DAR File No. 32330

Natural Resources, Geological Survey

R638-3

Energy Efficiency Fund

NOTICE OF PROPOSED RULE

DAR File No.: 32330
Filed: 01/28/2009, 01:46
Received by: NL

RULE ANALYSIS

Purpose of the rule or reason for the change:

The need for rule changes was determined through marketing the Fund directly to Utah Public School Districts, based upon the barriers they specifically identified. Further prioritization of rule changes was obtained from stakeholder surveys submitted to all 40 public school Superintendents, the membership of Utah Association of School Business Officials and Utah Facilities and Maintenance Organization, and a number of architecture firms identified by the Utah State Office of Education as conducting the majority of school design work. Likewise, the Revised Draft Rule Change has been vetted, discussed, and approved by the Loan Fund Review Committee that was established through the original rule.

Summary of the rule or change:

The main points of the rule changes are as follows: 1) propose changing eligibility requirements to allow marginally cost-effective proposals to compete for available funding, rather than out-right denying them eligibility; 2) propose changing application deadline to rolling basis; 3) recommend adding requirement of working with State Energy Program (SEP) on pre-application process; 4) suggest streamlining requirements for application materials by removing extensive facility descriptions, and moving all documentation materials to appendices; 5) consider consolidating criteria Review Committee uses to evaluate proposals; 6) suggest simplifying information contained in Review Committee recommendations to the Utah Geological Survey (UGS) Board; 7) recommend adding provision for UGS Board to approve applications through electronic communication; and 8) propose changing distribution of loan funds to accessible escrow account rather than lump sum upon completion.

State statutory or constitutional authorization for this rule:

Section 53A-20c-102

Anticipated cost or savings to:

the state budget:

There are no impacts to the state budget, because the Energy Efficiency Loan Fund appropriation was in a previous budget year. Additionally, the financial services provided by State Finance are already paid by a fee assessed to the recipient of the loan as established in the original rules. Likewise, the administration of the loan fund is already within the scope of the SEP, which does not change as a result of these amendments. While there was a change in the oversight of application processes, this additional effort is anticipated to be offset by reduced time spent in technical review of projects that were already evaluated throughout the course of the pre-application process. Fundamentally, many of the amendments are intended to ease the time burden on school district staff preparing applications.

local governments:

Local Governments are not affected by the operation of the Loan Fund. There will not be an impact on local government because the program and the process does not require any interaction or participation of the local government involvement in the application, approval, and deployment of the program.

small businesses and persons other than businesses:

Other persons will not be impacted by amendments to the Loan Fund rule. Small businesses will not see a fiscal impact because the suggested rule changes will not require any additional time or effort by small businesses during the application, approval, and deployment of the program.

Compliance costs for affected persons:

Compliance costs will not change for the majority of applicants, because the basic nature of the Loan Fund remains unchanged. In some cases where compliance cost is considered the opportunity cost for school districts making an application with no guarantee of funding, the compliance costs will be reduced because projects that were not previously eligible for funding will now be able to compete for remaining funding.

Comments by the department head on the fiscal impact the rule may have on businesses:

I have reviewed the proposed rule amendments for Rule R638-3 and concur with UGS's analysis that there will not be a fiscal impact on business. Michael R. Styler, Executive Director

The full text of this rule may be inspected, during regular business hours, at the Division of Administrative Rules, or at:

Natural Resources
Geological Survey
1594 W NORTH TEMPLE
SALT LAKE CITY UT 84116-3154

Direct questions regarding this rule to:

Jason Berry at the above address, by phone at 801-538-5413, by FAX at 801-538-4795, or by Internet E-mail at jasonberry@utah.gov

Interested persons may present their views on this rule by submitting written comments to the address above no later than 5:00 p.m. on:

03/17/2009

This rule may become effective on:

03/24/2009

Authorized by:

Michael R Styler, Executive Director

R638. Natural Resources, Geological Survey.

R638-3. Energy Efficiency Fund.

R638-3-3. Definitions.

A. "Board" means the Board of the Utah Geological Survey.

B. "Energy" means, for the purposes of this rule, electricity, natural gas or other methane, fuel oil, coal, or propane that is used by a school district to operate a building's electrical devices, lighting, heating and cooling systems, and other equipment necessary for the building's operation.

C. "Energy cost payback" means the period of time, generally expressed in years, that is needed for the energy cost savings of an energy efficiency project to equal the cost of the energy efficiency project. It does not include the time-value of money and is sometimes referred to as simple payback.

D. "Energy cost savings" means the monetary value to a school district of the energy that is saved or is not consumed as a result of an energy efficiency project and is generally stated on an annual cost savings basis. This value is measured based upon the current cost per unit of the energy source or sources used by the building at which an energy efficiency project is to take place.

E. "Energy efficiency project" means

1. For existing buildings, a retrofit to improve energy efficiency; or

2. For new buildings, an enhancement to improve energy efficiency beyond the minimum required by the energy code.

3. It does not mean

a. The repair of existing buildings or equipment;

b. Projects that save money through the switching of fuels, energy sources, or vendors;

c. Projects or measures intended to save money by changing the time of day or year at which energy is consumed (i.e. thermal energy storage or other peak demand reduction systems); or

d. Upgrades to non-fixed appliances or equipment within a building such as computers, copiers, and other systems.

F. "Energy savings" means the [source thermal value (British thermal units or Btu's) of energy]combined value, in British thermal units (Btu's), of all energy sources saved or not consumed as a result of an energy efficiency project. For purposes of this rule, the following conversion factors are used in [converting energy units saved by a project into source Btus's when evaluating loan applications]calculating the total energy savings:

1. Electricity - One kilowatt hour = 10,495 Btu's.

2. Natural gas or methane - One therm = 100,000 Btu's.

3. Natural gas or methane - One cubic foot = 1,030 Btu's.

4. Fuel oil - One gallon = 138,690 Btu's.

5. Coal - One pound = 11,580 Btu's.

6. Propane - One gallon = 91,333 Btu's.

G. "Fund" means the Energy Efficiency Fund established by Utah Code Section 53A-20c-102.

H. "Utah Energy Code" means the most-recent edition of the International Energy Conservation Code currently in effect within the State of Utah and as incorporated and amended by Utah Rule 156.56 (Utah Uniform Building Standard Act Rules).

I. "Quarter" means a three month period beginning with one of the following dates: January 1, April 1, July 1, and October 1.

[I]J. "SEP" means the State Energy Program, a subdivision of the Utah Geological Survey, which is required by Utah Code 53A-20c-102 to serve as staff to the revolving loan program associated with the Energy Efficiency Fund.

[J]K. "UGS" means the Utah Geological Survey.

 

R638-3-4. Eligibility of Projects for Loans.

A. Eligibility for loans from the Fund is limited to school districts within the state of Utah.

B. Loans may be used only by school districts to fully or partially finance energy efficiency projects within buildings owned and operated by the school district.

C. For energy efficiency projects involving renovation, upgrade, or improvement of existing buildings, the following project measures are eligible for loan financing from the Fund:

1. Building [shell improvements]exterior weatherization, air sealing, or thermal efficiency;

2. Increase or improvement in building insulation;

3. [Fenestration]Door, window, or skylight upgrades;

4. Lighting technology upgrades, or reduction of the number of fixtures;

5. [Lighting delamping;

6. ]Heating, ventilation, and air conditioning (HVAC) replacements or upgrades;

[7]6. Improvements to energy control systems;

[8]7. Other energy efficiency projects that a school district can demonstrate will result in a significant reduction in the consumption of energy within a building.

D. An energy efficiency project can be eligible as part of a new building construction if the following conditions are met:

1. The building measure or system for which a loan is sought must surpass the minimum prescriptive requirements of the Utah Energy Code; and

2. The completed building must exceed the minimum energy performance standards of the Utah Energy Code for its building type by at least 10%.

E. There is no limit to the total number of loans a single school district may receive from the Fund, however, no school district may receive a loan that would cause the sum of its outstanding loan balances to exceed $500,000.

F. An energy efficiency project is eligible for a loan only if the [energy cost payback of]total amount of funds awarded to the project [is]are repaid in a term of more than two and less than twelve years.

 

R638-3-5. Eligible Costs.

A. This section defines the specific costs incurred by an energy efficiency project that are eligible for financing from the Fund.

B. The following direct costs of an energy efficiency project may be eligible for financing, subject to the remaining conditions of this section:

1. Building materials;

2. Doors[ and ], windows, and skylights;

3. Mechanical systems and components including HVAC and hot water;

4. Electrical systems and components including lighting and energy management systems.

5. Labor necessary for the construction or installation of the energy efficiency project;

6. Design and planning of the energy efficiency project;

7. Energy audits that identify measures that are included in the energy efficiency project;

8. [I]Commissioning, inspections or certifications necessary for implementing the energy efficiency project.

C. The following costs are not eligible for financing from the Fund:

1. The costs of a construction or renovation project that are not directly related to energy efficiency measures;

2. Costs incurred for the acquisition of financing for the project;

3. Costs for equipment or systems that reduce energy costs without also resulting in reductions in the use of energy.

D. In cases for which the school district receives a financial incentive or rebate from a utility or other third party for undertaking some or all of the measures in an energy efficiency project, such incentives or rebates are to be deducted from the costs that are eligible for financing from the Fund. No loans made from the Fund may exceed the final cost incurred by the school district for the project after third party financing.

E. For an energy efficiency project undertaken as part of a new building construction, only the incremental cost of the project is eligible. For purposes of this section, incremental cost means the portion of the overall cost of a measure or system that exceeds the cost that would have been incurred by meeting the minimum prescriptive requirements of the Utah Energy Code.

F. For an energy efficiency project undertaken as part of the renovation of an existing building, building components or systems that are covered by the prescriptive requirements of the Utah Energy Code must exceed the minimum Utah Energy Code requirements in order for their costs to be eligible for a loan from the Fund.

 

R638-3-6. Loan Application Process.

A. The Board shall receive and evaluate applications for loans from the Fund [no fewer than three times per year]on a rolling basis as complete proposals are developed in conjunction with SEP staff.[ Notice of due dates for applications will be made available to school districts no less than three months in advance of the next scheduled Board meeting at which applications will be evaluated.]

B. School districts interested in applying for a loan should first contact SEP. SEP staff will consult or meet with school district staff to make an initial assessment of the strength or weakness of a proposed project. SEP staff may also choose to conduct a site visit of the proposed project location prior to an application. SEP staff [may assist]shall engage with school districts in a pre-application process evaluating potential project measures and [in ]preparing [an ]applications. Final applications shall be checked for completeness and eligibility by SEP staff prior to submission to the Board.

C. Applications for loans will be made using forms developed by SEP. Application forms shall require that the following information be provided by the school district:

1. [Name and location of the district]Identification of school district personnel responsible for financial authority and project management;

2. Name and location of the building or buildings where the energy efficiency project will take place;

3. [A description of the building or buildings, including what the building is used for, seasonal variations in use, general construction of the building, and square footage;

4. A description of the current energy usage of the building, including types and quantities of energy consumed, building systems, and their age and condition;

5. ]A description of the energy efficiency project to be undertaken, including existing conditions, specific measures to be undertaken, the cost or incremental cost of each measure, and the equipment or building materials to be installed;

[6]4. Projected or estimated energy savings that result from each measure undertaken as part of the project;

[7]5. Projected or estimated energy cost savings from each measure undertaken as part of the project;

[8. District funds expended per pupil in the district's most recent completed budget year;

9]6. [A]Appendices providing supplemental information detailing the extent of school district commitment to the project (i.e. special needs, prior investments, existing audit/design documents) or descriptions of any additional community or environmental benefits that may result from the project.

[D. Applications shall be received for the Board by the SEP which will conduct an initial review of each application. This initial review will be for the purpose of determining the completeness of the application, whether additional information is needed, whether proposed projects, measures, and costs are eligible for loan financing, and to assist the loan applicant in improving its application.

E]D. The Board shall establish a Review Committee to provide in-depth evaluation of loan applications. The Committee must consist of at least the following:

1. The SEP Manager;

2. An SEP technical specialist chosen by the SEP Manager;

3. The UGS Associate Director;

4. One member of the Board selected by the Board for a two year renewable term;

5. A representative of the Utah Office of Education approved by the Board for a two year renewable term.

Other members may be designated at the discretion of the Board.

[F]E. When SEP has deemed that an application is complete and that the proposed project complies with this rule, the application will be forwarded to the Review Committee for its evaluation.[ The Review Committee shall provide an opportunity for applicants to make presentations on their projects to the Committee before it has evaluated pending applications.]

[G]F. The Review Committee will review and discuss the merits of each application in light of [the application provided by the applicant, presentations made by the applicant,]all materials submitted by the school district and technical analysis undertaken by SEP staff. After discussion of each application, Review Committee members will evaluate each according to the following criteria and scoring:

1. The feasibility and practicality of the project (maximum 30 points);

2. The projected energy cost payback period of the project (maximum 20 points);

3. The energy savings and energy cost savings attributable to the project (maximum [10]30 points);

[4. The energy savings attributable to the project (maximum 20 points);

5. The financial need of the district for the loan including its financial condition, expenses per pupil, and the availability of other grants, rebates, or low-interest loans for the project (maximum 10 points);

6. The environmental and other benefits to the state and local community attributable to the project (maximum 10 points).]4. Any supplemental information contained in the appendices or available to the Review Committee through the Utah State Office of Education (i.e. school district finances and enrollment) (maximum 20 points).

A separate score sheet will be completed by each Review Committee member for each application under consideration.

[H]G. The Review Committee will compile the scores of each of its members for each application. Based upon the compiled scores of all members, the Committee will make recommendations to the Board for the funding of energy efficiency projects. For applications that receive an average score of less than 70 points, the Review Committee shall recommend that the Board not provide a loan from the Fund. Applications receiving an average score over 70 will normally be recommended for funding. However, if the current balance of the fund does not permit for the funding of all projects with an average score over 70, the Review Committee will recommend, beginning with the highest scoring application and working downward in score, those applications that may be funded given the current balance of the Fund.

[I]H. The Review Committee provides advice and recommendations to the Board. It is not vested with the authority to make decisions regarding the public's business in connection with the Fund. The Board is the decision making authority with regard to the award of loans from the Fund.

[J]I. Based upon the Review Committee's evaluations and recommendations, SEP will prepare a memorandum for the Board that will

1. Provide a brief description of each project reviewed by the Review Committee;

[2. List the energy savings, energy cost savings, and cost payback for each project as estimated by the applicant;

3. List the energy savings, energy cost savings, and cost payback for each project as estimated by the SEP technical specialist for the program;]2. List estimates of energy savings, energy cost savings and simple paybacks.

[4. List the aggregated total score and scores in each evaluation criterion for each application;

5]3. Specify projects recommended for funding and those not recommended for funding;

[6]4. Provide a brief explanation of the Review Committee's rationale for each application that is not recommended for funding.

[This memorandum is to be provided to each member of the Board no less than one week prior to the next scheduled Board meeting at which applications will be evaluated.

K]J. [At its next scheduled meeting after the Review Committee has met, the Board will consider pending applications for loans from the Fund and will review the Review Committee's recommendations for each project. The Board will then vote on each application. Applications receiving a majority of votes for approval from members that are present will be awarded loans from the Fund.]The Board can approve or deny loans through electronic correspondence if a majority of the quorum is in favor.

[L]K. When considering Loan applications, the Board may modify the dollar amount or project scope for [which a loan is awarded]approved projects if the Board determines that individual measures included in a project do not meet the requirements of this rule, are not cost effective, or that funds could better be used for funding of other projects.

 

R638-3-7. Loan Terms.

A. The maximum amount that may be approved by the Board for any single energy efficiency project is $250,000. The minimum amount that may be approved is $5,000.

B. No school district may receive a loan that would cause the sum of its outstanding loan balances to exceed $500,000.

C. [The amount of a loan award approved by the Board represents a maximum approved project cost. ]The final value of any loan may vary from the Board-approved amount according to the actual incursion of costs by the school district. In cases where costs have exceeded those presented in the initial application, a school district may request that the Board increase its loan award, subject to the limitations of subsections (A) and (B) above.

D. After approval of a loan application by the Board, a school district has one year in which to complete the energy efficiency project. If at the end of one year a school district is unable to meet this time limitation, it may request an extension from the Board of no more than six additional months.

E. Loan amounts from the Fund will be [disbursed only upon the completion of an energy efficiency project]encumbered in an escrow account for periodic disbursement at the discretion of the school district-appointed project manager (designated in loan application form, see R638-3-6.C1), with invoices of the expenditures documented in each quarterly progress report, and the final 10% withheld pending a determination of substantial completion by SEP.

F. Once a project has been completed, the school district shall provide to SEP documentation of actual costs incurred, such as invoices from contractors, as well as information on any third party financial incentives received. SEP will use this information to determine the actual cost of the project measures approved by the Board.

G. The final loan amount will be equal to actual costs incurred for the project minus the value of any third party incentives received unless

1. This amount exceeds $250,000, in which case the amount of the loan will be set at $250,000; or

2. This amount exceeds the amount approved by the Board, in which case the loan amount will be set at the amount originally approved by the Board; or

3. This amount exceeds the amount approved by the Board and the Board increases the loan award at the request of the school district.

H. No interest will be charged to school districts receiving loans for energy efficiency projects from the Fund.

I. [A small]An administrative fee may be charged to loan recipients to defray the cost of servicing loan accounts.[ The fee will be no less than $100 and no more than $200 per year of the loan's term.]

J. Loan repayment periods will be set to [be approximately equal to the energy cost payback of each loan]any term desired by the applicant between two and twelve years. The loan repayment period for a specific energy efficiency project begins with the first day of the next quarter after all of the loan funds have been disbursed.

K. Loan repayments will be due at the beginning of each quarter.

L. [L]Quarterly loan repayment amounts will be calculated as follows:

[((Final loan amount + administrative fee) / cost payback period) / 4](Total loan amount + (annual administrative fee x loan repayment period) / loan repayment period) / 4.

M. School districts that are approved for a loan award will enter into a contract with SEP that specifies all terms applying to the loan, including the terms specified in this rule and standard contract terms for contracts and loans currently in effect for the State of Utah.

 

R638-3-8. Reporting and Site Visits.

A. In the period between Board approval and project completion, the school district shall complete and provide to SEP a report at the beginning of each quarter. The report shall include information on the school district's progress in completing the energy efficiency project, its most-current estimate for the time of project completion, what proportion of the loan award has been disbursed in the quarter and total to date, and any notable problems or changes in the project since Board approval such as construction delays or cost overruns.

B. If a school district fails to submit the quarterly reports described in subsection (A) above, the Board may freeze the remainder of the loan award escrow account.

[B]C. After loan funds have been completely disbursed, the school district shall complete and provide to SEP annual reports due at the beginning of the calendar quarter in which the anniversary of the loan [disbursement occurs]repayment period began. This report shall include the following:

1. A description of the performance of the building and of the performance of the measures included in the energy efficiency project;

2. A description of any notable problems that have occurred with the building or the project;

3. A description of any notable changes to the building or to its operations that would cause a significant change in its energy consumption;

[4. Copies of energy bills incurred for the building during the prior year such as electric and utility bills or shipping invoices for fuels such as fuel oil or propane;

5]4. Documentation of [energy consumed by the ]building energy consumption and cost in the prior year.

Annual reports shall be provided for either the first four years after project completion or for each year of the repayment period, whichever is longer.

[C]D. If a school[s] district fails to submit the annual reports described in subsection ([B]C) above, the Board may bar the school district from eligibility for future loans from the Fund

[D]E. Approximately one year after project completion, SEP staff will conduct a site visit to the location of the energy efficiency project to verify project completion and assess the success of the project. Additional site visits may also be conducted by SEP staff during the repayment period. Loan recipients will assist SEP with such site visits, including providing access to all components of the energy efficiency project.

 

KEY: energy, efficiency, schools, loans

Date of Enactment or Last Substantive Amendment: [August 31, 2007]March 24, 2009

Authorizing, and Implemented or Interpreted Law: 53A-20c-102