1.1                          A bill for an act 
  1.2             relating to state government; authorizing capital cost 
  1.3             avoidance for guaranteed savings contracts; amending 
  1.4             Minnesota Statutes 2002, section 16C.14, subdivision 
  1.5             4; proposing coding for new law in Minnesota Statutes, 
  1.6             chapter 16C. 
  1.7   BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.8      Section 1.  Minnesota Statutes 2002, section 16C.14, 
  1.9   subdivision 4, is amended to read: 
  1.10     Subd. 4.  [ENERGY AND OPERATIONAL COSTS.] (a) The entire 
  1.11  cost of an energy efficiency installment purchase contract must 
  1.12  be a percentage of the resultant savings in energy and 
  1.13  operational costs.  Neither the state nor any agency is liable 
  1.14  to make payments on the contract except to the extent that there 
  1.15  are savings in energy and operational costs that must be shared 
  1.16  with other parties to the contract.  
  1.17     (b) The state and the contract vendor may agree to a 
  1.18  reasonable floor price for each type of energy used in the 
  1.19  savings calculations at the time of contract execution.  If the 
  1.20  state and the vendor agree to a floor price, that floor price 
  1.21  shall be used throughout the term of the contract. 
  1.22     (c) The contract vendor may assign payments due under the 
  1.23  contract, provided that the commissioner shall not be required 
  1.24  to make payments under the contract to more than one individual 
  1.25  or entity at a time. 
  1.26     Sec. 2.  [16C.144] [GUARANTEED SAVINGS CONTRACTS.] 
  2.1      Subdivision 1.  [DEFINITIONS.] (a) The following 
  2.2   definitions apply to this subdivision. 
  2.3      (b) "Utility cost-savings measure" means a training program 
  2.4   or facility alteration designed to produce utility cost savings 
  2.5   or maintenance cost savings that includes: 
  2.6      (1) insulation of the building structure and systems within 
  2.7   the building; 
  2.8      (2) storm windows and doors, caulking or weatherstripping, 
  2.9   multiglazed windows and doors, heat absorbing or heat reflective 
  2.10  glazed and coated window and door systems, additional glazing, 
  2.11  reductions in glass area, and other window and door system 
  2.12  modifications that reduce utility consumption; 
  2.13     (3) automatic energy control systems; 
  2.14     (4) heating, ventilating, or air conditioning system 
  2.15  modifications or replacements; 
  2.16     (5) replacement or modifications of lighting fixtures to 
  2.17  increase the energy efficiency of the lighting system without 
  2.18  increasing the overall illumination of a facility, unless an 
  2.19  increase in illumination is necessary to conform to the 
  2.20  applicable state or local building code for the lighting system 
  2.21  after the proposed modifications are made; 
  2.22     (6) energy recovery systems; 
  2.23     (7) cogeneration systems that produce steam or forms of 
  2.24  utility such as heat, as well as electricity, for use primarily 
  2.25  within a building or complex of buildings; 
  2.26     (8) utility cost-savings measures that provide long-term 
  2.27  operating cost reductions; 
  2.28     (9) devices that reduce water consumption or sewer charges; 
  2.29     (10) changes in operation or maintenance practices; 
  2.30     (11) procurement of low-cost utility supplies of all types 
  2.31  including electricity, natural gas, and other fuel sources, and 
  2.32  water; 
  2.33     (12) building operation programs that reduce utility and 
  2.34  operating costs including, but not limited to, computerized 
  2.35  energy management and consumption tracking programs, staff and 
  2.36  occupant training, and other similar activities; 
  3.1      (13) indoor air quality improvements that conform to 
  3.2   applicable building code requirements; 
  3.3      (14) services to reduce utility costs by identifying 
  3.4   utility errors and optimizing existing rate schedules under 
  3.5   which service is provided; or 
  3.6      (15) any other installation, modification of installation, 
  3.7   or remodeling of building infrastructure improvements, including 
  3.8   deferred maintenance improvements, that produce utility or 
  3.9   operational cost savings for their appointed functions in 
  3.10  compliance with applicable state and local building codes. 
  3.11     (c) "Guaranteed savings contract" means a contract for the 
  3.12  evaluation, recommendation, and installation of one or more 
  3.13  utility cost-savings measures.  The contract must provide that 
  3.14  all payments, except obligations on termination of the contract 
  3.15  before its expiration, are to be made over time, but not to 
  3.16  exceed 15 years from the date of final installation, and the 
  3.17  savings are guaranteed to the extent necessary to make payments 
  3.18  for the systems. 
  3.19     (d) "Operation and maintenance cost savings" means a 
  3.20  measurable decrease in operation and maintenance costs that are 
  3.21  a direct result of the implementation of one or more utility 
  3.22  cost-savings measures.  Such savings shall be calculated in 
  3.23  comparison with an established baseline of operation and 
  3.24  maintenance costs. 
  3.25     (e) "Qualified provider" means a person or business 
  3.26  experienced in the design, implementation, and installation of 
  3.27  utility cost-savings measures.  
  3.28     (f) "Capital cost avoidance" means money expended by a 
  3.29  state agency to pay for utility cost-savings measures or 
  3.30  equipment replacement, whose cost has been discounted by any 
  3.31  additional utility and operation savings generated from other 
  3.32  utility cost-savings measures identified in a contract under 
  3.33  this section. 
  3.34     (g) "Utility cost savings" means: 
  3.35     (1) cost savings caused by a reduction in metered or 
  3.36  measured physical quantities of a bulk fuel or utility resulting 
  4.1   from the implementation of one or more utility cost-savings 
  4.2   measures when compared with an established baseline of usage; or 
  4.3      (2) decrease in utility costs as a result of changes in 
  4.4   applicable utility rates or utility service suppliers.  The 
  4.5   decrease must be calculated in comparison with an estimable 
  4.6   baseline of utility costs. 
  4.7      Subd. 2.  [GUARANTEED SAVINGS CONTRACT.] The commissioner 
  4.8   may enter into a guaranteed savings contract with a qualified 
  4.9   provider to significantly reduce utility or operating costs.  
  4.10  The guaranteed savings contract must be completed using a 
  4.11  solicitation.  The qualified provider must give a sufficient 
  4.12  bond to the commissioner for the faithful performance of the 
  4.13  contract. 
  4.14     Before installation of equipment, modification, or 
  4.15  remodeling, the qualified provider shall first issue a report 
  4.16  summarizing estimates of all costs of installations, 
  4.17  modifications, or remodeling, including costs of design, 
  4.18  engineering, installation, maintenance, repairs, or debt 
  4.19  service, and estimates of the amounts by which utility or 
  4.20  operating costs will be reduced. 
  4.21     The commissioner may enter into a guaranteed savings 
  4.22  contract with a qualified provider if, after review of the 
  4.23  report, the commissioner finds that the amount it would spend on 
  4.24  the utility cost-savings measures recommended in the report is 
  4.25  not likely to exceed the amount to be saved in utility and 
  4.26  operation costs over 15 years from the date of installation if 
  4.27  the recommendations in the report were followed, and the 
  4.28  qualified provider provides a written guarantee that the utility 
  4.29  or operating cost savings will meet or exceed the costs of the 
  4.30  system.  The guaranteed savings contract may provide for 
  4.31  payments over a period of time, not to exceed 15 years. 
  4.32     The commissioner may enter into an installment payment 
  4.33  contract for the purchase and installation of utility 
  4.34  cost-savings conservation measures.  The contract must provide 
  4.35  for payments of not less than 1/15 of the price to be paid 
  4.36  within two years from the date of the first operation, and the 
  5.1   remaining costs to be paid monthly, not to exceed a 15-year term 
  5.2   from the date of the first operation. 
  5.3      Subd. 3.  [USE OF CAPITAL COST AVOIDANCE.] The commissioner 
  5.4   may contribute funds for capital cost avoidance for guaranteed 
  5.5   savings contracts.  Use of capital cost avoidance is subject to 
  5.6   the following: 
  5.7      (1) the utility cost-savings measures or equipment 
  5.8   replacement must include facility alteration; 
  5.9      (2) the current facility systems must be consuming excess 
  5.10  maintenance and operating costs; 
  5.11     (3) the savings generated by the utility cost-savings 
  5.12  measures or equipment replacement must be guaranteed; and 
  5.13     (4) the equipment that is replaced must either have 
  5.14  exceeded its useful life as determined by a life-cycle cost 
  5.15  analysis or must be deemed in need of replacement by a 
  5.16  registered professional engineer. 
  5.17     Subd. 4.  [MASTER LEASE.] The commissioner may execute a 
  5.18  master lease program under section 16A.85 for a contract under 
  5.19  this subdivision. 
  5.20     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
  5.21  following final enactment.