Policy Priorities
Comments & Testimony
Comments of the NAESCO In Response to the DRAFT REQUEST FOR
PROPOSALS (DRFP) NUMBER DE-RP36-06GO96031 (Draft)
The National Association of Energy Service Companies (NAESCO)
appreciates the opportunity to respond to the request for comments to
the issuance of the Draft Request for Proposals dated May 23, 2007.
NAESCO's current membership of about 85 organizations includes
firms involved in the design, manufacture, financing and installation
of energy efficiency and renewable energy equipment and the provision
of energy efficiency and renewable energy services in the private and
public sectors. NAESCO members deliver about $4 billion of energy
efficiency projects each year. NAESCO numbers among its members some
of the most prominent companies in the world in the HVAC and energy
control equipment business, including Honeywell, Johnson Controls,
Siemens, Trane and TAC/Tour Andover. Our members also include many of
the nation's largest utilities: Pacific Gas & Electric, Southern
California Edison, New York Power Authority, and TU Electric & Gas. In
addition, ESCO members include affiliates of ConEdison, Pepco Energy
Services, Constellation, PP&L, DMJM Harris and Direct Energy.
Prominent national and regional independent members include Custom
Energy, NORESCO, Onsite Energy, The EnergySolve Companies, Ameresco,
UCONS, Chevron Energy Solutions, Synergy Companies, Wendel Energy
Services, WESCO and Energy Systems Group. NAESCO member companies have
delivered energy efficiency projects at federal facilities for over
fifteen years.
NAESCO believes that it is qualified to offer comments in this
proceeding by virtue of its long history of involvement in the
development and implementation of the federal energy efficiency
programs since 1986. NAESCO has provided comments, testimony, and
guidance both to the Departments of Energy and Defense, GSA, and HUD
regarding the development and implementation of Energy Savings
Performance Contracts (ESPCs) as well as provided written and oral
testimony before the relevant Congressional Committees. At the state
level, NAESCO has been a party to the development of major energy
efficiency programs in California, Colorado, Texas, Kansas, Illinois,
Michigan, Maryland, New Jersey, New York, Massachusetts, Vermont and
Connecticut during the last decade. In addition, NAESCO has worked
with the state energy offices of Florida, Washington, North Carolina,
South Carolina, Virginia, Mississippi, Louisiana, Tennessee, and
Georgia to help train public sector facility managers and program
managers about optimizing the effectiveness of energy efficiency
program design and implementation. NAESCO representatives currently
serve on the Program Advisory Groups, which were constituted by the
California Public Utilities Commission to advise the California
investor-owned utilities on energy efficiency program administration,
and on the System Benefits Charge Advisory Group, which is constituted
by the New York Public Service Commission to evaluate the New York
energy efficiency programs, which are administered by the New York
State Energy Research and Development Authority (NYSERDA), rather than
the investor-owned utilities. NAESCO has also recently served on the
Energy Efficiency Task Force of the Clean and Diversified Energy
Action Council of the Western Governors Association and serves as an
Observer on the National Action Plan for Energy Efficiency (NAPEE)
Leadership Group.
Based on this extensive experience, NAESCO believes that it has a
deep working knowledge of the various models of effective energy
efficiency program design and maximizing the delivery of energy and
dollar savings as well as the economics of virtually all types of
energy efficiency and demand response programs that are currently in
the field in the U.S. We hope that this knowledge will be useful to
the Department of Energy as it considers the optimal way to “promote
the use of renewable energy technologies, acquire energy and water
conservation services, reduce energy and water consumption and/or
associated utility costs, and reduce energy and water-related
operations and maintenance costs.” Memorandum at 1
Summary of Comments
NAESCO offers the following comments in response to the Draft
Proposal dated May 23, 2007.
- NAESCO believes that setting the master contract at a one
billion dollar limit against which all task orders will be written
is unrealistically low and will not result in investment sufficient
to achieve the multiple resource acquisition goals set forth in the
Draft Proposal.
- While the draft RFP states that the use of renewable
technologies in future ESPCs is highly desirable, there is a general
lack of guidance as to how the cost impact of renewable technologies
will be assessed and evaluated when considering the price
reasonableness requirement among other requirements imposed on the
contractor.
- The procedure for awarding Task Orders (TOs) seems to add
requirements not found under the current process. This appears to
run counter to the goal of streamlining the process and reducing the
transaction cycle time. The measurement and verification
requirements, the commissioning requirements, the expansion of
contractor responsibilities all add to the length of the transaction
cycle as well as increase the ESPC cost thereby reducing dollar
savings.
- Milestones should be established for expediting the agency
selection and evaluation process leading to a shorter process cycle.
Discussion
NAESCO offers the following discussion on the major comments
summarized above.
- The master contract is set at a one billion dollar limit against
which all task orders will be written with a minimum task order of
$5,000. While one billion dollars may sound in aggregate like a
sizeable commitment to the ESPC program, it actually translates to
about $500-600 million in actual work to be implemented at federal
facilities during the five year base period or about $100-120
million per year in direct investment to be allocated among all
awardees. This is actually less than current investment levels and
dramatically less than the accelerated investment levels that policy
makers have stated they want to see invested in energy efficiency
and renewable technologies at federal facilities.
It is not clear to NAESCO why the one billion dollar limit was
established when the Draft Request expands the range of goods and
services being sought . The limit as currently set is unrealistic to
achieve the multiple objectives set forth in the Draft Request. In
order to achieve the $500 million per annum investment that has been
suggested by DOE policy makers in public meetings as their
objective, the base period master contract limit would need to be
set at a minimum of $5 billion.
Permitting a minimum task order of $5,000 appears to be a residual
requirement from the original contract terms and no longer serves a
purpose. The transaction costs for such a small task order would
negate any real cost savings.
- The draft states a clear preference for contractors to integrate
renewable technologies into the ESPCs to be implemented. While
combining energy efficiency and renewable technologies into a single
project drives down the payback of the renewable technologies by
blending the paybacks of both technologies, it still does not mean
that projects employing renewable technologies will price out at the
same dollar investment as if there were no renewable technologies
employed.
There is no guidance about how renewable energy technologies are to
be integrated into the project design given the cost factors. For
example, there is a price reasonableness requirement which may in
effect preclude the use of renewable technologies given the higher
costs associated with these technologies. Since it is the stated
objective of the RFP to accelerate the use of renewable technologies
in future ESPC TOs, it would be very useful for DOE to provide
guidance as to how renewable energy technologies should be evaluated
from a price reasonableness perspective and whether the evaluation
process by federal contracting officers will differ when renewable
technologies are included in the project design.
- New contractor requirements will extend the
transaction cycle and are not delineated clearly enough which will
likely lengthen the transaction cycle and slow down the project
tempo.
- The imposition on the contractor of determining the sources,
value and availability of financial, tax, and incentive options
under C.12 is not itself unreasonable. However, the section
repeatedly uses the term “responsibility of the contractor”
without any definition of the legal reach of the term
“responsibility”. We suggest that the term “responsibility” be
replaced with the requirement that the contractor use all best
efforts to assess the range of appropriate incentives available
for the project and utilize as appropriate in establishing project
costs and financing options. NAESCO also believes that specific
language be included in the final draft clarifying that these
incentives may be utilized in the financing of the project.
- Discussions as to whether commissioning requirements should be
included in this RFP or in a stand alone document are still
underway according to the notation currently comprising Attachment
J-12. We believe that any imposition of commissioning requirements
should be linked to the base contract document. There can be
significant costs associated with commissioning and these costs
need to be identified and rolled into the cost and termination
schedules so that all parties are aware of the incremental costs
incurred by the imposition of the commissioning requirement.
- The requirement for the incorporation of an Investor Deal
Summary and Standard Financing Offers in the form of a Selection
Memorandum under H.7.3. states that the process may be subject to
an audit by the agency. There is no indication of what types of
data an audit would examine or the objectives of such an audit. If
an audit is contemplated, additional information is required as to
firmly circumscribe the reach of the auditors, the time frame for
conducting such an audit, and the sanctions that could result. We
are not sure of the intent behind this requirement and generally
do not believe it is necessary. However, if the requirement
remains in the final version of the RFP, additional clarifying
language is necessary.
- In section C.4.2, there is now a requirement that the
Measurement and Verification plan identify buildings or spaces not
affected as well as energy or water using building systems or uses
not affected by the TO be identified. We suggest that this
requirement be removed as it places additional responsibility on
the contractor and generates additional costs and does not provide
sufficient value to the federal agency to justify the time and
cost. A well crafted M&V protocol should contain all the answers
to the inquiry in any case.
- Sections C.6.1, C.6.3, C.7.3 and C.8.3 provide the government
with the unilateral ability to declare itself free from
responsibility for its actions with regard to operation of the
energy conservation measures (ECMs) including instances where it
had oversight of direct operations, preventive maintenance and
repairs. This is patently one sided assignment of risk. The
relevant language must be changed so that the parties are
responsible only for the damages related to actions which are
directly attributable to their respective agents. This is
consistent with the existing contract language.
- In the DOE IDIQ contract currently in effect, responsibility
for O&M record keeping is assigned to the party providing O&M
service. Section C.6.4 of the draft RFP states that the ESCO is
responsible for record keeping regardless of whether or not it is
performing the O&M service. We believe the existing provision
should be retained which makes the party with access to the data
responsible for record keeping.
- The preliminary assessment requirements under H.4.1 are too
onerous and costly for the contractor. At a minimum, H.4.2.B.
should be revised and requirements g-j should be deleted. There is
subsequent opportunity under the IGA requirements set forth in
(H.5) to address these additional concerns.
- There should be timelines established for each significant piece
of the review process and an overall time limit placed on the agency
review process.
- There should be a process established by which stalled
projects which have been under consideration for more than 45 days
be referred to a designated individual(s) for resolution within 10
days. Contractors should be made aware of referral of their
project and given the opportunity to meet with the designated
individual(s) to discuss the stalled project and assist in the
resolution process.
- The invoicing process set forth in G.3 should be clarified so
that contractors are notified within ten days of receipt of the
invoice by the federal agency whether any part of the payment will
be disputed, withheld, or delayed. The contractor will also be
given the immediate opportunity to help cure the event which the
agency has determined to be the source of the payment dispute or
delay.
Conclusion
NAESCO appreciates the opportunity to offer these comments and
urges the Department of Energy to adopt NAESCO’s recommendations.
Respectfully submitted by,
Terry E. Singer
Executive Director
National Association of Energy Service Companies
1615 M Street, NW
Washington, DC 20036
202-822-0950
tes@dwgp.com |
