An energy savings performance contract (ESPC) is a complex document, so it’s natural to assume that every “I” is dotted and every ‘T” is crossed. But, there are a few areas that merit clarification as you embark on the ESPC process. Here are 10 tips, compliments of a Department of Energy guide.
1 – Energy Related Cost Savings
The agency and the contractor may agree that the project will include savings from recurring and/or one-time costs. One-time savings may be from avoided expenditures for projects that were appropriated but will no longer be necessary. Recurring savings are generally from reduced O&M expenses or reduced water consumption. These O&M and water savings must be based on actual spending reductions. Clarify sources of nonenergy cost savings and how they will be verified.
2 – Major changes in facility
The agency controls major changes in facility use, including closure. Clarify responsibilities in the event of a premature facility closure, loss of funding, or other major change.
3 – Operating hours
The agency generally has control over operating hours. Increases and decreases in operating hours can show up as increases or decreases in “savings” depending on the M&V method. Clarify whether operating hours are to be measured or stipulated and what the impact will be if they change.
4 – Load
Equipment loads can change over time. The agency generally has control over hours of operation, conditioned floor area, intensity of use (e.g., changes in occupancy or level of automation). Changes in load can show up as increases or decreases in “savings” depending on the M&V method. Clarify whether equipment loads are to be measured or stipulated and what the impact will be if they change.
5 – Weather
A number of energy efficiency measures are affected by weather. Neither the contractor nor the agency has control over the weather. Should the agency agree to accept risk for weather fluctuations, it should be contingent upon aggregate payments not exceeding aggregate savings. Clearly specify how weather corrections will be performed.
6 – User participation
Many energy conservation measures require user participation to generate savings (e.g., control settings). Clarify what degree of user participation is needed and utilize monitoring and training to mitigate risk.
7 – Equipment performance
The contractor has control over the selection of equipment and is responsible for its proper installation, commissioning, and performance. The contractor has responsibility to demonstrate that the new improvements meet expected performance levels including specified equipment capacity, standards of service, and efficiency. Clarify who is responsible for initial and long-term performance, how it will be verified, and what will be done if performance does not meet expectations.
8 – Operations
Performance of the day-to-day operations activities is negotiable and can impact performance. However, the contractor bears the ultimate risk regardless of which party performs the activity. Clarify which party will perform equipment operations, the implications of equipment control, how changes in operating procedures will be handled, and how proper operations will be assured.
9 – Preventive Maintenance
Performance of day-to-day maintenance activities is negotiable and can impact performance. However, the contractor bears the ultimate risk regardless of which party performs the activity. Clarify how long-term preventive maintenance will be assured, especially if the party responsible for long-term performance is not responsible for maintenance (e.g., contractor provides maintenance checklist and reporting frequency). Clarify who is responsible for performing long-term preventive maintenance to maintain operational performance throughout the contract term. Clarify what will be done if inadequate preventive maintenance impacts performance.
10 – Equipment Repair and Replacement
Performance of day-to-day repair and replacement of contractor-installed equipment is negotiable, however it is often tied to project performance. The contractor bears the ultimate risk regardless of which party performs the activity. Clarify who is responsible for performing replacement of failed components or equipment replacement throughout the term of the contract. Specifically address potential impacts on performance due to equipment failure. Specify expected equipment life and warranties for all installed equipment. Discuss replacement responsibility when equipment life is shorter than the term of the contract.
Department of Energy, Office of Energy Efficiency & Renewable Energy. 2017 “Risk, Responsibility, and Performance Matrix.”