OVERVIEW OF ENERGY SAVINGS PERFORMANCE CONTRACTS

Energy savings performance contracts (ESPC) are a methodology of financing an energy efficiency improvement project outside of a public entity's operating budget. It is a fiscally sound method to improve conditions in government facilities through reinvestments at no additional outlay for the government. ESPCs provide an efficient way to lower energy consumption while avoiding the need to incur in costs related to purchasing energy efficient equipment and renewable energy power sources. ESPCs serve as a tool for sustainability and asset modernization that establishes a guaranteed relationship that is based on mutual accountability. An ESPC constitutes a partnership between a Government Unit and an ESCO and is considered a time and cost-effective method for completing comprehensive energy upgrades. Before ESPC During ESPC After ESPC Net Savings Energy 0&M savings Net Savings Financing payment 0&M Utility Costs Utility Utility Costs Costs With the execution of an ESPC, a Qualified ESCO conducts a review and audit of a Project Site with the purpose of, along with input from the Government Unit and SOEP, recommending and designing a plan for implementing Conservation Measures which shall reduce a Government Unit's overall utility consumption needs. 5 I Page Energy Savings Performance Contract Program Amended Regulation The costs of implementing such Conservation Measures are financed through the net savings in energy consumption achieved as a result of the Conservation Measures implemented by the ESCO. As such, ESPCs allow a Government Unit to invest in Conservation Measures without the need of allocating public funds for such purposes. After the expiration of the ESPC, the Government Unit will continue to benefit from the savings generated by the Conservation Methods through an overall reduction in costs associated to energy and water consumption.