HF 3406

as introduced - 91st Legislature (2019 - 2020) Posted on 02/18/2020 11:27am

A bill for an act
relating to energy; providing for energy efficiency projects; proposing coding for
new law in Minnesota Statutes, chapter 16C; repealing Minnesota Statutes 2018,
section 16C.144, subdivisions 1, 2, 3, 4, 5.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

new text begin [16C.148] ENERGY EFFICIENCY PROJECTS.
new text end

new text begin Subdivision 1. new text end

new text begin Definitions. new text end

new text begin (a) For purposes of this section, the following terms have
the meanings given them.
new text end

new text begin (b) "Capital cost avoidance" means money expended by a state agency to pay for utility
cost-savings measures with a guaranteed savings agreement, provided the state agency
determines the measures being implemented to achieve the utility, operation, and maintenance
cost savings are a significant portion of an overall project.
new text end

new text begin (c) "Energy conservation measure" means a training program or facility alteration
designed to reduce energy consumption or operating costs. Energy conservation measure
includes:
new text end

new text begin (1) insulating the building structure and systems within a building;
new text end

new text begin (2) storm windows and doors, caulking or weatherstripping, multiglazed windows and
doors, heat absorbing or heat reflective glazed and coated window and door systems,
additional glazing, reductions in glass area, and other window and door system modifications
that reduce energy consumption;
new text end

new text begin (3) automatic energy control systems;
new text end

new text begin (4) heating, ventilation, or air conditioning system modifications or replacements;
new text end

new text begin (5) replacement or modifications of lighting fixtures to increase the energy efficiency
of the lighting system without increasing the overall illumination of a facility, unless an
increase in illumination is necessary to conform to applicable state or local building codes
after the proposed modifications are made;
new text end

new text begin (6) energy recovery systems;
new text end

new text begin (7) cogeneration systems that produce steam or forms of energy, including heat or
electricity for use primarily within a building or complex of buildings;
new text end

new text begin (8) energy conservation measures that provide long-term operating cost reductions;
new text end

new text begin (9) water devices and systems that (i) increase the efficiency or accuracy of water use,
and (ii) reduce energy use; and
new text end

new text begin (10) gas or electric metering devices, including submetering devices, that increase the
efficiency or accuracy of use measurements and reduce energy use.
new text end

new text begin (d) "Guaranteed energy-savings contract" means a contract (1) to evaluate and recommend
energy conservation measures, and (2) for one or more energy conservation measures.
new text end

new text begin (e) "Qualified provider" means a person or business experienced in designing,
implementing, and installing energy conservation measures.
new text end

new text begin (f) "State agency" means the Minnesota State Colleges and Universities, the University
of Minnesota, and the Department of Administration for all departments of the state.
new text end

new text begin Subd. 2. new text end

new text begin Energy efficiency projects; state agency contracts. new text end

new text begin (a) Before entering into
a contract under this subdivision, the state agency must comply with paragraphs (b) to (h).
new text end

new text begin (b) The state agency must seek proposals from multiple qualified providers by publishing
notice of the proposed guaranteed energy-savings contract in the state agency's official
newspaper. The state agency may publish the notice in other publications if the state agency
determines additional publication is necessary to notify multiple qualified providers.
new text end

new text begin (c) The state agency must select the qualified provider that best meets the state agency's
needs. A qualified provider to whom the contract is awarded shall give a sufficient bond to
the state agency for its faithful performance.
new text end

new text begin (d) The contract between the state agency and the qualified provider must describe the
methods that will be used to calculate the contract costs and the operational and energy
savings attributable to the contract.
new text end

new text begin (e) The qualified provider must issue a report to the state agency that: (1) describes all
costs of installations, modifications, or remodeling, including design, engineering,
installation, maintenance, repairs, or debt service; and (2) provides detailed calculations of
the projected reductions in energy and operating costs and the projected payback schedule,
expressed in years.
new text end

new text begin (f) The state agency must provide published notice of the meeting in which it intends to
award the contract to a qualified provider, the names of the parties to the proposed contract,
and the contract's purpose.
new text end

new text begin (g) The state agency must find that the amount spent by the state under the contract on
the utility cost-savings measures recommended in the engineering report, less the amount
contributed for capital cost avoidance, does not exceed the amount saved in utility operation
and maintenance costs up to 25 years from the date the utility cost-savings measures are
implemented.
new text end

new text begin (h) The state agency must provide a copy of a contract entered into under this subdivision
and the report provided under paragraph (e) to the commissioner of commerce within 30
days of the contract's effective date.
new text end

new text begin Subd. 3. new text end

new text begin Guaranteed energy-savings contracts. new text end

new text begin (a) Before installing equipment, making
a modification, or remodeling, the qualified provider must issue a report that: (1) summarizes
the estimated costs of the installations, modifications, or remodeling, including design,
engineering, installation, maintenance, repairs, or debt service; and (2) estimates the projected
reductions in energy or operating costs.
new text end

new text begin (b) The contract must provide that: (1) all payments, except obligations on termination
of the contract before its expiration, must be made over time, but not to exceed 25 years
from the date of final installation; and (2) the savings are guaranteed to the extent necessary
to make payments for the systems.
new text end

new text begin (c) A guaranteed energy-savings contract that includes a written guarantee that savings
meet or exceed the cost of energy conservation measures is not subject to competitive
bidding requirements. The state agency may spend up to 50 percent of postinstallation
energy savings on asset preservation and replacement under sections 16A.632 and 135A.04.
The balance of the savings cancels to the general fund.
new text end

new text begin (d) Notwithstanding any law to the contrary, a state agency may enter into a guaranteed
energy-savings contract with a qualified provider to significantly reduce energy or operating
costs.
new text end

new text begin (e) A state agency may enter into a guaranteed energy-savings contract with a qualified
provider if: (1) after reviewing the report, the state agency finds that the amount it would
spend on the energy conservation measures recommended in the report is not likely to
exceed the amount saved in energy and operation costs over 25 years from the date of the
conservation measure's final installation if the recommendations in the report are followed,
and (2) the qualified provider provides a written guarantee that the energy or operating cost
savings meets or exceeds the costs of the system. The guaranteed energy-savings contract
may provide for payments over a period of time, not to exceed 25 years.
new text end

new text begin (f) A state agency may enter into an installment payment contract to purchase and install
energy conservation measures. The contract must provide that payments constituting not
less than four percent of the price be paid within two years of the date of the first operation,
and that remaining costs be paid monthly for a period not to exceed a 25-year term from
the date of final acceptance.
new text end

new text begin (g) Guaranteed energy-savings contracts may extend beyond the fiscal year in which
the contract becomes effective. The state agency must include in its annual appropriations
measure for each subsequent fiscal year any amount payable under guaranteed energy-savings
contracts during the fiscal year. The failure of a state agency to make an appropriation under
this paragraph does not affect the validity of the guaranteed energy-savings contract or the
state agency's obligations under the contracts.
new text end

Sec. 2. new text begin REPEALER.
new text end

new text begin Minnesota Statutes 2018, section 16C.144, subdivisions 1, 2, 3, 4, and 5, new text end new text begin is repealed. A
guaranteed energy-savings contract in effect on July 31, 2019, continues to be governed by
Minnesota Statutes 2018, section 16C.144, subdivisions 1, 2, 3, 4, and 5, until the contract
expires.
new text end

APPENDIX

Repealed Minnesota Statutes: 20-6626

16C.144 GUARANTEED ENERGY-SAVINGS PROGRAM.

Subdivision 1.

Definitions.

(a) The following definitions apply to this section.

(b) "Utility" means electricity, natural gas, or other energy resource, water, and wastewater.

(c) "Utility cost savings" means the difference between the utility costs after installation of the utility cost-savings measures pursuant to the guaranteed energy-savings agreement and the baseline utility costs after baseline adjustments have been made.

(d) "Baseline" means the preagreement utilities, operations, and maintenance costs.

(e) "Utility cost-savings measure" means a measure that produces utility cost savings or operation and maintenance cost savings.

(f) "Operation and maintenance cost savings" means a measurable difference between operation and maintenance costs after the installation of the utility cost-savings measures pursuant to the guaranteed energy-savings agreement and the baseline operation and maintenance costs after inflation adjustments have been made. Operation and maintenance costs savings shall not include savings from in-house staff labor.

(g) "Guaranteed energy-savings agreement" means an agreement for the installation of one or more utility cost-savings measures that includes the qualified provider's guarantee as required under subdivision 2.

(h) "Baseline adjustments" means adjusting the utility cost-savings baselines annually for changes in the following variables:

(1) utility rates;

(2) number of days in the utility billing cycle;

(3) square footage of the facility;

(4) operational schedule of the facility;

(5) facility temperature set points;

(6) weather; and

(7) amount of equipment or lighting utilized in the facility.

(i) "Inflation adjustment" means adjusting the operation and maintenance cost-savings baseline annually for inflation.

(j) "Project financing" means any type of financing including but not limited to lease, lease purchase, installment agreements, or bonds issued by an entity, other than the state, with authority to issue bonds, obligating the state to make regular payments to satisfy the costs of the utility cost-savings measures until the final payment.

(k) "Qualified provider" means a person or business experienced in the design, implementation, and installation of utility cost-savings measures.

(l) "Engineering report" means a report prepared by a professional engineer licensed by the state of Minnesota summarizing estimates of all costs of installations, modifications, or remodeling, including costs of design, engineering, installation, maintenance, repairs, and estimates of the amounts by which utility and operation and maintenance costs will be reduced.

(m) "Capital cost avoidance" means money expended by a state agency to pay for utility cost-savings measures with a guaranteed savings agreement so long as the measures that are being implemented to achieve the utility, operation, and maintenance cost savings are a significant portion of an overall project as determined by the commissioner.

(n) "Guaranteed energy-savings program guidelines" means policies, procedures, and requirements of guaranteed savings agreements established by the Department of Administration.

Subd. 2.

Guaranteed energy-savings agreement.

The commissioner may enter into a guaranteed energy-savings agreement with a qualified provider if:

(1) the qualified provider is selected through a competitive process in accordance with the guaranteed energy-savings program guidelines within the Department of Administration;

(2) the qualified provider agrees to submit an engineering report prior to the execution of the guaranteed energy-savings agreement. The cost of the engineering report may be considered as part of the implementation costs if the commissioner enters into a guaranteed energy-savings agreement with the provider;

(3) the term of the guaranteed energy-savings agreement shall not exceed 25 years from the date of final installation;

(4) the commissioner finds that the amount the state would spend, less the amount contributed for capital cost avoidance, on the utility cost-savings measures recommended in the engineering report will not exceed the amount to be saved in utility operation and maintenance costs over 25 years from the date of implementation of utility cost-savings measures;

(5) the qualified provider provides a written guarantee that the annual utility, operation, and maintenance cost savings during the term of the guaranteed energy-savings agreement will meet or exceed the annual payments due under the project financing. The qualified provider shall reimburse the state for any shortfall of guaranteed utility, operation, and maintenance cost savings; and

(6) the qualified provider gives a sufficient bond in accordance with section 574.26 to the commissioner for the faithful implementation and installation of the utility cost-savings measures.

Subd. 3.

Project financing.

The commissioner may enter into project financing with any party for the implementation of utility cost-savings measures in accordance with the guaranteed energy-savings agreement. The term of the project financing shall not exceed 25 years from the date of final installation. The project financing is assignable in accordance with terms approved by the commissioner of management and budget.

Subd. 4.

Use of capital cost avoidance.

The affected state agency may contribute funds for capital cost avoidance for guaranteed energy-savings agreements. Use of capital cost avoidance is subject to the guaranteed energy-savings program guidelines within the Department of Administration.

Subd. 5.

Independent report.

For each guaranteed energy-savings agreement entered into, the commissioner of administration shall contract with an independent third party to evaluate the cost-effectiveness of each utility cost-savings measure implemented to ensure that such measures were the least-cost measures available. For the purposes of this section, "independent third party" means an entity not affiliated with the qualified provider, that is not involved in creating or providing conservation project services to that provider, and that has expertise (or access to expertise) in energy-savings practices.