Case Study - The Department of Veterans Affairs West Haven Campus, VA Connecticut Health Care System

Overview

The West Haven (Connecticut) Campus of the Veterans Affairs Connecticut Health Care System was the first Veteran's Hospital to award a shared energy savings (SES) contract (now known as energy savings performance contracts). The project involves replacement of the lighting system, installation of a cooling system, maintenance of the new chiller equipment, and several smaller efforts. Up-front costs are being provided through a $3.9 million investment by the contractor, EUA Cogenex, about $400,000 in rebates from the local utilities for gas and electric service (Southern Connecticut Gas and United Illuminating Company, respectively), and guaranteed energy cost savings over the life of the contract. The Government's share of energy savings over the 16 year contract is expected to be $880,000.

Background

Data collected early in the project showed that demand fell by 6,755 kilowatts in 1993 compared to 1992, and 2.7 million fewer kilowatt hours (kWh) of electricity were used in this period, lowering the kWh unit cost by 23 percent.

Among the smaller projects, replacement of hot water tanks will save over 7 billion Btu and $29,000 in fuel costs, and retrofits of air-conditioning air handlers will save more than 150 million Btu and $3,860 in fuel costs annually.

Project Summary

The program is currently in the fourth year of the 16 year contract. Lighting retrofits have been carried out and are expected to save $220,000 in utility costs annually. The central cooling system has also been upgraded.

More than 8,500 lighting fixtures were replaced throughout the Medical Center. Technologies used included T-8 fluorescent tubes in conjunction with specular reflectors and electronic ballasts. Two 800-ton, 30-year-old centrifugal chillers were replaced with a new 800-ton centrifugal and a 1,000-ton steam absorption chiller.

The contractor is to receive 90 percent of the energy savings and the Medical Center will retain 10 percent of the savings for chilled water use, up to 1.8 million ton-hours per year. Beyond this baseline level, the contractor will receive 25 percent of the savings, and the Medical Center will retain the remainder.

Benefits of Using SES Contracting

West Haven replaced aging, inefficient equipment with new energy-efficient technologies with no capital investment.

A team of three individuals who implemented the West Haven project received a 1995 Federal Energy and Water Management Award from the Department of Energy for their exceptional accomplishments in saving energy through this contract award.

Lessons Learned

The West Haven Center broke new ground when it awarded its shared energy savings contract. Their efforts identified a few legal and policy issues to be resolved prior to proceeding with energy savings performance contracts:

No Precedence for Energy Performance Contracts at the VA: It took nearly two years to establish the SES contract for West Haven because no other VA facility had ever negotiated anything similar. The Chief of Design Development merged sample contracts from the General Services Administration and the U.S. Navy into one that fit the situation at West Haven. The local utilities provided invaluable field data and technical assistance without cost to the Government.

Legal Issues Raised by ESPC: The VA is evaluating whether this type of contract is the best vehicle for carrying out its Federal energy-efficiency projects without incurring capital costs. After the contract was awarded for work at West Haven, the Chief of Design Development was appointed to a task force at Veterans Affairs Headquarters that is working to standardize the solicitation for ESPCs and simplify the process for obtaining legal approval. The legal contracting issues are:

Unfunded Liability - In signing a contract, the Government is committed to paying back the energy service company for its up-front investments, using future energy savings. Legal concerns center on a contingency such as having to decommission a facility and end the contract early, before energy savings have accumulated and the contractor s costs have been re-paid. The cost to terminate an ESPC in the event of a closure would be addressed by Congress the decision is made to close the facility. Congress would most likely appropriate funds for termination costs for all contracts under the facility in the event of closure.

Unanticipated Site Conditions - Unexpected conditions may arise during the implementation of a project, such as discovering asbestos or PCBs on-site.

Policy on who will handle and pay for these situations lies with the individual agency: FEMP's model solicitation has a clause that gives the contractor the option to remove the asbestos at his own expense or to give the Government the option to remove it at its expense.