2004 Minnesota Statutes

     16C.144 Guaranteed savings contracts. 

    Subdivision 1.    Definitions.  The following 
 definitions apply to this section.  

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

    (b) "Utility cost savings" means the difference between the 
 utility costs under the precontract conditions and the utility 
 costs after the changes have been made under the contract.  Such 
 savings shall be calculated in comparison to an established 
 baseline of utility costs. 

    (c) "Established baseline" means the precontract utilities, 
 operations, and maintenance costs.  

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

    (e) "Operation and maintenance cost savings" means a 
 measurable decrease in operation and maintenance costs that is a 
 direct result of the implementation of one or more utility 
 cost-savings measures but does not include savings from in-house 
 staff labor.  Such savings shall be calculated in comparison to 
 an established baseline of operation and maintenance costs. 

    (f) "Guaranteed savings contract" means a contract for the 
 evaluation, recommendation, and installation of one or more 
 utility cost-savings measures.  The contract must provide that 
 all payments are to be made over time but not to exceed ten 
 years from the date of final installation, and the savings are 
 guaranteed to the extent necessary to make payments for the 
 utility cost-savings measures.  

    (g) "Baseline adjustments" means adjusting the established 
 baselines in paragraphs (b) and (d) 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. 

    (h) "Lease purchase contract" means a contract obligating 
 the state to make regular lease payments to satisfy the lease 
 costs of the utility cost-savings measures until the final 
 payment, after which time the utility cost-savings measures 
 become the sole property of the state of Minnesota.  

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

    (j) "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.  

    (k) "Capital cost avoidance" means money expended by a 
 state agency to pay for utility cost-savings measures with a 
 guaranteed savings contract so long as the measures that are 
 being implemented to achieve the cost savings are a significant 
 portion of an overall project.  

    (l) "Guaranteed savings contracting guidelines" means 
 policies, procedures, and requirements of guaranteed savings 
 contracts established by the Department of Administration upon 
 enacting this legislation. 

    Subd. 2.    Guaranteed savings contract.  The 
 commissioner may enter into a guaranteed savings contract with a 
 qualified provider if: 

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

    (2) the qualified provider agrees to submit an engineering 
 report prior to the execution of the guaranteed savings 
 contract; 

    (3) the commissioner finds that the amount it would spend 
 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 ten years from the 
 date of implementation of utility cost-savings measures; 

    (4) the qualified provider provides a written guarantee 
 that the utility, operation, and maintenance cost savings will 
 meet or exceed the costs of the guaranteed savings contract.  
 The qualified provider shall reimburse the state for any 
 shortfall of guaranteed utility cost savings; and 

    (5) 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.    Lease purchase contract.  The commissioner 
 may enter into a lease purchase agreement with any party for the 
 implementation of utility cost-savings measures in accordance 
 with an engineering report.  The implementation costs of the 
 utility cost-savings measures recommended in the engineering 
 report shall not exceed the amount to be saved in utility and 
 operation and maintenance costs over the term of the lease 
 purchase agreement.  The term of the lease purchase agreement 
 shall not exceed ten years.  The lease is assignable in 
 accordance with terms approved by the commissioner of finance. 

    Subd. 4.    Use of capital cost avoidance.  The affected 
 state agency may contribute funds for capital cost avoidance for 
 guaranteed savings contracts.  Use of capital cost avoidance is 
 subject to the guaranteed savings contracting guidelines within 
 the Department of Administration. 

    Subd. 5.    Report.  By January 15 of 2005 and 2007, the 
 commissioner of administration shall submit to the commissioner 
 of finance and the chairs of the senate and house of 
 representatives capital investment committees a list of projects 
 in the agency that have been funded using guaranteed energy 
 savings, as outlined in this section, during the preceding 
 biennium.  For each guaranteed savings contract 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.  

    Subd. 6.    Contract limits.  Contracts may not be 
 entered into after June 30, 2007. 

    HIST: 1Sp2003 c 8 art 1 s 9