facility location.
         (d)  A provider shall provide to the local government the
  full capabilities to operate, maintain, repair, update,
  reconfigure, and engineer changes necessary to accommodate
  facility or operational changes or to incorporate new energy
  savings control strategies for any system, including a facility
  automation and control system, proposed under this chapter.  A
  provider is not required under this subsection to provide the local
  government with access to the operating system of the provider, but
  the user interface software must provide for all capabilities
  described by this subsection.
         Sec. 302A.059.  USEFUL LIFE OF CERTAIN EQUIPMENT OR SYSTEM.
  (a)  The useful life of an equipment or system that is to be
  installed as part of a conservation measure and is acquired through
  a performance contract may not exceed the useful life of the
  equipment or system as determined by the maximum asset depreciation
  range guidelines in effect for the Class Life Asset Depreciation
  Range System established by the Internal Revenue Service under the
  United States Internal Revenue Code.
         (b)  If an equipment or system described by Subsection (a) is
  not covered by the asset depreciation range guidelines described by
  that subsection, the useful life of the equipment or system may not
  exceed the useful life according to the equipment or system
  manufacturer's standards.
         Sec. 302A.060.  CERTAIN SAVINGS TO OFFSET COSTS OF
  CONSERVATION MEASURE. Operation and maintenance cost savings
  realized as the result of a performance contract may be used to
  offset the costs of a conservation measure under a performance
  contract, provided that the savings indicate a direct reduction
  within a local government's operating and maintenance budget.  Any
  projected operation and maintenance cost savings must be limited to
  only those that can be thoroughly documented and substantiated
  through invoices showing that the expenses claimed are real.
         Sec. 302A.061.  PERFORMANCE CONTRACT CONCURRENT WITH
  CONSTRUCTION CONTRACT. If a performance contract is to be executed
  concurrently with one or more conventional construction contracts,
  the performance contract must be separate and distinct from the
  other contracts.
         Sec. 302A.062.  REQUIRED PROVISION FOR CHANGE ORDER OR
  CONTRACT ADDENDUM. The change order or contract addendum must
  contain a provision that the change order or contract addendum, as
  applicable, is not executory until approval is obtained under
  Section 302A.111.
  SUBCHAPTER C.  PROCUREMENT PROCEDURES FOR PERFORMANCE CONTRACTS
         Sec. 302A.101.  PROCUREMENT OF PERFORMANCE CONTRACT.  A
  local government must procure a performance contract under this
  chapter in accordance with the procedures prescribed by this
  subchapter.
         Sec. 302A.102.  REQUEST FOR QUALIFICATIONS. (a)  A local
  government shall issue a request for qualifications when selecting
  a provider to perform any work related to a performance contract or
  perform a service in connection with a performance contract. The
  request for qualifications must be open to all providers before the
  local government enters into an agreement for an investment grade
  audit under Section 302A.108 or a performance contract.
         (b)  Before issuing a request for qualifications, a local
  government shall select or designate a third-party engineer to
  serve as the representative and consultant in accordance with
  Section 302A.004.
         (c)  A person that assists the local government in preparing
  a request for qualifications may not submit a response to the
  request.
         (d)  A prospective respondent or a prospective respondent's
  representative may not communicate with a member of the governing
  body or an employee of a local government who has influence in the
  evaluation or selection process regarding the request for
  qualifications from the time the request is published until the
  request has been acted on by the governing body, except for
  contacting the person identified in the request as the designated
  point-of-contact.  The occurrence of an act prohibited by this
  subsection will result in the prospective respondent's
  disqualification from consideration.
         (e)  In submitting a response to the request for
  qualifications, a responding provider shall certify in writing to
  the local government that neither the provider nor any of the
  provider's affiliates or subcontractors or the employees of the
  provider or of any of the provider's affiliates or subcontractors
  have:
               (1)  bribed or attempted to bribe an officer or
  employee of the local government in connection with the performance
  contract; and
               (2)  not participated in the creation of the request
  for qualifications.
         (f)  A local government shall publish notice of the request
  for qualifications in the same manner the local government would
  publish notice of the request for a competitive bid under the law
  applicable to the local government for the procurement of
  contracts.  In addition, the local government may send notice of the
  request for qualifications by the means most likely to reach
  providers interested in responding to the request, including by
  direct mail solicitation or electronic mail, or posting notice of
  the request on a government Internet website.
         (g)  A local government shall review, evaluate, and rank all
  properly submitted responses to the request for qualifications
  based on the provider's:
               (1)  business qualifications;
               (2)  personnel qualifications, including a list of any
  subcontractors to be used by the provider;
               (3)  financial qualifications, including information
  that documents the sources of proposed financing and specific
  projects that have used those proposed financing sources;
               (4)  construction management qualifications for all
  project phases;
               (5)  project track record, including references from
  past clients similar to the local government with respect to
  project size and the project's scope; and
               (6)  demonstrated ability to accomplish a performance
  contract.
         Sec. 302A.103.  REQUEST FOR PROPOSALS. (a)  To ensure only
  qualified and capable providers are invited to submit proposals,
  the local government shall create a short list of not more than five
  providers who submitted responses to the request for
  qualifications, ranked on the basis of demonstrated competence and
  qualifications.  If, after the request for qualifications is
  published, fewer than two providers have responded, the local
  government may select the one respondent to conduct a preliminary
  utility audit and negotiate an agreement for an investment grade
  audit report.
         (b)  After selecting the qualified providers from the short
  list as described by Subsection (a), the local government shall
  require each of the selected providers to perform a preliminary
  utility audit under Section 302A.104 and to submit a written
  proposal and make a presentation based on the audit. If a provider
  submits a proposal that does not calculate projected savings in the
  manner required by Section 302A.054, the local government shall
  reject the proposal.
         (c)  During the procurement process, the third-party
  engineer selected or designated under Section 302A.004 shall
  provide to the local government a written report containing both a
  qualitative and quantitative evaluation of a provider's
  qualifications and proposal.  The written report must include a
  recommendation for selecting a provider, but the local government
  is not obligated to follow the recommendation.
         Sec. 302A.104.  PRELIMINARY UTILITY AUDIT. (a)  As provided
  under Section 302A.103, each qualified provider selected from the
  short list must complete a preliminary utility audit in accordance
  with this section and submit a written report and proposal based on
  the audit. The preliminary audit proposal shall form the basis for
  a qualified provider's investment grade audit proposal under
  Section 302A.108.
         (b)  The preliminary utility audit must show for each
  proposed conservation measure, at a minimum, a comparison of the
  estimated costs and estimated project savings, increase in billable
  revenues, and, if applicable, efficiency or accuracy of metering
  equipment to support justification for each proposed conservation
  measure.
         (c)  To prepare a preliminary utility audit report, each
  qualified provider selected under Section 302A.103 must be given an
  equal opportunity to conduct an on-site survey of the facilities
  identified in the published request for qualifications.  A site
  visit must be scheduled after the date on which a request for
  qualifications is issued, but not before the date the responses are
  due.  During this period, the local government:
               (1)  shall assist the selected qualified providers in
  support of their responses through the collection of necessary
  facility technical information, including by providing to each
  qualified provider:
                     (A)  at least three years of utility bills;
                     (B)  floor plans as needed; and
                     (C)  maintenance records as needed; and
               (2)  may require that each selected qualified provider
  attend a pre-proposal conference, conducted for the purpose of
  discussing contract requirements and answering questions from
  prospective providers.
         (d)  A preliminary utility audit:
               (1)  must be performed on a representative sample of
  existing facilities; or
               (2)  if the local government is considering
  constructing a new facility, must be completed using comparative
  existing facilities with similar floor plans and identical uses.
         (e)  The preliminary utility audit must be provided at no
  cost to the local government and with no obligation to select the
  qualified provider to perform an investment grade audit.
         (f)  For a preliminary utility audit required under this
  section and before an agreement for an investment grade audit under
  Section 302A.108 is executed, a local government may not require a
  provider to submit:
               (1)  a full engineering evaluation of the facilities;
               (2)  a detailed scope of construction; or
               (3)  any architectural or engineering designs.
         Sec. 302A.105.  EVALUATION AND RANKING OF WRITTEN PROPOSALS.
  (a)  The local government shall evaluate and rank each written
  proposal submitted under Section 302A.103(b) and select the
  qualified provider that submits the written proposal that offers
  the best value for the local government based on the published
  selection criteria and on its ranking evaluation.
         (b)  Not later than the seventh business day after the date
  the performance contract that is the subject of the proposal is
  awarded under Section 302A.112, the local government shall make the
  evaluations, including any scores, public and provide them to all
  providers that were not selected.
         Sec. 302A.106.  REQUIRED EVALUATION BY CERTAIN LOCAL
  GOVERNMENTS BEFORE ENTERING INTO INVESTMENT GRADE AUDIT AGREEMENT.
  (a)  Before entering into an agreement for an investment grade
  audit:
               (1)  a school district shall evaluate and determine
  whether the audit or any other work reasonably required or
  contemplated under a performance contract would be in compliance
  with:
                     (A)  Section 44.031, Education Code;
                     (B)  Section 2269.056, Government Code;
                     (C)  Section 271.004; and
                     (D)  Subchapter B, Chapter 271;
               (2)  a municipality shall evaluate and determine
  whether the audit or any other work reasonably required or
  contemplated under a performance contract would be in compliance
  with Chapter 252; and
               (3)  a county shall evaluate and determine whether the
  audit or any other work reasonably required or contemplated under a
  performance contract would be in compliance with Subchapter C,
  Chapter 262, and Subchapter B, Chapter 271.
         (b)  A school district, municipality, or county shall make
  the appropriate determination required by Subsection (a) before
  proceeding with the procurement process under this subchapter.
         Sec. 302A.107.  NEGOTIATIONS FOR INVESTMENT GRADE AUDIT
  AGREEMENT. (a)  The local government shall first attempt to
  negotiate the scope of work and price for an investment grade audit
  agreement with the highest ranked qualified provider under Section
  302A.105.
         (b)  If the local government and the highest ranked qualified
  provider cannot enter into an agreement for an investment grade
  audit, the local government shall, formally and in writing, end all
  negotiations with that provider and proceed to negotiate with the
  qualified provider in the order of the selection ranking until an
  agreement is reached or negotiations with all ranked qualified
  providers ends.
         (c)  During the negotiation of an investment grade audit
  agreement, the local government shall request the selected
  qualified provider to submit to the local government the provider's
  costing methodology, which:
               (1)  means the provider's:
                     (A)  policy on subcontractor markup;
                     (B)  definition of general conditions;
                     (C)  range of costs for general conditions;
                     (D)  policy on retainage;
                     (E)  policy on contingencies;
                     (F)  discount for prompt payment; and
                     (G)  expected staffing for administrative duties;
  and
               (2)  does not include a guaranteed maximum price or bid
  for overall design or construction.
         (d)  An agreement for the performance of an investment grade
  audit under Section 302A.108 is the first of two contracts with the
  selected qualified provider. The subsequent contract is described
  by Section 302A.108(a).
         Sec. 302A.108.  INVESTMENT GRADE AUDIT; REPORT. (a)  
  Following successful negotiations of an investment grade audit
  agreement under Section 302A.107, the selected qualified provider
  shall perform an investment grade audit to establish the exact
  scope of work to be performed under a proposed performance
  contract. The results of the audit will form the basis for
  negotiating the performance contract with the local government
  after presenting the audit report to the local government.
         (b)  The scope of work for an investment grade audit must
  include:
               (1)  collecting facility information, such as data and
  background information on:
                     (A)  facilities;
                     (B)  equipment;
                     (C)  operations; and
                     (D)  utility use and costs;
               (2)  conducting an inventory of existing systems and
  equipment, which requires a physical inspection of the facility and
  an interview with a facility manager to log information on major
  energy and water-using equipment;
               (3)  establishing the current baseline and base year
  consumption and reconciling those with end-use consumption
  projections;
               (4)  identifying and assessing a list of potential
  conservation measures with a detailed projection of savings,
  increase in billable revenues, or accuracy of metering equipment to
  be obtained at the facilities as a result of the implementation of
  the recommended conservation measures; and
               (5)  preparing a detailed investment grade audit report
  that includes:
                     (A)  a proposed measurement and verification
  plan;
                     (B)  a sample periodic utility savings report; and
                     (C)  the items described by Subsection (c).
         (c)  The investment grade audit report under Subsection
  (b)(5) must:
               (1)  specify the total and itemization cost of each
  recommended conservation measure that will comprise a proposed
  performance contract, including projected costs associated with:
                     (A)  the investment grade audit;
                     (B)  the design of the measure;
                     (C)  any engineering services;
                     (D)  any financing and debt services;
                     (E)  the third-party engineer services;
                     (F)  annual measurement and verification
  services;
                     (G)  annual maintenance services;
                     (H)  training of employees; and
                     (I)  repairs;
               (2)  identify the methods for measurement and
  verification, in accordance with Section 302A.055, of the savings
  or increase in billable revenues, or both, for each recommended
  conservation measure;
               (3)  identify all design and compliance issues that
  require the professional services of an architect or engineer, and
  identify the architect or engineer who will provide those services;
               (4)  include a schedule of all costs, showing a
  calculation of each cost of implementing the proposed conservation
  measures and the projected savings, increase in billable revenues,
  or increase in meter accuracy that could be realized and maximized;
               (5)  list the subcontractors and vendors to be used by
  the qualified provider with respect to the proposed performance
  contract; and
               (6)  identify maintenance requirements necessary to
  ensure continued savings, an increase in billable revenues, or an
  increase in meter accuracy that could be realized and maximized,
  and describe how those requirements will be fulfilled.
         (d)  The outcome of an investment grade audit cannot be
  predetermined. The provider may not make up losses or
  inefficiencies to make the cost of the performance contract project
  appear budget neutral.
         (e)  The cost for an investment grade audit must be based on
  the cost per square footage actually audited and is intended to be
  the market rate for a technical energy audit. The cost may then be
  adjusted by mutual written agreement of the parties in the event
  that the audited square footage is changed by either party.
         (f)  If the investment grade audit report prepared by a
  provider offers a guaranteed savings or increase in billable
  revenues that is not materially less than the savings or revenues
  estimated in the preliminary audit, the investment grade audit
  report becomes, on execution of the performance contract, part of
  the final performance contract, and the costs incurred by the
  provider in preparing the investment grade audit report are
  considered to be part of the performance contract.
         (g)  If a local government decides not to enter into a
  performance contract after an investment grade audit report is
  prepared and the results of the audit are within 10 percent of both
  the guaranteed savings and increase in billable revenues contained
  in the preliminary utility audit proposal and the total proposal
  amount, the local government shall reimburse the provider that
  prepared the investment grade audit report the reasonable
  documented costs incurred by the provider in preparing the
  investment grade audit report if the local government has
  specifically appropriated money for that purpose.
         (h)  The results of an investment grade audit become the
  property of the local government.
         (i)  On completion of the investment grade audit, the
  qualified provider shall submit the investment grade audit report
  prepared under this section to the local government.
         Sec. 302A.109.  SUBMISSION OF PROPOSAL FOR PERFORMANCE
  CONTRACT; NEGOTIATIONS.  (a)  After acceptance by the local
  government of an investment grade audit report submitted by the
  qualified provider under Section 302A.108, the qualified provider
  may submit a proposal for a performance contract to the local
  government. The local government may then negotiate a performance
  contract with the qualified provider.
         (b)  On successful negotiation of a performance contract,
  the local government shall require the third-party engineer to
  review the investment grade audit report and supporting
  documentation in accordance with Section 302A.110.
         (c)  Prior to the award of any performance contract, the
  local government shall submit the required documents and obtain
  approval in accordance with Section 302A.111.
         Sec. 302A.110.  REVIEW BY THIRD-PARTY ENGINEER; REPORT.  (a)  
  Before obtaining approval of a proposed performance contract as
  required by Section 302A.111, the local government shall require
  the third-party engineer selected or designated under Section
  302A.004 to review the investment grade audit report and supporting
  documentation as well as any subsequent change order, contract
  addendum, or other amendment to the proposed contract. The
  third-party engineer must verify that the proposed performance
  contract, the investment grade audit report, and the measurement
  and verification plan present a cohesive package that fully
  describes the intended scope of services.
         (b)  In conducting the review under Subsection (a), the
  third-party engineer shall provide the local government with a
  written opinion evaluating and validating the methodology and
  calculations related to cost savings, increase in billable
  revenues, and, if applicable, efficiency or accuracy of metering
  equipment associated with each proposed conservation measure
  identified in the investment grade audit report that will become
  part of the final performance contract. The third-party engineer
  may recommend that the local government not enter into the
  contract.
         (c)  In identifying and developing potential utility cost
  reduction projects, the third-party engineer must certify that the
  documents described by Subsection (a) have been reviewed and are
  complete.
         Sec. 302A.111.  REVIEW BY STATE AGENCY. (a)  Before awarding
  a performance contract, a contract for third-party financing, or a
  combination of both, a local government shall submit the proposed
  contract to the Texas Water Development Board and the State Energy
  Conservation Office for review and approval in accordance with this
  section. The Texas Water Development Board and the State Energy
  Conservation Office shall review the documents submitted and
  evaluate the economic assumptions that purportedly support the
  implementation of each conservation measure.
         (b)  The Texas Water Development Board shall evaluate the
  technical and economic feasibility of each proposed water-related
  conservation measure in the proposed performance contract,
  including any metering or related equipment, system, or process or
  procedure, and either approve or disapprove each of those proposed
  conservation measures.
         (c)  The State Energy Conservation Office shall evaluate the
  technical and economic feasibility of each conservation measure in
  the proposed contract that is not water related and either approve
  or disapprove each of those proposed conservation measures.
         (d)  In addition to the submission of a final proposed
  performance contract under Subsection (a), the local government
  must submit:
               (1)  the final investment grade audit report under
  Section 302A.108;
               (2)  a proposed measurement and verification plan;
               (3)  a sample periodic utility savings report;
               (4)  the written certifications listed under
  Subsection (f); and
               (5)  any other relevant documents determined necessary
  by the Texas Water Development Board or the State Energy
  Conservation Office, as applicable, to streamline the review.
         (e)  In conducting an evaluation under this section, the
  Texas Water Development Board and the State Energy Conservation
  Office shall make their determination on the basis of a review of:
               (1)  the project's scope and whether it is appropriate
  for a performance contract, including a conservation measure's use
  of capital cost avoidance savings in accordance with state law;
               (2)  the project's compliance with applicable
  provisions of this chapter;
               (3)  the written certifications of the following that
  are required under Subsection (f) and other provisions of this
  chapter:
                     (A)  members of the governing body of the local
  government;
                     (B)  the provider;
                     (C)  any subcontractors of the provider; and
                     (D)  the third-party engineer;
               (4)  the methodology and calculations related to cost
  savings, increase in billable revenues, and, if applicable,
  efficiency or accuracy of metering equipment; and
               (5)  the financing mechanism and proper financing
  documentation, and the availability of local funds to pay for
  conservation measures that will use capital cost avoidance savings.
         (f)  To obtain approval for the proposed performance
  contract, the local government shall submit the following written
  certifications for review as provided by this section:
               (1)  each member of the governing body shall certify
  that in lieu of competitive bidding or competitive sealed proposals
  for construction services under a public work contract, the
  performance contract was procured under a request for
  qualifications process in accordance with this subchapter;
               (2)  the provider shall certify that neither the
  provider nor any of the provider's affiliates or subcontractors,
  employees of the provider or the provider's affiliates, or
  subcontractors has bribed, or attempted to bribe, an official or
  employee of the local government in connection with the performance
  contract and has not participated in the creation of the request for
  qualifications for the performance contract;
               (3)  the provider or any third-party engineer
  contracted to perform a measurement and verification review shall
  certify that the methodologies for determining savings, increase in
  billable revenues, and, if applicable, efficiency or accuracy of
  metering equipment will be performed in accordance with Section
  302A.055; and
               (4)  the third-party engineer shall certify that the
  engineer is free from financial interest in the provider of the
  performance contract that conflicts with the proper completion of
  work associated with the performance contract.
         (g)  The Texas Water Development Board and the State Energy
  Conservation Office shall complete their review and provide their
  approval or disapproval not later than the 30th business day after
  the date of receiving a complete proposed performance contract.
  Submission of an incomplete contract may result in delayed review
  and approval.
         (h)  The Texas Water Development Board and the State Energy
  Conservation Office may charge a reasonable fee for conducting a
  review under this section, and the payment of the fee may be
  included in the financing for the performance contract.
         (i)  A local government that fails to provide documentation
  required by the State Energy Conservation Office or the Texas Water
  Development Board in accordance with this section may not engage in
  further performance contracts until the documentation has been
  provided.
         (j)  The Texas Water Development Board and the State Energy
  Conservation Office may adopt rules necessary to implement this
  section.
         Sec. 302A.112.  AWARDING OF PERFORMANCE CONTRACT. (a)  On
  receiving notice of approval from the state under Section 302A.111
  and subject to Section 302A.113, a local government shall enter
  into the performance contract with the qualified provider for the
  work, including any construction work, identified in the investment
  grade audit report.
         (b)  The local government shall provide a copy of the
  executed performance contract and corresponding addendums to the
  State Energy Conservation Office not later than the 30th day after
  the effective date of the contract.
         Sec. 302A.113.  MEETING TO ANNOUNCE AWARD OF PERFORMANCE
  CONTRACT; NOTICE.  A local government shall hold a meeting to
  announce the awarding of a performance contract. Public notice of
  the meeting must be provided before the design and implementation
  of the conservation measures begin. The notice must include:
               (1)  the names of all potential parties to the proposed
  performance contract;
               (2)  a description of the conservation measures
  included in the performance contract; and
               (3)  an explanation of how the conservation measures
  will:
                     (A)  be financed; and
                     (B)  generate savings or increase billable
  revenues sufficient to pay for the cost of the conservation
  measures.
         Sec. 302A.114.  CHANGE ORDER AND CONTRACT ADDENDUM SUBJECT
  TO SAME REVIEW PROCESS. Each change order or contract addendum to a
  performance contract is subject to the same review and approval
  requirements of the performance contract under Sections 302A.110
  and 302A.111.
         Sec. 302A.115.  PROCUREMENT OF SUPPLIES, EQUIPMENT, AND
  MATERIAL.  (a)  This subsection does not apply to the purchase of
  construction-related goods in an amount greater than $50,000, which
  must comply with Section 791.011(j), Government Code.
         (b)  A local government may contract for the purchase of
  supplies, materials, or equipment by using contracts that are
  available through the state's cooperative purchasing program under
  Subchapter D, Chapter 271.
         Sec. 302A.116.  PROCUREMENT OF CERTAIN CONSTRUCTION-RELATED
  SERVICES.  (a)  This section applies to the purchase of a
  construction-related service from a provider under a performance
  contract in an amount that exceeds $50,000.
         (b)  A local government may not use a purchasing cooperative
  under Chapter 791, Government Code, or a local cooperative
  organization under Subchapter F, Chapter 271, of this code for the
  purchase of a preliminary utility audit, investment grade audit,
  architectural services, design services, or engineering services
  from a provider under a performance contract.
  SUBCHAPTER D. METHOD OF FINANCING; PAYMENTS; USE OF FUNDS
         Sec. 302A.151.  METHOD OF FINANCING. (a)  The financing of a
  performance contract may be provided by the provider or an
  independent third-party. The contract for third-party financing
  may be separate from the performance contract.
         (b)  A performance contract may be financed:
               (1)  under a lease-purchase contract that has a term
  not to exceed 20 years from the final date of installation of the
  conservation measures and that meets federal tax requirements for
  tax-free municipal leasing or long-term financing;
               (2)  with the proceeds of bonds; or
               (3)  under a contract with the provider of the
  conservation measures that has a term not to exceed the lesser of 20
  years from the final date of installation of the conservation
  measures or the average useful life of the conservation measures.
         Sec. 302A.152.  REQUIRED PROVISION FOR SEPARATE CONTRACT FOR
  THIRD-PARTY FINANCING.  A separate contract for third-party
  financing must include a provision that the third-party financier
  may not be granted rights or privileges that exceed the rights and
  privileges available to the provider of the performance contract.
         Sec. 302A.153.  PAYMENTS TO PROVIDERS. (a)  Subject to
  Subsection (b), the governing body of a local government may pay the
  provider of a conservation measure, including payment of finance
  charges, solely out of the savings or increase in billable revenues
  realized by the local government under the performance contract.
         (b)  A payment to the provider must be based on the
  percentage of project completion, and not on a pre-established
  schedule.
         Sec. 302A.154.  ANNUAL BUDGET AND APPROPRIATIONS; USE OF
  FUNDS DESIGNATED FOR CERTAIN EXPENDITURES. The governing body of a
  local government may:
               (1)  include in its annual budget and appropriations
  the amounts payable under a performance contract, including the
  amount payable under an installment payment contract or
  lease-purchase contract financing the contract; and
               (2)  use funds designated for utilities expenditures,
  operation and maintenance expenditures, and capital expenditures
  for purchases on an installment payment or lease purchase basis,
  provided that the use is consistent with the purpose of the
  appropriation.
         Sec. 302A.155.  USE OF FUNDS RESULTING FROM EXCESS
  GUARANTEED SAVINGS OR INCREASE IN BILLABLE REVENUES. A local
  government may use excess actual guaranteed savings or increase in
  billable revenues revealed by an annual reconciliation statement
  under Section 302A.302 throughout the term of a performance
  contract to reinvest in other conservation measures within the
  scope of the performance contract through a change order or
  contract addendum as authorized under this chapter.
         Sec. 302A.156.  CAPITAL COST AVOIDANCE SAVINGS. (a)  The use
  of capital cost avoidance savings are subject to the limitations
  specified by Subsection (b).
         (b)  The amount of expenditures to be paid from capital cost
  avoidance savings under a performance contract:
               (1)  may not exceed 50 percent of the total project
  cost; and
               (2)  are limited to payment for permanent equipment or
  retrofits for:
                     (A)  storm windows or doors, multiglazed windows
  or doors, heat-absorbing or heat-reflective glazed and coated
  window or door systems, or other window or door system
  modifications;
                     (B)  heating, ventilating, or air-conditioning
  major components or system modifications or replacements;
                     (C)  new lighting fixtures that are required to
  achieve standards published by the Illuminating Engineering
  Society of North America, provided the existing light fixtures have
  been determined to be obsolete and incapable of achieving these
  standards that increase energy efficiency;
                     (D)  life safety system replacements or upgrades
  that have been determined to be necessary to conform with existing
  state and local codes and standards; or
                     (E)  roof retrofits that are part of a larger
  conservation measure, including solar, where the replacement is
  necessary for the installation of the conservation measure and the
  local government determines that replacement of more than 20
  percent of the roof is necessary for the installation of the
  conservation measure.
  SUBCHAPTER E. WORK PERFORMED UNDER PERFORMANCE CONTRACT
         Sec. 302A.201.  SUBCONTRACTORS FOR AUTHORIZED WORK UNDER
  PERFORMANCE CONTRACT. (a)  A provider may be designated as the
  general contractor or prime contractor for the installation or
  implementation of any authorized work under a performance contract,
  including any improvements to be made pursuant to the performance
  contract, provided that a subcontractor contracting with the
  provider for that purpose:
               (1)  is experienced in the design, installation, or
  implementation of the conservation measures agreed to between the
  provider and local government; and
               (2)  submits to the local government all written
  certifications required under this chapter.
         (b)  During the negotiation of a performance contract, the
  provider shall submit to the local government a list of
  subcontractors the provider intends to use and disclose whether a
  subcontractor on the list is a subsidiary or wholly owned or
  partially owned affiliate of the provider. The provider shall
  update the disclosure during the term of the performance contract.
         (c)  A subsidiary or wholly owned or partially owned
  affiliate of a provider may not be an eligible contractor or
  subcontractor under a performance contract unless:
               (1)  an analysis provided to the local government
  demonstrates that there is an economic advantage to the local
  government in having such contractor or subcontractor perform work
  as part of the performance contract; and
               (2)  the local government determines that having such
  contractor or subcontractor perform work as part of the performance
  contract provides the best value for the local government.
         Sec. 302A.202.  WORK RELATED OR ANCILLARY TO CONSERVATION
  MEASURES. (a)  The governing body of the local government may
  contract with a provider to perform work that is related to,
  connected with, or otherwise ancillary to the conservation measures
  resulting in utility cost savings and in operation and maintenance
  cost savings as identified in the scope of a performance contract.
         (b)  Additional work authorized under this section may not
  increase the square footage of a facility unless the increase is
  necessary to make a mechanical, electrical, or plumbing improvement
  to achieve a reduction in energy consumption or to conserve water
  resources.
         (c)  A change order, contract addendum, or other amendment
  for any additional conservation measures described by Subsection
  (a) must be reasonably required or contemplated under the
  investment grade audit under Section 302A.108 used to propose the
  original performance contract.
         Sec. 302A.203.  LIMITATION ON MODIFICATION TO SCOPE OF
  PERFORMANCE CONTRACT. The scope of a performance contract may not
  be modified by change order, contract addendum, or other method of
  contract:
               (1)  to perform work that is not related to, connected
  with, or otherwise ancillary to the conservation measures described
  by Section 302A.202;
               (2)  in a way that increases the price of the original
  awarded contract by more than 25 percent of the original contract
  value; or
               (3)  to perform work that would cause the annual
  savings and increase in billable revenues resulting from the
  performance contract to be less than the total annual contract
  payments made by the local government, including any financing
  charges or debt service to be incurred by the local government over
  the term of the contract.
         Sec. 302A.204.  LAW APPLICABLE TO ENGINEERING SERVICES
  PERFORMED UNDER PERFORMANCE CONTRACT. Sections 1001.053 and
  1001.407, Occupations Code, apply to work performed under a
  performance contract.
  SUBCHAPTER F. FRAUD DETERRENCE PROGRAM
         Sec. 302A.251.  COMPLIANCE PROGRAM AND INTERNAL CONTROL TO
  DETECT AND DETER FRAUD. (a)  A provider that enters into a
  performance contract under this chapter shall maintain a compliance
  program and internal controls designed to detect and deter
  fraudulent and corrupt conduct, including:
               (1)  policies and procedures to create redundancy in
  the subcontractor bid review, bid normalization, bid revision, and
  selection process; and
               (2)  savings and cost review processes.
         (b)  The policies and procedures described by Subsection
  (a)(1) must specifically correct or prevent the circumstances that
  would allow a single employee to control the subcontractor
  selection process and obtain kickbacks or bribes either directly
  from subcontractors and vendors or indirectly through
  intermediaries in connection with the performance contract.
         (c)  If necessary and appropriate, a provider shall modify an
  existing compliance contract to ensure that the provider maintains
  a rigorous compliance program that incorporates relevant internal
  controls, policies, and procedures designed to effectively detect
  and deter violation of fraud, anti-corruption, procurement
  integrity, and anti-kickback laws.
  SUBCHAPTER G. ANNUAL REPORTS AND STATEMENTS
         Sec. 302A.301.  ANNUAL MEASUREMENT AND VERIFICATION REVIEW;
  REPORT.  (a)  During the term of a performance contract and at the
  discretion of the local government, a local government shall retain
  the provider or an independent third-party to perform an annual
  measurement and verification review of, and prepare a report on,
  savings, increase in billable revenues, and, if applicable,
  efficiency or accuracy of metering equipment resulting from the
  conservation measures when compared with the established baseline
  set forth in the performance contract.
         (b)  The measurement and verification review and report must
  comply with the measurement and verification methodologies
  described by Section 302A.055(a)(2) that were published or listed
  on the date the performance contract was entered into between the
  local government and provider. An independent third-party retained
  under this section must:
               (1)  have the qualifications of a third-party engineer
  as described by Section 302A.004(b); and
               (2)  be retained under a separate contract from the
  third-party engineer selected under Section 302A.004.
         Sec. 302A.302.  ANNUAL RECONCILIATION STATEMENT. (a)  
  Pursuant to Section 302A.052(a)(2), the provider shall provide an
  annual reconciliation statement of the guaranteed savings or
  increase in billable revenues based on the results of the
  measurement and verification review under Section 302A.301. The
  statement must disclose any shortfall or surplus between guaranteed
  savings or increase in billable revenues specified in the
  performance contract and actual, not stipulated, savings incurred
  during a given guarantee year as described by Subsection (b). If
  the annual reconciliation statement reveals an excess actual
  guaranteed savings or excess increase in billable revenues in a
  given year, the surplus may not be used to cover any shortfalls in
  subsequent contract years.
         (b)  A guarantee year consists of a 12-month term beginning
  on the date all the conservation measures become fully operational.
         (c)  A provider shall pay the local government any shortfall
  amount not later than the 30th day after the date the total year
  savings have been determined.
  SUBCHAPTER H. ENFORCEMENT
         Sec. 302A.351.  VIOLATION OF PERFORMANCE CONTRACT PROVISION
  CONTAINING PROHIBITION AGAINST CONTINGENCY FEES. If a provider
  violates the provision of a performance contract described by
  Section 302A.052(c), the local government may:
               (1)  terminate the contract without liability; and
               (2)  at the local government's discretion, deduct from
  the contract price, including any finance charges subject to the
  contract, or otherwise recover, the full amount of the fee,
  commission, percentage, gift, or consideration.
         Sec. 302A.352.  CRIMINAL OFFENSES. (a) In this section,
  "person" means an individual, corporation, association,
  partnership, firm, or company.
         (b)  A person, including an employee working for the
  provider, commits an offense if the person offers, agrees, or
  contracts to solicit or secure a performance contract or
  subcontract related to the performance contract for any other
  person and the person is paid or to be paid any fee, commission,
  percentage, gift, or other consideration contingent on, or
  resulting from, the awarding or making of a performance contract.
         (c)  A person commits an offense if the person offers to pay,
  or pays, any fee, commission, percentage, gift, or other
  consideration contingent on, or resulting from, the awarding or
  making of a performance contract.
         (d)  A local government official commits an offense if the
  official offers to solicit or secure, or solicits or secures, a
  performance contract between the local government and a person and
  the official is to be paid, or is paid, any fee, commission,
  percentage, gift, or other consideration contingent on the awarding
  or making of the performance contract.
         (e)  A person who is a local government employee or
  contractor with any influence on the awarding or making of a
  performance contract commits an offense if the person offers to
  solicit or secure, or solicits or secures, a performance contract
  and the person is to be paid, or is paid, any fee, commission,
  percentage, gift, or other consideration contingent on the awarding
  or making of a performance contract between the local government
  and another person.
         (f)  An offense under this section is a felony of the second
  degree.
         (g)  If conduct that constitutes an offense under this
  section also constitutes an offense under another law, including
  money laundering under Chapter 34, Penal Code, the actor may be
  prosecuted under this section, the other law, or both.
         Sec. 302A.353.  ENFORCEMENT BY ATTORNEY GENERAL AND LOCAL
  PROSECUTORS. With the consent of the appropriate local county or
  district attorney, the attorney general has concurrent
  jurisdiction with that consenting local prosecutor to prosecute an
  offense under Section 302A.352.
         Sec. 302A.354.  DECLARATORY OR INJUNCTIVE RELIEF.  This
  chapter may be enforced through an action for declaratory or
  injunctive relief filed not later than the 10th day after the date
  on which the contract is awarded.
         SECTION 2.  Article 59.01(2), Code of Criminal Procedure, is
  amended to read as follows:
               (2)  "Contraband" means property of any nature,
  including real, personal, tangible, or intangible, that is:
                     (A)  used in the commission of:
                           (i)  any first or second degree felony under
  the Penal Code;
                           (ii)  any felony under Section 15.031(b),
  21.11, or 38.04 or Chapter 29, 30, 31, 32, 33, 33A, or 35, Penal
  Code;
                           (iii)  any felony under Chapter 43, Penal
  Code, except as provided by Paragraph (B);
                           (iv)  any felony under The Securities Act
  (Title 12, Government Code); or
                           (v)  any offense under Chapter 49, Penal
  Code, that is punishable as a felony of the third degree or state
  jail felony, if the defendant has been previously convicted three
  times of an offense under that chapter;
                     (B)  used or intended to be used in the commission
  of:
                           (i)  any felony under Chapter 481, Health
  and Safety Code (Texas Controlled Substances Act);
                           (ii)  any felony under Chapter 483, Health
  and Safety Code;
                           (iii)  a felony under Chapter 151, Finance
  Code;
                           (iv)  any felony under Chapter 20A or 34,
  Penal Code;
                           (v)  a Class A misdemeanor under Subchapter
  B, Chapter 365, Health and Safety Code, if the defendant has been
  previously convicted twice of an offense under that subchapter;
                           (vi)  any felony under Chapter 32, Human
  Resources Code, or Chapter 31, 32, 35A, or 37, Penal Code, that
  involves a health care program, as defined by Section 35A.01, Penal
  Code;
                           (vii)  a Class B misdemeanor under Chapter
  522, Business & Commerce Code;
                           (viii)  a Class A misdemeanor under Section
  306.051, Business & Commerce Code;
                           (ix)  any offense under Section 42.10, Penal
  Code;
                           (x)  any offense under Section 46.06(a)(1)
  or 46.14, Penal Code;
                           (xi)  any offense under Chapter 71, Penal
  Code;
                           (xii)  any offense under Section 20.05,
  20.06, 20.07, 43.04, or 43.05, Penal Code;
                           (xiii)  an offense under Section 326.002,
  Business & Commerce Code; or
                           (xiv)  a Class A misdemeanor or any felony
  under Section 545.420, Transportation Code, other than a Class A
  misdemeanor that is classified as a Class A misdemeanor based
  solely on conduct constituting a violation of Subsection (e)(2)(B)
  of that section;
                     (C)  the proceeds gained from the commission of a
  felony listed in Paragraph (A) or (B) of this subdivision, a
  misdemeanor listed in Paragraph (B)(vii), (ix), (x), (xi), or (xii)
  of this subdivision, or a crime of violence;
                     (D)  acquired with proceeds gained from the
  commission of a felony listed in Paragraph (A) or (B) of this
  subdivision, a misdemeanor listed in Paragraph (B)(vii), (ix), (x),
  (xi), or (xii) of this subdivision, or a crime of violence;
                     (E)  used to facilitate or intended to be used to
  facilitate the commission of a felony under Section 15.031 or
  Chapter 43, Penal Code; [or]
                     (F)  used to facilitate or intended to be used to
  facilitate the commission of an offense under Section 20.05, 20.06,
  or 20.07 or Chapter 20A, Penal Code; or
                     (G)  the proceeds gained from the commission of an
  offense under Section 302A.352(b), (c), (d), or (e), Local
  Government Code.
         SECTION 3.  The following laws are repealed:
               (1)  Section 44.901, Education Code; and
               (2)  Chapter 302, Local Government Code.
         SECTION 4.  The changes in law made by this Act apply to a
  contract entered into or amended or modified on or after the
  effective date of this Act.  A contract entered into or amended or
  modified before the effective date of this Act is governed by the
  law in effect on the date the contract was entered into or amended
  or modified, and the former law is continued in effect for that
  purpose.
         SECTION 5.  This Act takes effect September 1, 2023.
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