• Energy Savings Improvement Program Statutory Changes
  • October 9, 2012 | Author: Craig A. Gargano
  • Law Firm: Parker McCay P.A. - Mount Laurel Office
  • Energy Savings Improvement Programs ("ESIP") allow governmental entities, including school districts, to make improvements to their facilities that result in a reduction in energy usage. However, the costs of such improvements may not exceed the savings achieved from the reduction in energy usage. ESIPs are particularly beneficial to school districts because they can be financed through either: (i) the issuance of bonds without the requirement of a public referendum; or (ii) a lease with a term of up to fifteen (15) years rather than the five (5) year term otherwise mandated by law. Effective September 19, 2012, the New Jersey State Legislature has enacted certain statutory revisions to the procedures for implementing an ESIP applicable to all governmental entities.

    The above noted statutory changes are intended to improve the procedural efficiency of the ESIP process and ensure that contracts with the companies who install the energy conservation measures ("ESCOs") provide a greater degree of protection from misleading proposals to governmental entities. The changes with the greatest impact for a school district include:

    (i) The New Jersey Board of Public Utilities ("BPU") will prepare a standard form Request for Proposal ("RFP") to be used in obtaining the services of an ESCO. In general, ESCOs assist in: (i) the preparation of a comprehensive plan of which energy conservation measures would most benefit the governmental entity; and (ii) the installation of such energy conservation measures on behalf of the governmental entity. The standard form RFP will promote more uniform responses and ensure that each ESCO provides all information necessary to make an informed choice of an ESCO. Governmental entities are permitted to prepare their own RFP in their descretion, provided such RFP form recieves prior approval from the BPU;

    (ii) ESCOs that manufacture their own direct digital control systems (i.e. devices used to automatically control heating, ventilating and air conditioning functions) must have the price of such direct digital control systems reviewed and approved by the BPU prior to making them a required component of an ESIP;

    (iii) Savings projections provided by ESCOs in their responses to RFPs will be more predictable through the elimination of the use of financial incentives with fluctuating values (including, but not limited to Solar Renewable Energy Credits); and

    (iv) If a governmental entity intends to finance its ESIP through a lease-purchase agreement, it may extend the duration of the lease-purchase agreement to fifteen (15) years (or twenty (20) years in the case of a combined heat and power project) from the date upon which all energy conservation measures are completed rather than due from the date the lease is finally executed.

    The above information provides a synopsis of some of the significant changes to ESIPs resulting from the revised legislation.