Program Requirements and Definitions

Program Requirements and Definitions. (A) “Eligible Energy Conservation Measures (ECMs)” are energy systems or equipment listed below: (i) heating, ventilation, and air conditioning systems; (ii) lighting; (iii) windows; (iv) insulation; (v) energy management controls; (vi) life safety measures that provide long-term operating cost reductions; (vii)building operation programs that reduce operating costs; (viii)renewable energy systems and equipment; (ix) water conservation systems and equipment, including accuracy and measurement of water distribution and/or consumption; (x) facilities improvements or enhancements directly related to the above; (xi) alternative fuel motor vehicles including vehicles that have been converted to such and ancillary equipment related to or associated with the fueling of alternative fuel vehicles; and (xii)other equipment, services and improvements providing energy efficiency as determined by the division. (B) Energy Cost Savings: a reduction in the costs related to “Energy Services” or “Energy Efficient Services” as defined in Section 31-7-14 (1)(a)(iii) and 31-7-14 (1)(a)(vii) of the Mississippi Code of 1972, as amended. Energy Cost Savings are a reduction in the cost of energy, renewable energy, water and other natural resources conservation and must be verifiable. Energy cost savings are generally recurring savings - savings that occur year after year. (C) Allowable cost savings may also include savings from the elimination of future expenses and from the avoidance of future replacement expenditures as a result of new equipment installed or services performed. (D) Guaranteed energy savings plus verifiable guaranteed related cost savings achieved by the project shall be sufficient to cover all project costs, including annual maintenance and monitoring fees, guarantee fees, and contractor fees. (E) For “energy saving performance contracts” and for “shared savings contracts,” MDA- ENRD defines “energy savings plus related cost savings” as scientifically quantifiable and verified measurable savings from energy and/or water usage reductions plus cost savings from related operations and maintenance reductions and other cost-avoidance measures. (F) Energy Related Cost Savings: a reduction in expenses (other than energy cost savings) related to energy-consuming equipment, generally related to equipment operations, maintenance, renewal, replacement, repair expenses, or avoided capital costs. Energy related cost savings shall be verified to be considered part of the ESPC. i. Operation and Maintenance (O&M) Savings: a reduction in operation and maintenance costs associated with the equipment. Accompanying documentation, such as invoices of previous repair costs, must be submitted along with detailed calculations and descriptions. O&M savings should only be captured in the applicable years and during the lifetime of the particular equipment. Elimination of maintenance contracts is allowable if verifiable. ii. Capital Cost Avoidance (CCA): a cost reduction generated by avoiding planned future capital expenditures, either for equipment replacement or services performed. CCA on equipment that is being purchased and replaced through the ESPC rather than in the future is calculated by taking the difference between what it would have cost to implement the project in the future and the current costs of that equipment replacement under the ESPC. For additional CCA calculations, it is recommended that a Life Cycle Cost Assessment (LCCA) be used to monetize the non-energy benefits. USDOE (2005) defines life-cycle costs as “…the sum of present values of investment costs, capital costs, installation costs, energy costs, operating costs, maintenance costs, and disposal costs over the lifetime of the project, product, or measure.” Cost avoidance can be captured as a one-time benefit or normalized over the term of the performance contract. iii. Material Savings: a reduction in costs associated with parts and materials purchased for existing energy-consuming systems. These are allowable as long as the initial values can be determined and verified. iv. Labor Savings: a reduction in personnel associated with the operations and maintenance of the energy-consuming system. It will not be considered by MDA-ENRD unless a job is eliminated and staff is released. Even if someone is assigned different responsibilities, that money is not eliminated from the budget and therefore not available as savings. (G) Simple Payback Period (SPP): the length of time required to recover the costs of the ESPC investments through energy and related cost savings. The combined simple payback period shall not exceed 20 years, although an individual ECM can have a payback longer than 20 years. SPP is calculated by diving the value of the initial investment by the projected annual energy cost savings. SPP is usually given in years and/or tenths of a year. The simple payback formula is: Simple Payback SPP (years) = I _ _ _ _ _ _ _ _ _ ES/year Where, SPP = Simple payback period I = Initial investment ES/year = Projected annual energy savings at current prices (H) Useful Life: the length of time over which equipment can be depreciated. Per Section 31-7-14, Miss. Code, each energy system or equipment useful life shall meet or exceed the term of the contract to be considered an eligible measure. (I) MDA-ENRD will check to ensure warranty time periods has been captured correctly where applicable. (J) Verification of savings means MDA-ENRD shall verify all projected savings in an ESPC. Projected savings that are not quantified, measured and verified will not be considered as part of the ESPC. Supporting documentation, including detailed narratives and graphs/charts shall be submitted with each proposed project.