Ariz. Admin. Code § 7-2-1069

Current through Register Vol. 30, No. 37, September 13, 2024

Section R7-2-1069 - Guaranteed Energy Cost Savings Contracts

A. A school district may procure a guaranteed energy cost savings contract with a qualified provider through competitive sealed proposals in accordance with R7-2-1041 through R7-2-1050.

1. The request for proposal evaluation factors required by R7-2-1042(A)(1)(h) shall include objective criteria for selecting the qualified provider, including the cost of the contract, the energy cost savings, the net projected energy savings, the quality of the technical approach, the quality of the project management plan, the financial solvency of the qualified provider and the experience of the qualified provider with projects of similar size and scope.

2. Notwithstanding R7-2-1042(A)(1)(h), the request for proposals shall set forth the respective numerical weighting for each evaluation criterion.

3. At the qualified provider's expense, the proposal shall include an independent third-party validation of cost savings calculations associated with each proposed energy cost savings measure by a licensed, registered professional engineer, with credentials from the national association of energy engineers, who has demonstrated experience in energy analysis. The school district shall approve the selection of the independent third party.

4. A school district may enter into a guaranteed energy cost savings contract with a qualified provider if the school district determines that the energy savings project will pay for itself within the expected life of the energy cost savings measures implemented (according to the manufacturer's equipment standards), the term of the financial agreement or 25 years, whichever is shortest, if the recommendations in the proposal are followed. Notwithstanding this subsection, a school district may elect to use a shorter capital cost repayment schedule than required pursuant to this subsection. The school district shall retain the cost savings achieved by a guaranteed energy cost savings contract, and these cost savings may be used to pay for the contract and project implementation.

5. A qualified provider is a person that is experienced in designing, implementing or installing energy cost savings measures, that has a record of established projects or measures of similar size and scope, that has demonstrated technical, operational, financial and managerial capabilities to design and operate cost savings measures and projects and that has the financial ability to satisfy guarantees for energy cost savings.

B. In selecting a contractor to perform any construction work related to performing the guaranteed energy cost savings contract, the qualified provider may:

1. Develop and use a prequalification process for contractors.

2. Require the contractor to demonstrate that the contractor is adequately bonded to perform the work and that the contractor has not failed to perform on a prior job.

C. A study shall be performed by the selected qualified provider in order to establish the exact scope of the guaranteed energy cost savings contract, the fixed cost savings guarantee amount and the methodology for determining actual savings. The selected qualified provider will provide the school district with a final study report which validates that the fixed cost savings guarantee amount will meet or exceed the cost savings calculations contained within the original proposal. The study report shall be reviewed and approved by the school district before the actual installation of any equipment. The qualified provider shall transmit a copy of the approved study report to the division of school facilities within the department of administration and the governor's office.

D. The information to develop the energy baseline shall be derived from historical energy costs or actual energy measurements or shall be calculated from energy measurements at the facility where energy cost savings measures are to be installed or implemented. The baseline shall be established before the installation or implementation of energy cost savings measures.

E. One or more school districts may enter into a financing agreement with a qualified provider or a financial institution, trustee or paying agent for the purchase and installation or implementation of energy cost savings measures. Any required financing may be obtained as part of the original competitive sealed proposal process from the qualified provider, or from a third-party financing institution that is procured separately in accordance with Articles 10 and 11.

F. The selected qualified provider shall provide a performance bond in accordance with R7-2-1103(A)(1)(c).

G. The selected qualified provider shall make public the information in the subcontractor's bids.

H. The guaranteed energy cost savings contract shall include the following:

1. A requirement that, in determining whether the projected energy savings calculations have been met, the energy savings shall be computed by comparing the energy baseline before installation or implementation of the energy cost savings measures with the energy consumed after installation or implementation of the energy cost savings measures. The qualified provider and the school district may agree to make modifications to the energy baseline only for any of the following:

a. Changes in utility rates.

b. Changes in the number of days in the utility billing cycle.

c. Changes in the square footage of the facility.

d. Changes in the operational schedule of the facility.

e. Changes in facility temperature.

f. Significant changes in the weather.

g. Significant changes in the amount of equipment or lighting used in the facility.

h. Significant changes in the nature or intensity of energy use such as the change of classroom space to laboratory space.

2. A payment schedule, with payments over a period of not more than the expected life of the energy cost savings measures implemented (according to the manufacturer's equipment standards), the term of the financial agreement or 25 years, whichever is shortest, except a school district may elect to use a shorter capital cost repayment schedule than required pursuant to this subsection.

3. A requirement that all payments, except obligations on termination of the contract before its expiration, be made pursuant to the terms of the financing agreement.

4. A written guarantee from the qualified provider that the energy savings will meet or exceed the costs of the energy cost savings measures over the expected life of the energy cost savings measures implemented (according to the manufacturer's equipment standards), the term of the financial agreement or 25 years, whichever is shortest, except a school district may elect to use a shorter capital cost repayment schedule than required pursuant to this subsection. The school district shall ensure that the contractor:

a. For the term of the guaranteed energy cost savings contract, prepares a measurement and verification report on an annual basis in addition to an annual reconciliation of savings.

b. Reimburses the school district for any shortfall of guaranteed energy cost savings on an annual basis.

c. Uses the international performance and measurement and verification protocol standards or the federal energy management program standards to validate the savings guarantee.

I. A school district may use a simplified energy performance contract for projects that are less than $500,000. Simplified energy performance contracts are not required to include an energy savings guarantee and shall comply with all requirements in this Section except for subsections (D), (H)(1)(a) through (h) and (H)(4)(a) through (c).

J. This Section does not apply to the construction of new buildings.

K. For all projects under this Section, the school district shall report to the division of school facilities within the department of administration and the governor's office:

1. The name of the project.

2. The name of the qualified provider.

3. The total cost of the project.

4. The expected energy cost savings and relevant escalators.

5. The agreed-on baseline in the measurement and verification agreement in both kilowatt hours and dollars.

Ariz. Admin. Code § R7-2-1069

Adopted by exempt rulemaking at 33 A.A.R. 1526, effective 7/1/2014. Amended by final exempt rulemaking at 26 A.A.R. 597, effective 7/1/2020. Amended by final exempt rulemaking at 27 A.A.R. 2342, effective 9/27/2021.