Energy Performance Contracts Facilitate Big Changes for CA School District

Hacienda la Puente Unified School District in California is well on its way to improving energy-related performance in its aging facilities. For the past six years, it gradually has installed modern lighting and the upgraded HVAC and HVAC controls.

It is an interesting story that shows that persistence – and energy performance contracts (EPCs) – are vital.

The district, which has more than 30 facilities covering more than 2.1 million square feet, serves the City of Industry, which is about 10 miles from Los Angeles. In 2010, the school district felt that it was time to begin upgrading and modernizing, according to Director of Facilities Mark Hansberger.

At that point, however, the impact of the recession still was being felt. This made financing upgrades via traditional design/bid/build approaches challenging. The answer was use of energy performance contracts that shift the capital expense to the vendor side in exchange for all or part of the ongoing savings those changes make possible.

The initial request for proposals for what would evolve into a large set of contracts fell short because too few energy service companies applied. “The board was concerned that pool wasn’t big enough,” Hansberger told Energy Manager Today. “So we did it again.”

Schneider Electric and a second company – which Hansberger declined to name – were given two small retrofit lighting projects in 2012. He said that the district was pleased with Schneider Electric’s work. The company was chosen for what in essence was the second phase of the project, which focused on four high schools, the district office and the adult education center. All told, the six buildings consume about 47 percent of the energy used by the school district, Hansberger said. Schneider Electric did the lighting and electrical work. It also is oversaw installation of HVAC automation systems and new HVAC systems by local companies.

The district subsequently commissioned a third phase, which focused on ten more locations. That project is in the late stage “punch phase,” in which small items that need adjustment or were missed are attended to.

The district got assists from the state along the way. In 2012, California voters approved Proposition 39, which provides funding for energy efficiency initiatives from 2013 to 2018. The amount varies annually. The Hacienda la Puente USD generally receives more than $1 million, such as the $1.3 million it received for fiscal 2016.

More money is rolling into the district. On November 8, the community passed a $148 million general obligation bond. The school district also will get about $8 million from Proposition 51, which also was approved on election day.

The money will be used for a fourth phase of the long-running project. This will include modernization of classrooms, many of which are in 50 to 60 year-old buildings. This is not incidental: The costs could run to $150,000 per classroom, Hansberger said.

The energy performance contract are great tools, but must be approached carefully, Hansberger said. “We went through a long process,” he said. “[Questions that must be answered include], How do you know you are getting the best value out of the performance contract? What does payback look like? How do we know they are going to pay? Are the guarantees real and material? Is this company going to disappear on us?”

Hansberger said that the school district chose to take a very low key path in mapping out payback periods and return-on-investment. For instance, the numbers considered by administrators did not include operational savings or forecast decreases in the cost of energy. “In terms of financing, we took a very, very conservative approach,” Hansberger said. The Hacienda la Puente Unified School District expects to save about $818,000 annually.

Hansberger says that performance contracts are a good way to keep the scope of project in line with finances. “If you are doing lighting retrofit [for instance], the use of typical process in California is to hire an engineer [to design the project] to go to bid,” Hansberger said. “That process doesn’t provide you any assurance of either energy saving or the total cost of project. Our district has gone through that and gotten plans that were so expensive that we couldn’t afford to carry out the work. The nice thing about the performance contract model is that it balances out cost with savings so it makes sense and you end up doing thing that are reasonable to do.”

The bottom line to Hansberger is that this approach to financing big projects offers great advantages. “Performance contracting is a very good way to get extra dollars and get hard numbers on what the cost will be and what the the savings will be,” he said. “You get some assurance that you don’t have in the standard design/bid/build process in California.”