Alternative Financing Q&As

March 31, 2005

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Q. What types of technical assistance does FEMP provide for Super ESPC projects?

A. FEMP, through the DOE Regional Office and National Laboratories, provides agencies with technical support to assess technical and economic feasibility of ESPC or other alterative financing approaches for agency site energy projects. If an agency elects to implement an ESPC project, FEMP provides free training on the DOE Super ESPC Delivery Order process for development, award, and implementation of a privately-financed, performance-based energy savings project; provides a Project Facilitator (technical resource with ESPC project development and energy engineering expertise) to assist the agency with education and technical assistance all the way through submittal of an initial proposal by an Energy Service Company (ESCO). If an agency wants to proceed with project development toward award of a Delivery Order and post-award implementation and administration under the DOE Super ESPC contract, the agency can continue using the services of a FEMP Project Facilitator on a reimbursable basis.

Q. What is a site survey, what happens during a site survey, and what are the roles of the ESCO and agency?

A. An ESCO conducts a multi-day site survey to gather information about a site's energy uses, equipment needs, and modernization plans and priorities. The survey is typically conducted immediately following the initial kickoff meeting by a small group of ESCO auditors, escorted by site facilities staff. The auditors will gather several years of utility bills, site and building layouts, and information about the site's equipment and its use (operating hours, nameplate data, etc). The ESCO uses the survey data as a basis for preparing its initial proposal for the agency.

Q. How can an ESPC Delivery Order's period of performance be reduced?

A. The period of performance of an ESPC is defined to be the time required for an ESPC's net savings to pay off the ESCO's expenses, including financing costs and fee. A reduction in the period of performance can be accomplished by increasing the annual net savings, or decreasing the size of the project loan, or both. The net savings can be increased by increasing the total project savings, or by decreasing on-going project expenses (M&V costs, management costs, O&M costs, etc). Either way, more money is available to repay the loan quicker. The loan size can be reduced by reducing the cost of the project investment, or by reducing the interest rate on the loan. Either way, the loan can be repaid more quickly.

Q. Can my agency award an ESPC Delivery Order for a project that primarily conserves water?

A. Yes, the recent National Defense Authorization Act that reauthorized the ESPC program and extended the ESPC sunset date to October 1, 2006, also allowed water-related savings to be used to pay for ESPCs. The Act defines the term "energy savings" to mean—A reduction in the cost of energy, water, or wastewater treatment, from a base cost established through a methodology set forth in the contract, used in an existing federally owned building or buildings or other federally owned facilities as a result of—

  1. the lease or purchase of operating equipment, improvements, altered operation and maintenance, or technical services;
  2. the increased efficient use of existing energy sources by cogeneration or heat recovery, excluding any cogeneration process for other than a federally owned building or buildings or their federally owned facilities; or
  3. the increased efficient use of existing water sources in either interior or exterior applications. The ACT defines "energy savings contract" and "energy savings performance contract" to mean—A contract that provides for the performance of services for the design, acquisition, installation, testing, and where appropriate, operation, maintenance, and repair, of an identified energy or water conservation measure or series of measures at one or more locations. Such contracts shall, with respect to an agency facility that is a public building, be in compliance with the prospectus requirement and procedures of section 3307 of title 40, United States Code.

The Act defines energy or water conservation measure to mean—

  1. an energy conservation measure, as defined in section 551 of the National Energy Conservation PolicyAct; or
  2. a water conservation measure that improves the efficiency of water use, is life-cycle cost-effective, and involves water conservation, water recycling or reuse, more efficient treatment of waste water or stormwater, improvements in operation or maintenance efficiencies, retrofit activities, or other related activities, not at a federal hydroelectric facility.