Energy Performance Contracting

A Proven Tool for Financing Public Facility Improvements

Are you an elected official, chief administrator, financial manager, facilities manager, energy manager or sustainability coordinator at a

  • State agency, institution of higher education?
  • County, municipality, school district, or special district in Colorado?

If so, are you…

  • Concerned about how much of your operating budget is spent on electricity, heating and water bills?
  • Concerned that your facilities’ electrical, mechanical and water systems are breaking down, and you do not have the budget resources to permanently fix the problems?
  • Considering moving ahead with just lighting improvements while holding off on more costly repairs?
  • Wondering just how much longer building maintenance can be deferred until a major problem hits?
  • Worried that competition is stiff for the available capital construction grants or loans?
  • Concerned that construction costs keep escalating?
  • Hearing too many comments from staff, students and others about “it’s too warm, it’s too cold, it’s too dark in here?”
  • Motivated to meet your sustainability targets?

The Colorado Energy Office (CEO) has a proven tool that may address your concerns. Leverage those easy, quick paybacks on lighting upgrades into funding for more expensive repairs and upgrades through energy performance contracting. Bring together your finance and facilities colleagues and key decision-makers to consider this proven, low-risk tool for financing a holistic, comprehensive approach to public facility improvements.

Since Colorado established its Energy Performance Contracting (EPC) program in the mid-1990s,152 public jurisdictions have worked with an energy services company (ESCO) to identify nearly $35 million in annual utility savings through a technical energy audit. Because each technical energy audit is high-quality, investment-grade, these guaranteed utility savings have been leveraged to attract $574 million in capital construction funds. As of June 2018, 206 active and completed projects have improved the performance of public school and university buildings, veterans facilities, libraries, parks, community centers, wastewater treatment plants, prisons and other government buildings in communities across 75% of Colorado’s counties.


Facility improvements include:

  • Indoor lighting fixtures & controls
  • Occupancy sensors
  • HVAC improvements
  • Boiler replacements
  • Pumps, fans & drivers
  • Equipment controls
  • Operations & scheduling
  • Building envelope improvements
  • Water efficiency
  • Street, traffic and other outdoor lighting
  • Vehicle/fleet efficiency
  • Renewable energy installations
  • Advanced water metering

A Results-Oriented Program

Through these improvements, state agencies, colleges and universities, counties, cities and towns, school districts and special districts have saved to date:

Electricity - 193 million kWh   

Natural gas, propane, heating oil & coal - 10.3 million therms

Water - 507,560,000 gallons 

Annual utility cost savings - $34.2 million

Operations & Maintenance (O&M) cost savings - $3 million  

Because of these savings, the Colorado EPC program is ranked #7 nationally in total construction project investments and in source energy saved, according to the Energy Services Coalition Race to the Top.

A list of Colorado cities and towns that have utlized EPC to date can be found here.

If you are interested in the Colorado Energy Performance Contracting program, please contact Sr. Program Manager Mirka della Cava at 303-866-3464 or mirka.dellacava@state.co.us.


Facilitating Improvements

Colorado has designed its EPC program to be a smooth experience for public facility owners. Because of our record of success, other state EPC programs often borrow elements of our program design. Key program design elements include:

  1. An ongoing collaboration between CEO, the Offices of the State Architect and Attorney General and the Colorado Chapter of the Energy Services Coalition to create standardized contracts, protocols, guidelines and processes.  All comply with Colorado’s enabling legislation for EPC activity in state agencies and institutions of higher education, as well as local governments, as well as TABOR, Dodd Frank and other regulations, industry standards, and our own high standards for success.
  2. CEO and the Office of the State Architect collaborate to pre-qualify a pool of energy service companies to ensure a depth and breadth of services to meet clients’ goals and needs. All pre-qualified ESCOs execute a contract with CEO to ensure each company adheres to statutory and regulatory requirements, industry standards and our program standards for success.
  3. CEO provides each public facility owner with free coaching and technical assistance throughout the life cycle of an energy performance contracting project. These services are provided by a member of CEO’s EPC program team staff.

CEO project consulting services are available to public jurisdictions: (1) upon execution of a Memorandum of Understanding and (2) if the public facility owner’s selection of a pre-qualified ESCO. Note: the MOU is not a legally binding agreement nor is it a commitment of money.


Five Steps to Savings

CEO wants every public facility owner venturing into energy performance contracting to have a successful experience. To that end, CEO has developed a five-step process so that each public facility owner is comfortable with its decisions throughout the life-cycle of its energy performance contracting project.

STEP 1: GET ORGANIZED

During this step, you (a public facility owner) talk with a member of CEO’s program team or an ESCO to discuss your facility concerns, goals and objectives and whether EPC would be an appropriate tool to meet them. If you are talking with one of Colorado’s pre-qualified ESCOs, that ESCO will introduce you to CEO’s free technical assistance program. 

  • CEO assigns an EPC project consultant to provide you advice and technical assistance at every step in the lifecycle of an EPC project. 
  • If EPC looks like an appropriate tool to meet your needs, then CEO and/or an ESCO makes a presentation to your Board, Council, Commission or other decision-making body. That presentation describes the benefits of EPC, the EPC process and CEO’s free technical assistance program. At the presentation, we share the Energy Performance Contracting brochure and review the Memorandum of Understanding.
  • If your decision-making body agrees to pursue the development of an EPC project, an authorized person signs the CEO’s Memorandum of Understanding. That allows you to receive CEO’s free technical assistance throughout your project. The signed MOU is sent in to CEO for its signature. A fully executed MOU is sent back to you to reference over the lifetime of your project.
  • You organize your project team and designate the project lead. Successful projects most often draw in elected officials, the chief executive, key financial staff, facility managers and maintenance staff, and sometimes building occupants.

STEP 2: SELECT A PRE-QUALIFIED ESCO

During this step, you hire a pre-qualified ESCO best suited to achieving your goals. State agencies, institutions of higher education and many local governments require a selection process in procuring contractors; some local governments do not. CEO supports you either way. Open book pricing applies to all projects.

If you require a competitive selection process, this Step 2 applies:

STEP 3: GET AN INVESTMENT GRADE AUDIT & EPC PROJECT PROPOSAL

During this step, your team executes a contract with your selected pre-qualified ESCO. With your team’s assistance, your ESCO does the detective work to find energy, water and costs savings. Your ESCO provides you with an audit report and project proposal.

  • Your key decision-makers and facility management staff, your selected pre-qualified ESCO and CEO meet to develop the project’s scope of work and clearly understand and agree upon intent, your ESCO’s proposed services and CEO’s ongoing assistance.
  • To ensure a high-quality, investment-grade audit, CEO and its pre-qualified ESCOs provide clients with the standardized State-approved Investment Grade Audit (IGA) and EPC Project Proposal Contract. CEO assists in developing and negotiating final contract terms, ensuring that terms and expectations are incorporated into the contract. State agencies and higher education are provided standardized contracts; local jurisdictions, templates that can be customized.
  • You and your ESCO execute the negotiated Investment Grade Audit Report and EPC Project Proposal Contract.
  • Your key decision-makers and facility staff, your ESCO and CEO hold a project kickoff meeting.
  • Your ESCO conducts the investment-grade technical energy audit.
  • Your ESCO develops a draft Investment Grade Audit Report and a draft EPC Project Proposal, and then provides copies to both you and CEO for review and discussion.
  • CEO provides an independent review of the draft audit to ensure that the (1) process set forth in your Contract terms are fulfilled, (2) technical, financial and legal terms of the ESCO’s contract with CEO are fulfilled, and (3) energy and cost calculations, proposed facility improvement measures and the measurement and verification plan are reasonable.
  • You, your ESCO and CEO meet to discuss the draft Investment Grade Audit Report and EPC Project Proposal.
  • Your ESCO refines the draft report and proposal based on your input and provides you and CEO with final copies.

There are several program resources to ensure an investment-grade audit is performed and a high quality project is proposed. One set of documents is tailored for state facility owners; the other set is for local facility owners.

STEP 4: EXECUTE AND IMPLEMENT AN ENERGY PERFORMANCE CONTRACT (CONSTRUCTION)

Upon your approval, your ESCO makes facility improvements.

  • CEO and its pre-qualified ESCOS always provide clients with the standardized, State-approved Energy Performance Contract, Measurement and Verification Guidelines and Commissioning Guidelines to develop a draft contract.  State agencies and higher education are provided standardized contracts. Local jurisdictions are provided templates that can be customized. CEO and/or your ESCO can provide M&V101 training that describes M&V options and implications.
  • Your team, your ESCO and CEO meet to develop an Energy Performance Contract that meets (1) all terms set forth in the Audit and (2) all your technical, financial and legal requirements as well as those of the Colorado EPC Program. CEO also ensures the document addresses potential future “what-if” scenarios.
  • Your ESCO provides an acceptable M&V plan following CEO Measurement and Verification Guidelines. It is a component of the EPC Contract.
  • If acceptable, you sign the Energy Performance Contract.
  • You negotiate and execute a Financing Contract within private sector financial markets, as desired. State agencies and institutions of higher education pursue financing through the Colorado Treasurer’s Office. Local jurisdictions can consider adapting the Financing Bid Package used by state agencies and institutions of higher education. Your ESCO will help identify rebates, incentives and funding sources and financing.
  • Your ESCO goes into construction, sees that facility improvement measures are installed as specified, and commissions the installations.
  • CEO provides support during construction as necessary.
  • Your team, your ESCO and CEO complete a post-construction walkthrough of facilities. (Required for all School District projects. Suggested for all other clients.)
  • If acceptable, you sign a Notice of Completion.
  • Your ESCO provides you and CEO a Post Implementation Report that documents as-built conditions and any changes to the energy savings guarantee.

There are several program resources to ensure execution of an energy performance contract that complies with statutory and regulatory requirements, industry standards and Colorado’s own high standards for success.  One set of documents is tailored for state facility owners; another set, for local facility owners.

STEP 5: MEASUREMENT AND VERIFICATION OF GUARANTEED SAVINGS

Congratulations! Now that you have completed construction, the energy and cost savings begin. And your ESCO verifies that!

  • Your ESCO provides you and CEO with Measurement and Verification (M&V) reports for three years as required by your energy performance contract and Colorado state statute.
  • CEO provides you with an independent review of the M&V reports prior to your acceptance.
  • CEO provides you with trouble-shooting expertise as needed. CEO does not provide dispute resolution but can help you assess the situation.
  • You enjoy energy and cost savings!

Additional Sources of Funding

The energy savings from a performance contract can pay for many efficiency improvements. However, to successfully implement very capital-intensive measures, additional sources of capital may be necessary. Your ESCO can help identify and apply for incentives, grants and/or loans. Some possibilities for additional sources of funding include:

If you have an adequate capital budget, your own funds can be used to fully, or partially fund, the cost of your investment in energy upgrades. You will effectively pay pennies on the dollar for the improvements, because the generated energy cost savings will fund all or a portion of the upgrades.

Your electric, gas and water utilities may have incentive programs to help you pay for efficiency improvements.

The Colorado Department of Local Affairs (DOLA) Energy and Mineral Impact Assistance Grant funding cycles are open three times per year.

Six U.S. Department of Agriculture Rural Development regional offices in Alamosa, Cortez, Craig, Delta, Las Animas and Wray have specialists that support its Community Facilities Direct Loan & Grant Program.

If you own a historic building, investigate History Colorado Grants & Financial Incentives.

Colorado Water Resources and Power Development Authority provides financing and grant resources for wastewater treatment or water facilities.

EPA Water Sense provides links to rebates for water efficiency projects such as toilet replacements.

Grants, incentives and programming are available through the Colorado Energy Office for electric vehicles and charging stations as well as alternative fuel vehicles and related infrastructure needs.


How an ESCO Becomes Part of the Colorado EPC Program

In 2018, CEO confirmed the following list of pre-qualified ESCOs. CEO is not currently soliciting or reviewing applications. Any Request for Proposal cycle is posted on the Colorado Vendor Self Service (VSS) website.

Following are documents from CEO's 2018 ESCO selection process, which can be helpful for understanding required qualifications.

2018 CEO ESCO RFP Solicitation

2018 CEO ESCO RFP Attachment A - ESCO Base Contract

2018 CEO ESCO RFP Attachment B - ESCO Response to RFP


Interested? Contact Us

If the Colorado Energy Performance Contracting program sounds like a promising fit or if you have questions, please contact Mirka della Cava at 303-866-3464 or mirka.dellacava@state.co.us.