Energy Performance

Contracting in HUD’s

Public Housing Stock:

A Brief Overview

U.S. Department of Housing and Urban Development  |  Office of Policy Development and Research

Energy Performance

Contracting in HUD’s Public

Housing Stock:

A Brief Overview

U.S. Department of Housing

and Urban Development

Office of Policy Development and Research

Affordable Housing Research

and Technology Division

Prepared by

Michael J. Early

Michael D. Blanford

Will R. Zachmann

Barry L. Steffen

June 2017

Acknowledgments

Energy Performance Contracting in HUD’s Public Housing Stock: A Brief Overview has benefited

from the generous contributions of many individuals. Development of this report was made

possible by funding from the U.S. Department of Housing and Urban Development (HUD),

Office of Policy Development and Research (PD&R). The authors particularly appreciate the

thoughtful support and advice provided by Elizabeth Cocke of PD&R’s Affordable Housing

Research and Technology Division. They thank Christopher Golden of the HUD Office of Public

and Indian Housing for his insight and guidance, and they are indebted to the leaders and staff

of the housing authorities we visited: Wilmington Housing Authority (DE001), Clinton County

Housing Authority (PA040), Greenwood Housing Authority (MS107), North Little Rock Housing

Authority (AR002), Kansas City, Kansas Housing Authority (KS001), Denver Housing Authority

(CO001), Housing Authority of the County of Chester (PA046), Metropolitan Development and

Housing Agency (TN005), and Watervliet Housing Authority (NY025). They also thank al  those

who reviewed the report and provided helpful comments. Without the combined efforts of all

those listed, this report would not have been possible.

Disclaimer

The contents of this report represent the views of the authors and do not necessarily reflect the

views or policies of the U.S. Department of Housing and Urban Development or the U.S.

government.

Preface

The U.S. Department of Housing and Urban Development (HUD), Office of Public and Indian

Housing (PIH) administers the Energy Performance Contracting (EPC) program, an innovative

approach to providing Public Housing Authorities (PHAs) with the financial flexibility to install

cost-effective, utility-related improvements with little or no upfront expenditure.

Since the EPC program’s inception in the 1980s, PIH reports that approximately 315 EPCs

(affecting approximately 250,000 units) have been approved, representing nearly $1.5 billion in

utility cost reduction investments. These performance contracts have been executed in al  10

HUD regions and in PHAs with sizes ranging from very small (fewer than 250 units) to very large

(6,600 units or more); however, no substantive review of program performance has been

conducted.

To better understand how EPCs have helped improve conditions and reduce operating costs in

our nation’s public housing stock, a multidisciplinary team from HUD’s Office of Policy

Development and Research undertook a pilot study to assess the program’s overall

effectiveness and value. The research team’s findings and observations provide PIH with a set

of proposed actions that could significantly expand the adoption of EPCs within the PHA

community. By giving PHAs the financial flexibility to use resultant utility cost savings to fund

utility-related capital improvements, EPCs encourage PHAs to make more strategic and

comprehensive utility upgrades than limited capital funding would otherwise support.

I do hope that PIH policymakers will carefully consider the research team’s observations and

use them to inform policies that wil  encourage and support more PHAs to use the EPC program

as a viable tool for improving the properties under their control.

iii

Contents

Executive Summary ........................................................................................................................ vii

Introduction .................................................................................................................................... 1

Objective ................................................................................................................................... 1

History ....................................................................................................................................... 2

Overview of the Program .................................................................................................... 3

Federal Incentives for Funding Energy Conservation in Public Housing ............................ 3

Key Aspects of an Energy Performance Contract ............................................................... 4

EPC Financing ...................................................................................................................... 6

HUD’s EPC Approval Process............................................................................................... 7

Methodology ................................................................................................................................... 8

PHA EPC Data Set ...................................................................................................................... 8

Selection of Participating PHAs ............................................................................................... 11

Questionnaire ......................................................................................................................... 12

Site Visits Performed ............................................................................................................... 13

EPC-Related Data .................................................................................................................... 15

Participants in the Field of Energy Performance Contracting ................................................ 15

Discussion...................................................................................................................................... 16

Results of the Questionnaire .................................................................................................. 16

EPC Benefits and Savings .................................................................................................. 16

Use of Excess Savings ........................................................................................................ 16

Level of Effort on Application Process .............................................................................. 16

Resident Training and Awareness ..................................................................................... 16

Analysis of Measurement and Verification, Utilities Expense Level Data, and HUD

Assessment Data ............................................................................................................... 17

Normalizing Utility Consumption Data ............................................................................. 18

Methodology and Limitations ........................................................................................... 18

Average Percentage Change Estimates ............................................................................ 18

Example Calculation .......................................................................................................... 21

Public Housing Policy Inquiries ............................................................................................... 21

Apply EPC Utility Savings Toward Non-Energy-Related and Non-Water-Related Capital

Improvements ............................................................................................................. 21

Provide a Compensatory Fee to PHAs That Self-Manage an EPC ..................................... 23

Is the Rigor of the Application Process Necessary To Ensure a Cost-Effective Project? .. 24

Summary ....................................................................................................................................... 25

iv

Observations Supporting EPC Program Objectives ...................................................................... 26

Objective: Reducing the Approval Time of an EPC Application .............................................. 26

Observation: Develop a PHA-EPC working group ............................................................. 26

Objective: Providing Greater Transparency in the Department’s Application Review Efforts .. 26

Observation: Revise the duration metric of the EPC application approval time .............. 27

Objective: Providing Further Guidance on the Col aborative Use of an EPC and RAD ........... 27

Observation: Develop a decision logic tree in support of using an EPC in conjunction

with RAD ..................................................................................................................... 28

Objective: Providing More Transparency in the Realized Savings of an EPC .......................... 28

Observation: Annually update cash flow spreadsheets ................................................... 29

Observation: Align the reporting periods of the annual M&V reports with annual UEL

quantities .................................................................................................................... 29

Conclusion ..................................................................................................................................... 31

References .................................................................................................................................... 32

Appendix A: Questionnaire Administered to Study Participants ................................................. 33

Appendix B: Aggregate and Open-Ended Questionnaire Responses ........................................... 54

Appendix C: Utility Expense Level Quantities ............................................................................... 81

Appendix D: Sidebars and Photos ................................................................................................. 86

Lighting Systems ..................................................................................................................... 86

Water and Water Heating ....................................................................................................... 87

Appliances ............................................................................................................................... 88

HVAC ....................................................................................................................................... 89

Programmable Thermostats and Controls ............................................................................. 90

Renewable Energy Sources ..................................................................................................... 91

List of Tables

Table 1: Distribution of EPCs and PHAs, and EPC Adoption Rate, by PHA Size .............................. 9

Table 2: Distribution of EPCs and PHAs, and EPC Adoption Rate, by HUD Region ......................... 9

Table 3: Distribution of EPC and PHA Unit Count, and Affected Unit Rate, by PHA Size ............. 10

Table 4: Distribution of EPC and PHA Unit Count, and Affected Unit Rate, by HUD Region ........ 11

Table 5: Diverse Mix of Participating PHAs ................................................................................... 12

Table 6: Details Related to the Nine Participating PHAs .............................................................. 14

Table 7: Average Percentage Change Relative to Funding Year 2005 Consumption Quantities . 19

Table 8: Average Percentage Change Relative to First EPC .......................................................... 20

Table 9: Average Percentage Change Relative to Second EPC ..................................................... 20

Table 10: Average Percentage Change Relative to Third EPC ...................................................... 20

v

Table 11: DE001 ............................................................................................................................ 81

Table 12: PA04 .............................................................................................................................. 82

Table 13: MS107 ........................................................................................................................... 82

Table 14: AR002 ............................................................................................................................ 83

Table 15: KS001 ............................................................................................................................. 83

Table 16: CO001 ............................................................................................................................ 84

Table 17: PA046 ............................................................................................................................ 84

Table 18: TN005 ............................................................................................................................ 85

Table 19: NY025 ............................................................................................................................ 85

List of Figures

Figure 1: Public Housing Authorities (PHAs) in Lower 48 States and Puerto Rico That Have

and Have Not Executed an Energy Performance Contract ....................................................... 8

Figure 2: Public Housing Authorities (PHAs) Visited During the Energy Performance

Contracting (EPC) Study .......................................................................................................... 13

Figure 3: CFL Lighting, Nashville Site Visit ..................................................................................... 86

Figure 4: Energy-Efficient Lighting, North Little Rock Site Visit .................................................... 86

Figure 5: Natural Gas Water Heater, Denver Site Visit ................................................................. 87

Figure 6: Dual Flush Water-Efficient Toilet, Greenwood Site Visit ............................................... 87

Figure 7: Tankless Water Heater, Watervliet Site Visit ................................................................. 87

Figure 8: Energy-Efficient Dryers, Clinton Site Visit ...................................................................... 88

Figure 9: Energy-Efficient Refrigerator, Denver Site Visit ............................................................. 88

Figure 10: Residential Unit Mini-Split Heat Pump System, Nashville Site Visit ............................ 89

Figure 11: Energy-Efficient Natural Gas Boiler, Wilmington Site Visit.......................................... 89

Figure 12: Programmable Thermostat, Clinton Site Visit ............................................................. 90

Figure 13: HVAC Control Panel, Nashville Site Visit ...................................................................... 91

Figure 14: These Townhouse-Style Apartments Rely on Geothermal Heat Pumps To

Substantial y Reduce Both Demand and Associated Costs; Chester Site Visit ....................... 91

Figure 15: Geothermal Heat Pump, Chester Site Visit .................................................................. 92

Figure 16: Solar Panels Used for Domestic Hot Water, Chester Site Visit .................................... 92

Figure 17: Rooftop Solar Photovoltaic Panels, Kansas City Site Visit ........................................... 93

Figure 18: Solar Water Heaters, Kansas City Site Visit .................................................................. 93

Figure 19: Rooftop Solar Photovoltaic Array, Watervliet Site Visit .............................................. 93

vi

Executive Summary

This report summarizes an exploratory study of the effectiveness and value of the U.S.

Department of Housing and Urban Development (HUD), Office of Public and Indian Housing’s

(PIH’s) Energy Performance Contracting (EPC) program. In August and September 2015, HUD’s

Office of Policy Development and Research (PD&R) staff made onsite visits to nine public

housing authorities (PHAs) that have either executed a new EPC or exercised an option to an

existing EPC in place since 2010. The research effort compiled and analyzed data derived from a

questionnaire for PHA staff, in-person discussions with PHA staff, an inspection of EPC-installed

improvements, a col ection of EPC documents, and discussions with multiple participants in the

field of energy performance contracting.

During the development of the research protocol, PIH requested that we explore three policy-

related issues that could be informed by the study:

1.  Whether to al ow PHAs to use utility savings from EPCs for non-energy-related or non-

water-related capital improvements.

2.  Whether to provide a compensatory fee to PHAs that choose to self-manage their EPC.

3.  Whether the degree of rigor of the EPC application process is necessary to ensure the

cost-effectiveness of projects.

The findings from this research helped PD&R understand the strengths and weaknesses,

regulatory intent, and general effectiveness of the EPC program. We developed a set of

observations to assist HUD in improving the EPC program. Because the study involved a

relatively small and therefore unrepresentative sample of PHAs, PD&R may revise these

suggestions based on the results of its forthcoming nationwide study of the EPC program, which

is intended to provide a more conclusive evaluation and better understanding of the program’s

value and overall effectiveness.

Both the current project and the proposed evaluation efforts wil  be key to HUD’s long-term

strategies for reducing utility consumption within its housing portfolio, in part because the EPC

program is being affected by the advent of HUD’s Rental Assistance Demonstration (RAD),

which removes certain units from HUD’s public housing inventory and therefore from the EPC

funding stream.

The PD&R team drew on findings from the current study to develop the fol owing set of

observations for PIH:

•  The nine PHAs visited are not a perfect representation of the 247 PHAs that have

executed an EPC project. But they have enough diversity in size and experience for us to

make some observations about the EPC program.

•  The EPC program has provided value to the nine PHAs studied. Eight of the nine

participants felt the program to be (1) a benefit to their housing authority, (2) to have

funded improvements that otherwise would not have been made; and (3) either was

outperforming or performing as projected. Five of the housing authorities reported cost

savings in excess of the EPC debt service.

vii

•  Our conversations with these nine PHAs and discussions with program staff suggest

some areas that are working well and others that might be improved.

•  The rigorous application process is clearly important for both the PHAs and HUD. The

application is key to program success. Yet the burden and chal enge of completing an

application could be lessened by HUD establishing with its Technical Assistance funds a

peer learning network that connects some of the 247 PHAs that have successfully

implemented EPCs with PHAs applying for the first time. For example, that peer network

could provide guidance on how to design EPC projects that wil  not unduly harm a PHA’s

operating budget when there are HUD Operating Fund shortfal s.

•  The program could be slightly less burdensome, and more appealing to PHAs, if fewer

restrictions were put on how PHAs can use their cost savings, currently they are limited

to spending those cost savings on either energy or water savings improvements.

Perhaps this flexibility could be offered as an incentive to PHAs if they self-manage their

EPC. Self-management appears to improve oversight and efficiency.

Finally, there are a number of likely improvements to the metrics and data being col ected by

HUD from the PHAs that would provide better information on the benefits and costs of the

performance contracts.

v iii

Introduction

Objective

This report summarizes an exploratory study of the effectiveness and value of the Office of

Public and Indian Housing’s (PIH’s) program on Energy Performance Contracting (EPC). 1 During fiscal year (FY) 2015, staff from HUD’s Office of Policy Development and Research (PD&R) made

site visits to nine public housing authorities (PHAs) that have executed an EPC. The research

effort compiled and analyzed data derived from a questionnaire for PHA staff, in-person

discussions with PHA staff, an inspection of EPC-installed improvements, a col ection of EPC

documents, and discussions with multiple participants in the field of energy performance

contracting.

During the development of the research protocol, PIH requested that we explore three policy-

related issues that could be informed by this study.

1.  Whether to allow PHAs to use utility savings from EPCs for non-energy-related or non-

water-related capital improvements.

2.  Whether to provide a compensatory fee to PHAs that choose to self-manage their EPC.

3.  Whether the degree of rigor of the EPC application process is necessary to ensure the

cost-effectiveness of projects.

The findings from this research helped PD&R understand the strengths and weaknesses,

regulatory intent, and general effectiveness of the EPC program. We developed a set of

observations to assist HUD in improving the EPC program. Because the study involved a

relatively small and therefore unrepresentative sample of PHAs, PD&R may revise these

suggestions based on the results of its forthcoming nationwide study of the EPC program, which

is intended to provide a more conclusive evaluation and better understanding of the program’s

value and overall effectiveness. The findings of this initial study clarify the costs incurred and

hurdles encountered by participating PHAs in implementing EPCs and will inform a two-phase,

more comprehensive, nationwide cost-benefit evaluation of the EPC program that is proposed

to begin in FY 2016.

Phase one of the upcoming study would involve a more extensive analysis of PHAs that have

EPCs, working with a larger sample of housing authorities with a more representative variation

in size, location, installed improvements, and energy conservation incentives deployed. Phase

two would focus specifically on very small and small PHAs (fewer than 250 and 500 units,

respectively) and on their interest in and efforts at applying for and administering EPCs.

The research team has learned that many very small and small PHAs lack the capability to

complete the EPC application process, the volume of potential improvements needed to attract

the services of an Energy Service Company (ESCo), and the capability to effectively assess and

self-manage an EPC (Board of Trustees of the University of Il inois, 2015). The Department does

1 http://portal.hud.gov/hudportal/HUD?src=/program_offices/public_indian_housing/programs/ph/phecc/eperformance.

1

not presently have the capacity to provide the technical assistance required to boost adoption

by very small and small PHAs, nor does it have the resources required to incentivize ESCos to

take on projects that may prove to be of higher risk or to yield lower returns.

Both the current project and the proposed follow-on efforts are intended to inform HUD’s long-

term strategies, in part because the EPC program is being affected by the advent of HUD’s

Rental Assistance Demonstration (RAD). RAD allows PHAs to leverage public and private debt

and equity to reinvest in the public housing stock.

In RAD, public housing units move to a Section 8 platform with a long-term contract that, by

law, must be renewed. This renewal clause ensures that the units will remain permanently

affordable to low-income households; however, it also removes the units from HUD’s public

housing inventory and possibly from the EPC funding stream.

If a PHA wishes to convert all or a portion of its EPC-related properties to RAD, it must first

determine how it plans to satisfy the existing EPC obligation. Housing authorities have the

option of either paying off the EPC debt or assuming the debt and continuing to make the EPC

debt payment after conversion to RAD. Regardless of the option chosen, a letter must be

submitted to the corresponding field office that formal y requests for HUD to end the EPC

incentives at the time of conversion and describes how the PHA wil  address the EPC debt. In

instances in which only a portion of a property is converted to RAD, a new baseline utility

consumption measurement must be established for the portion of the project that remains in

public housing and continues to receive EPC incentives. HUD has recently released a frequently

asked questions2 (FAQ) document that provides additional information related to using an ECP

in conjunction with RAD.

History

EPC is an innovative financing technique designed to provide PHAs with cost-effective

improvements—energy conservation measures (ECMs)—that are instal ed with low or no

upfront expenditures by the PHA. The costs of the improvements are typical y borne by the

performance contractor, who is repaid using a portion of the cost savings resulting from the

improvements.

As of FY 2015, PIH reports that since the 1980s, when this type of financing technique began, 3

the Department has approved approximately 315 EPCs (affecting approximately 250,000 units),

totaling nearly $1.5 bil ion in investments. EPCs have been executed in al  10 HUD regions4 and in PHAs ranging from very small (fewer than 250 units) to very large (6,600 units or more). Until

now, however, no substantive review of the program’s performance has been conducted.

2 http://portal.hud.gov/hudportal/documents/huddoc?id=RAD_EPC_FAQs_030316.pdf.

3 See http://portal.hud.gov/huddoc/2011EPCInventory.xls and

http://portal.hud.gov/hudportal/documents/huddoc?id=EPCInventory2012-2015.xlsx. The “EPC Database: Summary Statistics”

spreadsheet contains documentation on EPCs from 1987 through 2011; the “(NEW) EPC Inventory” spreadsheet contains documentation on EPCs executed between 2012 and 2015.

4 http://portal.hud.gov/hudportal/HUD?src=/localoffices/regions.

2

Overview of the Program

Section 118(a) of the Housing and Community Development (HCD) Act of 1987 (Oak Ridge

National Laboratory, 1992) instituted adjustments to HUD’s Performance Funding System (PFS)

that enabled PHAs to take advantage of innovative financing techniques (such as energy

performance contracting) that are not dependent on additional federal funding. Section 118(a)

consisted of two new incentives aimed at encouraging PHAs to reduce utility consumption and

a third incentive that favors utility purchase arrangements that reduce the cost of energy

consumed. HUD implemented the energy conservation incentives of the HCD Act through

revised PFS regulations at 24 CFR 990, which were published as a final rule on September 11,

1991.

Current EPC rules5 include the fol owing two requirements for funding energy conservation improvements: (1) the ECMs  must be financed by an entity other than HUD (that is, a private

loan); and (2) reasonably anticipated energy savings  must be sufficient to cover al  of the EPC-

related debt service that will accrue within 20 years of executing the contract.

In support of these regulations, the Department also issues notices to clarify the EPC-related

financial incentives. The Department’s most recent EPC notices are hosted on PIH’s EPC

webpage, 6 which provides resources about all aspects of the EPC program.

Federal Incentives for Funding Energy Conservation in Public Housing

HUD’s current EPC program provides PHAs with three incentives: Frozen Rolling Base Incentive

(FRB), Add-On Subsidy Incentive (AOS), and Resident-Paid Utility Incentive (RPU). These

incentives adjust the federal operating subsidies7 available to PHAs to enable utility conservation improvements in public housing that reduce utility consumption from baseline

levels. The Department also offers the Rate Reduction Incentive (RRI), which can be included in

an EPC but can also be used as a separate incentive independent of the EPC program. The RRI

allows PHAs to recoup costs of interventions that reduce the  rates paid for utilities. RRIs may be used in conjunction with the FRB, AOS, or RPU incentives (HUD, 2014). A description of

requirements associated with each incentive follows. In total, the incentives are designed to

enable PHAs to al ocate more of their operating subsidy toward needed repairs and other

eligible expenses.

5  Utilities expense level: Incentives for energy conservation/rate reduction, 24 CFR 990.185.

https://www.gpo.gov/fdsys/pkg/CFR-2011-title24-vol4/pdf/CFR-2011-title24-vol4-sec990-185.pdf.

6 http://portal.hud.gov/hudportal/HUD?src=/program_offices/public_indian_housing/programs/ph/phecc/eperformance.

7  Operating fund  formula, 24 CFR 990. 110. https://www.gpo.gov/fdsys/pkg/CFR-2011-title24-vol4/pdf/CFR-2011-title24-vol4-

sec990-110.pdf. Section 9(f) of the United States Housing Act of 1937 establishes an Operating Fund for the purposes of making assistance available to PHAs for the operation and management of public housing. The Operating Fund provides operating subsidy to assist PHAs to serve low-income families. In general, the annual contributions (operating subsidy) that each PHA is eligible to receive is determined by a formula and is based on the difference between formula expenses and formula income.

3

Frozen Rolling Base Incentive

A PHA may request that the Department freeze its 3-year rolling base utility consumption level

(RBCL), 8 used to calculate operating subsidies, at the level of consumption that existed prior to the instal ation of the EPC improvements. Under the FRB, PHAs may retain 100 percent of the

cost savings throughout the term of the contract; they must use at least 75 percent of the

annual savings for payment of the EPC loan, however.

Add-On Subsidy Incentive

An add-on (additional operating) subsidy is an increase in the total operating subsidy for a PHA

to amortize the costs of EPC improvements and other direct costs of the performance contract.

PHAs that use the AOS are limited to receiving the lesser of the project’s costs or savings

achieved. Any savings associated with overperformance of the instal ed improvements cannot

be retained; such excess savings, however, can be applied to additional improvements (that is,

expanding the current project) or used to accelerate debt service on the existing contract.

Resident-Paid Utility Incentive

The RPU allows a PHA to exclude from its Operating Fund rental income calculations, for the

duration of the EPC, any increased rental income that results from decreased utility al owances

achieved through reduced utility consumption. The change in utility al owances is based on the

difference between the baseline and revised al owances of the projects.

Rate Reduction Incentive

If a PHA takes action—beyond normal public participation and effective management in

ratemaking proceedings—to reduce its utility cost structure, then HUD will allow the PHA to

retain 50 percent of the annual savings. Examples of such PHA actions include purchasing

natural gas at the wellhead, making administrative appeals, or taking legal action to reduce its

utility rates. Although there are no time limits on the RRI, the incentive is subject to annual

review, meaning that the actions taken must continual y prove to be innovative and cost

effective. Furthermore, the Department has issued recent guidance that expands the RRI

incentive to assist housing authorities in capturing the cost savings associated with renewable

energy technologies (HUD, 2014).

Key Aspects of an Energy Performance Contract

EPC is a turnkey service that provides customers with a comprehensive set of energy efficiency,

renewable energy, and distributed generation measures. Many EPCs are accompanied by

guarantees that the savings produced by a project wil  be sufficient to finance the full cost of

8 The RBCL is equal to the average of yearly consumption levels for the 36-month period ending on June 30, that is, 18 months prior to the first day of the applicable funding period. A yearly consumption level is the actual amount of each utility consumed during a 12-month period ending June 30. For example, for the funding period January 1, 2015, through December 31, 2015, the RBCL wil  be the average of three yearly consumption levels: Year 1 = July 1, 2010, through June 30, 2011; Year 2 = July 1, 2011, through June 30, 2012; Year 3 = July 1, 2012, through June 30, 2013.

4

the project. ESCos are often retained to install and maintain the utility improvements of an EPC.

In an EPC, the ESCo can provide the full range of services required to complete the project.

These services can include the fol owing.

Energy Audit

An EPC generally requires the activity to begin with an energy audit of the property, which

consists of an inspection, a survey, and an analysis of existing energy use in a building or

property. The energy audit is the first step in assessing how much energy the building or

property consumes and in evaluating what measures can be taken to make it more energy

efficient. The audit will establish a baseline against which the savings achieved through

performance enhancements may be measured, and wil  identify any problems that, when

corrected, may save significant amounts of energy over time.

Design Engineering

Usually, the next step is preparation of an engineering design by the ESCo that can range from

simply specifying energy-efficient lighting and water conservation measures to more complex

projects that integrate renewable energy sources (such as solar panels, solar water heaters, or

geothermal heat pumps), or that replace or upgrade inefficient heating and cooling equipment.

Construction Management and Commissioning

Once the design is approved, the ESCo provides construction management expertise and helps

arrange for long-term project financing. At the end of the construction phase, the ESCo will

commission the property by conducting an intensive quality assurance process. The purpose of

commissioning is to ensure that the energy upgrades are operating as intended and that

building staff are prepared to properly operate and maintain the new systems and equipment.

Operations and Maintenance

After commissioning has been completed, the EPC may require the ESCo to continue providing

daily operations and maintenance (O&M) services to augment those performed by building

staff. This O&M assistance may be limited to any innovative new technologies (for example,

advanced heat pumps or solar panel arrays) that may have been incorporated as a result of the

EPC. The parameters of any assistance to be provided by the ESCo should be negotiated at the

outset and clearly stipulated in the EPC.

Savings Measurement and Verification

The final major element of a performance contract is the measurement and verification (M&V)

process that quantifies the savings attributable to the instal ed improvements. This element is

critical, because the facility owner is depending on the EPC project savings to pay for its

financing obligations, and the ESCo is guaranteeing the level of energy savings that wil  be

achieved as a result of its work. As such, the careful design and implementation of M&V

protocols serve as the foundation for the long-term success of an EPC project.

5

A typical EPC project today employs the International Performance Measurement and

Verification Protocol (NREL, 2002) to estimate the utility savings that wil  be achieved through

an EPC (ICF International and National Association of Energy Services Companies, 2007). Not

every EPC includes all of the elements and activities described previously. The choice of building

components, systems, and the responsibilities of al  parties to the agreement wil  reflect the

PHA’s unique project needs, the skills and capabilities of in-house staff, and available resources.

On projects where the performance contract is self-managed, the PHA generally serves as the

general contractor and oversees al  aspects of the performance contract.

EPC Financing

Arrangement of Long-Term Project Financing

Most EPC projects are financed with long-term debt or leases, though some customers are able

to pay a portion of an EPC project with capital budget al ocations. In the early days of EPC,

ESCos typical y provided both project technical services and project financing, as financial

institutions rarely understood how EPCs worked and therefore were unwil ing to finance them.

Some ESCos also acted as product distributors, because many mainstream construction

materials and systems distributors were unwilling to stock emerging technology products such

as electronic ballasts for compact fluorescent lighting.

Many EPC projects include a guarantee from the ESCo to the customer that projected energy

savings will be sufficient to pay the full cost of long-term project financing. The form of the

guarantee varies by project, because the guarantees are crafted to suit the requirements of

specific customers and federal and state legislation and regulations.

When an EPC has a financing transaction involving a security interest or other encumbrance in

public housing property, HUD requires PHAs to obtain written approval for the security interest

or encumbrance pursuant to Section 30 of the U.S. Housing Act of 1937 (HUD, 2013). 9 Under some lease-purchase agreements, the ownership of the energy retrofit equipment may reside

with the third party, for example, a bank, ESCo, or other entity. When equipment ownership

resides with a third party, a Section 30 approval is not required.

Third-Party Financing Marketplace

Almost all EPC projects are financed by third-party finance companies—usually banks and other

financial institutions. Major financial institutions like Bank of America, Citibank, GE Capital, and

PNC Bank are important funding sources. In addition, specialized EPC project finance brokers

(somewhat analogous to mortgage brokers) originate project financing deals and then locate a

bank or direct lender to make the loan.

9 The guidebook provides further information on Section 30 requirements.

6

Available Capital

Funding appears to be contingent on the size of the project, and larger PHAs have more ready

access to funds. A recent study by the University of Il inois found that smal  and medium PHAs

are often unable to attract investors for energy financing at reasonable market rates (Board of

Trustees of the University of Il inois, 2015).

Typical Rates and Terms

A typical EPC project is financed directly with the customer (rather than through the ESCo),

because many customers can secure better interest rates than those available to the ESCos. The

customers generally borrow money to finance the projects, with the ESCo guaranteeing the

lender that payments from project savings wil  be sufficient to cover the finance costs.

HUD’S EPC Approval Process

To participate in the EPC program, PHAs must first determine who wil  oversee the

performance contract. The PHA may elect either to hire an ESCo or to manage the contract

itself.

An ESCo can offer a comprehensive range of energy solutions to the PHA, including energy

auditing, design engineering, construction management, O&M, and M&V. When the EPC is self-

managed, the PHA typically serves as the general contractor, overseeing al  aspects of the

performance contract and receiving technical support from a third-party consultant.

HUD has developed flow diagrams that outline the steps necessary for application approval

under either scenario. In general terms, both approaches require developing and advertising a

request for proposal (RFP), conducting an energy audit, developing an EPC contract package,

and submitting the contract package for HUD review; the contract is awarded upon receipt of

HUD approval. The Department’s review process comprises multiple stages—RFP technical

review, completeness review checklist, technical review checklist, and panel review—intended

to ensure that PHAs are complying with HUD regulations and guidance, and to minimize any

risks to the Department. The flow diagrams (under “EPC Process Review”) and checklists (under

“Checklists”) can be found on the PIH EPC webpage. 10

Under 24 CFR 965.308(b), 11 HUD field offices are the departmental entities that review all EPC

solicitations and contract packages. In support of field office review, the Office of Field

Operations (OFO) Energy Center was established in circa 2010 to provide quality control (QC)

reviews of new contracts and associated savings, quality assurance reviews of existing

contracts, and technical assistance to both PHAs and the HUD field offices.

10 http://portal.hud.gov/hudportal/HUD?src=/program_offices/public_indian_housing/programs/ph/phecc/eperformance.

11 https://www.gpo.gov/fdsys/pkg/CFR-2012-title24-vol4/pdf/CFR-2012-title24-vol4-part965-subpartC.pdf.

7

Methodology

PHA EPC Data Set

Since the inception of EPCs as a financing mechanism for energy retrofits, the Department

reports12 that approximately 315 EPCs (affecting approximately 250,000 units; see Figure 1) have been implemented, resulting in a total investment of nearly $1.5 billion in energy

improvements. EPCs have been executed in al  10 HUD regions in PHAs ranging from very small

(fewer than 250 units) to very large (6,600 units or more). In addition, PIH maintains

spreadsheets13 that document the EPCs that were executed from 1987 through 2015. These documents contain summary-level EPC information, presented on a fiscal year basis.

Figure 1: Public Housing Authorities (PHAs) in Lower 48 States and Puerto Rico

That Have and Have Not Executed an Energy Performance Contract (EPC)

Tables 1 and 2 ilustrate the distribution of the Department’s EPCs by PHA size category and

HUD region. Also displayed are the number of housing authorities in the respective category or

region that the Department assists, and the percentage of housing authorities that have

executed an EPC relative to the total number of housing authorities of the same PHA size

category and HUD region. Because multiple housing authorities have executed additional

phases to their initial EPC, EPCs outnumber PHAs that have executed an EPC.

12 See http://portal.hud.gov/huddoc/2011EPCInventory.xls and

http://portal.hud.gov/hudportal/documents/huddoc?id=EPCInventory2012-2015.xlsx.

13 See http://portal.hud.gov/huddoc/2011EPCInventory.xls and

http://portal.hud.gov/hudportal/documents/huddoc?id=EPCInventory2012-2015.xlsx.

8

Table 1 illustrates that the likelihood that a PHA has adopted an EPC varies by the PHA size

category. While most PHAs operating low-income public housing are very small and small—

fewer than 500 units—(74.3 percent and 14.2 percent, respectively), the EPC adoption rates for

these PHAs (1.5 percent and 15.3 percent, respectively) are the lowest among the five size

categories. Across all the PHAs, 247 had executed an EPC through FY 2015, for an overall EPC

adoption rate of 7.9 percent.

Table 2 similarly shows that EPC adoption rates vary by HUD region. Regions IV, V, VI, VII, VIII,

and X have EPC adoption rates below 10 percent, and four of these six regions include 10

percent or more of all PHAs with public housing programs.

Table 1: Distribution of EPCs and PHAs, and EPC Adoption Rate, by PHA Size

PHA Size

EPCs Through FY15

PHAs That Have

PHAs

EPC Adoption

Executed an EPC

(Low-Income)

Rate

percent (number)

percent (number)

percent (number)

percent

Very small (fewer than 250)

11.7 (37)

14.2 (35)

74.3 (2,318)

1.5

Small (250–499)

24.8 (78)

27.5 (68)

14.2 (444)

15.3

Medium (500–1,249)

27.9 (88)

30.4 (75)

7.1 (221)

33.9

Large (1,250–6,599)

32.1 (101)

25.5 (63)

3.9 (121)

52.1

Very large (6,600+)

3.5 (11)

2.4 (6)

0.4 (14)

42.6

100.0 (315)

100.0 (247)

100.0 (3,118)

7.9a

EPC = Energy Performance Contract. PHA = public housing authority.

a The total adoption rate (7.9 percent) is the quotient of the “PHAs that have executed an EPC” and “PHAs (Low-Income)” (247/3,118 = 0.0792).

Note: Due to rounding, not all reported percentages precisely equal 100.0 percent.

Table 2: Distribution of EPCs and PHAs, and EPC Adoption Rate, by HUD Region

HUD Region

EPCs Through FY15

PHAs That Have

PHAs

Executed an EPC

(Low-Income)

EPC Adoption Rate

percent (number)

percent (number)

percent (number)

percent

I

16.5 (52)

16.2 (40)

5.4 (169)

23.7

II

14.6 (46)

13.8 (34)

5.3 (165)

20.6

III

17.5 (55)

15.8 (39)

5.5 (173)

22.5

IV

20.3 (64)

21.1 (52)

25.4 (793)

6.6

V

19.0 (60)

19.0 (47)

17.1 (533)

8.8

VI

3.5 (11)

4.0 (10)

22.6 (704)

1.4

VII

1.3 (4)

1.6 (4)

11.1 (346)

1.2

VIII

2.5 (8)

2.8 (7)

3.6 (112)

6.3

IX

4.4 (14)

5.3 (13)

2.2 (68)

19.1

X

0.3 (1)

0.4 (1)

1.8 (55)

1.8

Totals

100.0 (315)

100.0 (247)

100.0 (3,118)

7.9a

EPC = Energy Performance Contract. HUD = U.S. Department of Housing and Urban Development. PHA = public

housing authority.

a The total adoption rate (7.9 percent) is the quotient of the “PHAs that have executed an EPC” and “PHAs (Low-Income)” (247/3,118 = 0.0792).

Note: Due to rounding, not all reported percentages precisely equal 100.0 percent.

9

Tables 3 and 4 il ustrate the distribution of units affected by an EPC by PHA size category and

HUD region. These tables also display the overal  unit count of the PHAs that have executed an

EPC, and the percentage of units that have been affected by an EPC relative to the total number

of PHA units of the same PHA size category and HUD region.

Table 3: Distribution of EPC and PHA Unit Count, and Affected Unit Rate, by PHA Size

PHA Unit Count

Unit Count

PHA Unit Count

PHA Size

Affected Unit Rate

(Executed an EPC)

(Affected by an EPC)

(Low-Income)

percent (number)

percent (number)

percent (number)

percent

Very small (fewer than 250)

1.2 (5,858)

2.1 (5,273)

17.1 (204,751)

2.6

Small (250–499)

5.2 (24,960)

8.9 (22,350)

12.9 (153,964)

14.5

Medium (500–1,249)

12.4 (59,736)

21.8 (54,738)

14.1 (168,472)

32.5

Large (1,250–6,599)

32.7 (157,063)

49.4 (123,775)

25.4 (303,911)

40.7

Very large (6,600+)

48.4 (232,232)

17.8 (44,486)

30.4 (363,120)

12.3

100.0 (479,849)

100.0 (250,622)

100.0 (1,194,218)

21.0a

EPC = Energy Performance Contract. PHA = public housing authority.

a The total affected unit rate (21.0 percent) is the quotient of the “Unit Count (Affected by an EPC)” and “PHA Count (Low-Income)” (250,622/1,194,218 = 0.2098).

Note: Due to rounding, not all reported percentages precisely equal 100.0 percent.

Table 4: Distribution of EPC and PHA Unit Count, and Affected Unit Rate, by HUD Region

PHA Unit Count

Unit Count

PHA Unit Count

HUD Region

Affected Unit Rate

(Executed an EPC)

(Affected by an EPC)

(Low-Income)

percent (number)

percent (number)

percent (number)

percent

I

8.6 (41,318)

10.9 (27,343)

6.3 (75,161)

36.4

II

43.8 (209,963)

15.8 (39,478)

21.5 (256,372)

15.4

III

11.0 (52,847)

18.1 (45,271)

10.3 (123,389)

36.7

IV

11.2 (53,548)

18.2 (45,665)

25.2 (301,239)

15.2

V

16.3 (78,314)

21.8 (54,623)

15.5 (184,802)

29.6

VI

2.5 (11,869)

4.6 (11,503)

9.9 (118,331)

9.7

VII

0.7 (3,540)

1.4 (3,526)

3.4 (40,339)

8.7

VIII

1.3 (6,444)

2.1 (5,378)

1.4 (16,750)

32.1

IX

4.0 (19,275)

5.8 (14,537)

4.6 (54,458)

26.7

X

0.6 (2,731)

1.3 (3,298)

2.0 (23,377)

14.1

Totals

100.0 (479,849)

100.0 (250,622)

100.0 (1,194,218)

21.0a

EPC = Energy Performance Contract. HUD = U.S. Department of Housing and Urban Development. PHA = public

housing authority.

a The total affected unit rate (21.0 percent) is the quotient of the “Unit Count (Affected by an EPC)” and “PHA Count (Low-Income)” (250,622/1,194,218 = 0.2098).

Note: Due to rounding, not all reported percentages precisely equal 100.0 percent.

10

Table 3 il ustrates that a majority of the units affected by an EPC are, not surprisingly, within

the three larger PHA size categories: medium (54,738 units), large (123,775 units), and very

large (44,486 units). After control ing for housing authorities that have executed multiple EPCs,

it was determined that 250,622 units14 (244 PHAs) have been affected by an EPC through FY

2015, for an overal  affected unit rate of 21.0 percent.

Table 4 similarly shows that the rate of units affected by an EPC varies by HUD region. Regions

VI, VII, and X have affected unit rates below 15 percent, and each of these regions contains less

than 10 percent of the Department’s public housing unit count.

Selection of Participating PHAs

In June 2015 the research team conducted preliminary discussions with a pool of 16

prospective PHAs to determine their willingness and availability to participate in the EPC study.

This subset of PHAs was selected from the Department’s 2011 EPC data set; the only

prerequisite for participation was that the PHA must have completed EPC improvements after

2009. The timing aspect of this prerequisite coincides with establishment of the OFO-Energy

Center team, which is based in HUD’s Buffalo Field Office and serves as the Department’s

central point for review and approval of EPCs. Based on conference calls and email

communication, the team classified potential study participants into three groups: nine PHAs

expressed an interest in participating, four indicated disinterest, and the remaining three were

listed as potential alternates.

As illustrated in Table 5, the nine participating PHAs were selected to represent a diverse mix of

housing authorities based on factors such as PHA size, complexity of installed improvements,

HUD region, EPC dollar amount, and phase of the EPC. Cost-effective travel by the research

team was another factor in the selection. 15 A majority of the identified potential PHAs that expressed disinterest or were listed as a potential alternate site indicated either that the units

under their existing EPC were being transited to RAD or that a majority of their current staff

were not familiar with the executed EPC and how it benefited the housing authority. The team

conducted site visits at al  nine participating PHAs during August and September 2015.

Due to the pilot’s small sample size, and because some PHAs did not wish to participate, the

research team recognizes that the conclusions drawn from this effort may be based on an

unrepresentative group of PHAs. PD&R’s fol owup study is expected to present a clearer view of

the EPC universe.

14 For PHAs that have executed multiple EPCs (that is, have executed more than one EPC phase), the EPC phase that had the largest number of affected units was retained. If the number of affected units was identical for the multiple phases, then the number of affected units for the most recent EPC phase was retained. If a PHA’s number of affected units was missing from the EPC data set, the PHA and its overall unit count were excluded from this analysis.

15 PD&R staff were granted FY15 travel funds to visit the nine participating housing authorities. The site visits were performed between August and September 2015.

11

Table 5: Diverse Mix of Participating PHAs

Units

PHA Name

PHA

PHA

Total

Code

State

PHA

Regiona

Sizeb

Units

Affected by

EPC

Wilmington Housing Authority

DE001

DE

III

large

1,556

1,472

Clinton County Housing Authority

PA040

PA

III

smal

457

457

Greenwood Housing Authority

MS107

MS

IV

smal

408

408

North Little Rock Housing Authority

AR002

AR

VI

medium

1,042

1,040

Kansas City, Kansas Housing Authority

KS001

KS

VII

large

2,058

2,046

Denver Housing Authority

CO001

CO

VIII

large

3,922

3,379

Housing Authority of the County of Chester

PA046

PA

III

smal

331

207

Metropolitan Development and Housing Agency

TN005

TN

IV

large

5,383

4,580

Watervliet Housing Authority

NY025

NY

II

smal

307

307

EPC = Energy Performance Contract. PHA = public housing authority.

a U.S. Department of Housing and Urban Development, “HUD’s Regions,”

http://portal.hud.gov/hudportal/HUD?src=/localoffices/regions.

b Very smal  (fewer than 250 units); smal  (250–499 units); medium (500–1,249 units); large (1,250–6,599 units); and very large (6,600+ units).

Of the PHAs that confirmed interest in participating, two (DE001 and CO001) were currently

self-managing their EPCs; the remaining seven had hired an ESCo to manage the contracts on

their behalf. 16 Four of the PHAs (AR002, KS001, MS107, and PA040) were in the initial phase of the contract, four (CO001, DE001, NY025, and PA046) had executed a second phase, and the

remaining housing authority (TN005) had executed a third phase of the term contract.

Questionnaire

Between July and September 2015 the research team administered the study’s questionnaire to

the participating PHAs. The questionnaire was designed so that only respondents who understood

the executed EPC would be able to complete it. The questionnaire covered four topical

sections—general EPC-related information, utility conservation and utility savings, developing

and self-managing an EPC, and resident-related matters pertaining to the executed EPC.

In conjunction with the EPC-specific documents, the questionnaire also served as a means of

examining whether long-term utility savings are being achieved; how the resulting cost savings

are being used; the process, time commitment, and workload (from the PHA’s perspective)

associated with applying to the EPC program; and barriers to greater EPC adoption by PHAs. A

copy of the questionnaire is included as appendix A.

The questionnaire was administered over an 8-week period and was sent to participating PHAs

via email in either Word or Acrobat format. On average, respondents were given 7 days prior to

the research team’s site visit to complete and submit the questionnaire. All nine participating

PHAs completed and submitted the questionnaire in a timely manner.

16 Although Watervliet hired an ESCo to manage the second phase of their EPC, the first phase of their EPC was self-managed.

12

Site Visits Performed

In August and September 2015, the research team made site visits to each of the participating

PHAs (see Figure 2). Each visit lasted approximately half a day and consisted of a roundtable

discussion with PHA management and staff, fol owed by a walkthrough (tour and engineering

review) of the installed EPC improvements. For research purposes, the team requested and

received permission from each participating PHA to record the roundtable meeting discussions.

The site visits performed and key details relating to each of the executed performance

contracts are described in the fol owing text and in Table 6.

During the roundtable discussions, the PHA’s responses to the completed questionnaires were

discussed and PHA staff were given an opportunity to speak about their experiences and

lessons learned from their participation in the EPC program. All PHA participants were frank in

their discussions and provided first-hand insights about what they would have done differently

had they elected to complete another phase of their performance contract; they also candidly

offered advice for other PHAs that may be interested in applying to the program.

Figure 2: Public Housing Authorities (PHAs) Visited During the Energy Performance

Contracting (EPC) Study

13

Table 6: Details Related to the Nine Participating PHAs

EPC

EPC Term

1st-Year

PHA Name

PHA Code

Type of

EPC

Contract

Improvements

Estimated

Phase

(Years)

Incentives

Costsa

Savings

building

Wilmington Housing Authorityb

DE001

envelope, HVAC,

water,

2

15

FRB, AOS,

RPU

$3,058,724

$662,697

appliances

lighting, water,

Clinton County Housing Authorityc

PA040

building

1

12

FRB, RPU

$1,127,749

$128,128

envelope, HVAC

Greenwood Housing Authorityd

MS107

lighting, water,

HVAC

1

15

AOS

$3,165,742

$278,706

North Little Rock Housing

lighting, water,

Authoritye

AR002

building

1

12

AOS, RPU

$3,559,665

$365,273

envelope, HVAC

building

envelope, HVAC,

Kansas City, Kansas Housing

lighting, water,

Authorityf

KS001

appliances

1

20

FRB, AOS,

renewable

RPU

$16,242,534

$1,030,364

energy,

miscel aneous

lighting, water,

HVAC,

Denver Housing Authorityg

CO001

appliances,

2

16

AOS

$20,738,802

$2,431,363

building

envelope

lighting, water,

Housing Authority of the County of

building

Chesterh

PA046

envelope,

2

15

FRB

$3,000,000

$407,825

appliances,

HVAC

building

Metropolitan Development and

envelope,

Housing Agencyi

TN005

appliances,

3

5

FRB, RPU

$3,079,703

$68,964

lighting, HVAC

building

Watervliet Housing Authorityj

NY025

envelope, HVAC,

lighting,

2

15

FRB, RPU

$1,014,851

$88,422

appliances

EPC = Energy Performance Contract. PHA = public housing authority.

a For the purposes of this analysis, contract costs correspond to the investment costs for the respective EPC Phase.

b DE001’s Phase 2 EPC is self-managed and extends the existing EPC incentive term from 12 to 20 years. DE001’s Phase 1 ESCo was Honeywel , Inc.

c PA040’s Phase 1 ESCo is Pepco Energy Services.

d MS107’s Phase 1 ESCo is Siemens Industry, Inc.

e AR002’s Phase 1 ESCo is Honeywel , Inc.

f KS001’s Phase 1 ESCo is Johnson Controls.

g CO001’s Phase 2 EPC is self-managed and extends the existing EPC incentive term from 12 to 20 years. CO001’s Phase 1 ESCo was Honeywel , Inc.

h PA046’s Phase 2 extends the existing EPC incentive term from 15 to 20 years. PA046’s Phase 1 and Phase 2 ESCo is Johnson Controls, Inc.

i TN005’s Phase 3 extends the existing EPC incentive term from 15 to 20 years. TN005’s Phase 1, Phase 2, and Phase 3 ESCo is Siemens Industry, Inc.

j NY025’s Phase 2 extends the existing EPC incentive term from 12 to 15 years. NY025’s Phase 2 ESCo is Siemens Industry, Inc.

14

EPC-Related Data

The OFO-Energy Center team hosts a SharePoint site that contains detailed information on a

large number of the EPC projects that the Department has executed. The research team was

granted access to this website and gathered contractual information from it on EPC application

files, baseline consumption levels, approval documents, and M&V data—all of it pertaining to

the performance contracts for each of the participating PHAs. Most of the contractual

information was available through the SharePoint site; some data gaps existed, however. In an

effort to fil  these gaps, the local PIH field office staff (and in some cases the participating PHAs)

were asked to obtain any required documentation that was unavailable on the SharePoint site.

Participants in the Field of Energy Performance Contracting

Upon completion of the site visits, the research team contacted a number of internal and

external participants in the EPC field. Discussions with these individuals provided a range of

perspectives on the EPC program and its application process, and suggested approaches to both

improving the EPC program and increasing its adoption rate among members of the PHA

community. During each of these discussions, the research team described the purpose of the

in-house research project and received feedback on the various participants’ experiences with

HUD’s EPC program.

15

Discussion

Results of the Questionnaire

Each participating PHA completed a questionnaire about its EPC, its utility savings, the process

of developing and managing an EPC, and resident-related matters. The questionnaire consisted

of 90 questions and was designed so that, in order to respond appropriately and fully,

respondents had to have a working knowledge of their EPC. A summary of the completed

questionnaires’ major takeaways follows; both aggregate and open-ended responses to al  of

the questions can be found in appendix B.

EPC Benefits and Savings

Key questionnaire responses suggest that the EPCs for this set of PHAs were a success. Eight of

nine participants stated that their performance contracts were overperforming or performing

as projected (Q35). Similarly, eight of nine participants responded that they believe their

executed EPC was of benefit to their housing authority (Q55).

When considering their EPC experiences from a counterfactual perspective (that is, what would

conditions have been like in the  absence of the EPC), eight of nine respondents indicated that only a portion of the improvements instal ed through the EPC program would have been

made (Q62), and six of seven respondents believe they would not have been able to achieve

the same amount of savings (Q63).

Use of Excess Savings

From an excess savings perspective, five of nine respondents reported achieving savings after

paying the annual debt service on their executed EPC (Q38). Respondents were asked to

elaborate on how their savings were used. Four responding PHAs used the savings to pay

eligible operating expenses, three specified instal ing additional improvements by expanding

their current EPC, and one used the savings to accelerate payment on its EPC debt (Q39).

Question 39 al owed respondents to make multiple selections.

Level of Effort on Application Process

The team was unable to quantify the level of effort that the participating housing authorities

applied to the EPC application process. Only one of the nine participants responded that it

kept a record of the workload (that is, labor hours) associated with applying to the EPC

program (Q58). The respondent specified that housing authority staff al ocated

approximately 320–640 labor hours (8–16 weeks) toward the EPC application process (Q59).

Resident Training and Awareness

The results of the questionnaire il ustrate that participating housing authorities were energy

conscious to some degree and made efforts to raise residents’ awareness of their role in the

conservation process. All nine participants instituted some form of outreach or training

program to encourage greater utility conservation among residents (Q81), and eight of nine

respondents believe that notifying residents of the executed EPC and the resulting building

16

upgrades—by posting flyers, distributing PHA newsletters, and holding discussions during

resident meetings—would help residents understand the importance of utility conservation

and how their actions can either support or diminish a given project’s success (Q87). When

asked whether these programs resulted in observable changes in residential utility use, two

of nine respondents stated that they had observed noticeable changes; the remainder either

observed no changes in behavior (three of nine) or indicated that they could not make the

determination (four of nine) (Q88).

A majority of affected residents are not required to pay their own utility bil s because they

live in buildings that are master metered, which may partly explain the somewhat marginal

change in resident behavior. Another contributing factor may be the relatively low resident

turnout at the (PHA-provided) outreach and training programs. Seven of the nine

respondents specified that turnout among their respective residents was no higher than

25 percent (Q86).

With increasing interest on the part of PHAs in promoting energy conservation partly countered

by minimal engagement on the part of residents, it may be in HUD’s best interests to develop

and disseminate resources aimed at energy conservation initiatives that draw on the rapidly

developing literature on behavioral economics, with a particular focus on resident behavior

modification strategies. Currently, in keeping with EPC regulations and guidance, projected

savings from resident behavior modification strategies cannot be considered an EPC, although

these strategies can be funded as a supporting project (soft) cost. As a result, any such

information dissemination wil  need to be conducted in paral el to the EPC program. Supporting

this premise, the questionnaire found that eight of nine respondents would be wil ing to take

part in a future HUD research effort to identify viable strategies for promoting resident

involvement in utility conservation (Q90).

Analysis of Measurement and Verification, Utilities Expense Level Data, and

HUD Assessment Data

In an effort to quantify the utility consumption savings associated with the study’s EPCs, the

research team sought to gather and analyze M&V, utilities expense level (UEL), and HUD

assessment data for each of the participating PHAs. M&V data document the installed

improvements’ quantified savings based on the contractual agreements between the PHA and

the ESCo or energy consultant, and are provided annual y in accordance with each EPC’s unique

schedule. UEL data (HUD administrative data) are self-reported by PHAs, and are recorded and

submitted in accordance with HUD guidelines (that is, on a July 1 to June 30 basis). HUD

assessment data document the achieved EPC savings and factors used by the Department to

verify the savings as provided by agreements between the PHA and HUD.

Although the research team experienced difficulties with incomplete M&V datasets and did not

find any HUD assessment data, an analysis was performed on the participating PHAs’ UEL data;

17

annual development-level consumption quantities from Funding Years 2005–201517 (actual consumption spanning July 1, 2003 to June 30, 2014). The UEL data sets for each of the study’s

participating PHAs can be found in appendix C.

Normalizing Utility Consumption Data

When analyzing consumption data, the research team is cognizant that it is common practice to

normalize the data in order to remove any variations associated with weather and building-

occupancy conditions. Normalization allows a building’s performance to be compared against

itself under normal operating conditions. Weather normalizing is typically based on daily or

monthly measurements, while occupancy normalizing is generally analyzed from a monthly

perspective.

For this study, neither of these normalizing approaches was performed. With the UEL data

col ected only on an annual basis, plausible correlations with respect to annual heating degree-

day (HDD) and cooling degree-day (CDD) measurements were not observed. In addition, the

research team assumed that the participating PHAs’ occupancy patterns were similar over the

analyzed Funding Years.

Methodology and Limitations

The research team’s approach toward analyzing the UEL data consisted of comparing the

average consumption quantities of before and after the respective EPC phase was executed.

This approach was chosen because (1) the UEL data sets consist of EPC and non-EPC related

consumption quantities, and (2) each performance contract consists of a unique start date,

which increases the likelihood that the reporting periods for a majority of the PHAs’ EPC

incentives do not align with the UEL reporting cycle. Thus, with al  of this taken into

consideration, the research team’s intent is to provide a general analysis describing the

effectiveness of the executed EPCs.

Average Percentage Change Estimates

Tables 8, 9, and 10 illustrate, for each applicable utility type, the average percentage savings

observed after each PHAs’ first, second, and third EPC, respectively (if applicable). As previously

mentioned in this report, four of the PHAs (AR002, KS001, MS107, and PA040) were in the

initial phase of their performance contract, four (CO001, DE001, NY025, and PA046) had

executed a second phase, and the remaining housing authority (TN005) had executed a third

phase. In addition, Table 7 has been included to provide context regarding each PHA’s average

percentage change, for applicable utility types, relative to their Funding Year 2005 UEL

measurements.

17 Each Funding Year consists of 12 months of utility consumption data, starting 18 months prior to the beginning of the respective Funding Year. For example, Funding Year 2005 consists of consumption data from July 1, 2003–June 30, 2004.

18

Table 7: Average Percentage Change Relative to Funding Year 2005 Consumption Quantities

PHA

Electricity

Natural Gas

Sewer/Water

Sewer

Water

PA046

20.95%

-3.28%

17.09%

N/A

N/A

TN005

-11.75%

-6.94%

-39.65%

N/A

N/A

KS001

-0.85%

-8.34%

N/A

-1.98%

-8.04%

NY025a

0.06%

-23.28%

--------

N/A

N/A

CO001

-33.77%

-40.77%

-32.59%

N/A

N/A

PA040

5.66%

-10.21%

N/A

-9.40%

-9.48%

DE001

-14.45%

-38.16%

-37.08%

N/A

N/A

MS107b

-40.81%

-47.05%

--------

N/A

N/A

AR002

0.21%

-31.29%

-12.08%

N/A

N/A

a The UEL data sets do not contain any measurements for NY025’s owner-paid sewer and water utility.

b The UEL data sets do not contain any measurements for MS107’s owner-paid sewer and water utility.

The research team is cognizant that this analytical approach is not ideal and does not provide

an accurate depiction of the value or savings associated with the installed EPC improvements.

However, considering that the UEL data sets are administrative data and the only consistently

available resource for utility consumption analysis, the research team believes that the chosen

approach is defensible. For the purposes of this study, the Funding Year in which the incentives

for each PHAs’ EPC were initially observed mark the beginning of the post-EPC consumption

period and span through Funding Year 2015. Similarly, all years prior to the Funding Year in

which the incentives were initially observed mark the end of the pre-EPC consumption period

and span back to Funding Year 2005.

Table 8 displays that seven of nine PHAs observed average percentage decreases across all of

their reported utilities after their first executed EPC, which positively illustrates reductions in

consumption for a majority of the study’s participating PHAs. The two remaining PHAs were

TN005 and MS107. TN005 executed its first EPC in Funding Year 1998; however, UEL data sets

were not available until Funding Year 2005. MS107 observed an average percentage increase in

utility consumption since executing its first EPC; however, from a positive perspective, Table 7

il ustrates that the housing authority has observed an overall average percentage decrease

relative to its Funding Year 2005 UEL quantities.

Relative to the PHAs’ second EPC, Table 9 illustrates that all five PHAs in this subgroup observed

average percentage decreases for at least one of their utilities. On a further positive note, Table

9 reveals that two of the PHAs (PA046 and DE001) observed average percentage decreases for

two of their utilities, while the remaining two PHAs (CO001 and TN005) observed average

percentage decreases for all of their utilities.

Table 10 illustrates that the only PHA to have executed a third EPC (TN005) observed an

average percentage decrease in utility consumption for all of its reported utilities.

19

Table 8: Average Percentage Change Relative to First EPC

PHA

Electricity

Natural Gas

Sewer/Water

Sewer

Water

Funding Year in Which Incentives

Were Initial y Observed

PA046

-6.09%

-38.62%

-5.82%

N/A

N/A

2010

TN005

N/A

N/A

N/A

N/A

N/A

1998

KS001

-0.68%

-11.85%

N/A

-7.98%

-12.52%

2012

NY025a

-2.57%

-24.37%

--------

N/A

N/A

2008

CO001

-40.16%

-56.70%

-42.38%

N/A

N/A

2008

PA040

-2.05%

-12.70%

N/A

-41.31%

-41.03%

2013

DE001

-17.24%

-43.57%

-24.20%

N/A

N/A

2009

MS107b

45.58%

55.92%

--------

N/A

N/A

2011

AR002

-2.84%

-44.87%

-26.76%

N/A

N/A

2009

a The UEL data sets do not contain any measurements for NY025’s owner-paid sewer and water utility.

b The UEL data sets do not contain any measurements for MS107’s owner-paid sewer and water utility.

Table 9: Average Percentage Change Relative to Second EPC

PHA

Electricity

Natural Gas

Sewer/Water

Sewer

Water

Funding Year in Which Incentives

Were Initial y Observed

PA046

13.95%

-43.56%

-28.92%

N/A

N/A

2015

TN005

-9.83%

-5.70%

-33.57%

N/A

N/A

2009

KS001

N/A

N/A

N/A

N/A

N/A

N/A

NY025a

4.47%

-34.20%

--------

N/A

N/A

2011

CO001

-35.32%

-50.47%

-34.00%

N/A

N/A

2012

PA040

N/A

N/A

N/A

N/A

N/A

N/A

DE001

23.40%

-12.76%

-7.88%

N/A

N/A

2015

MS107

N/A

N/A

N/A

N/A

N/A

N/A

AR002

N/A

N/A

N/A

N/A

N/A

N/A

a The UEL data sets do not contain any measurements for NY025’s owner-paid sewer and water utility.

Table 10: Average Percentage Change Relative to Third EPC

PHA

Electricity

Natural Gas

Sewer/Water

Sewer

Water

Funding Year in Which Incentives

Were Initial y Observed

PA046

N/A

N/A

N/A

N/A

N/A

N/A

TN005

-13.02%

-11.36%

-46.44%

N/A

N/A

2013

KS001

N/A

N/A

N/A

N/A

N/A

N/A

NY025

N/A

N/A

N/A

N/A

N/A

N/A

CO001

N/A

N/A

N/A

N/A

N/A

N/A

PA040

N/A

N/A

N/A

N/A

N/A

N/A

DE001

N/A

N/A

N/A

N/A

N/A

N/A

MS107

N/A

N/A

N/A

N/A

N/A

N/A

AR002

N/A

N/A

N/A

N/A

N/A

N/A

20

Example Calculation

To il ustrate the procedure that was fol owed, the research team offers the fol owing example.

The Kansas City Housing Authority (KS001) began observing its EPC incentives in Funding Year

2012. KS001’s pre-EPC consumption period consisted of consumption from Funding Years

2005–2011; having averages of 10,813,312 kWh (electricity), 25,457,333 kWh (natural gas),

69,739,780 gal. (sewer), and 77,734,938 gal. (water). While the post-EPC consumption period

spanned from Funding Years 2013–2015; having averages of 10,739,763 kWh (electricity),

22,440,725 kWh (natural gas), 64,171,668 gal. (sewer), and 68,000,867 gal. (water).

Therefore, by KS001’s average percentage changes for its utilities are:

Electricity: (10,739,763−10,813,312) × 100% = −0.68%

10,813,312

Natural Gas: (22,440,725−25,457,333) × 100% = −11.85%

25,457,333

Sewer: (64,171,668−69,739,780) × 100% = −7.98%

69,739,780

Water: (68,000,867−77,734,938) × 100% = −12.52%

77,734,938

By averaging each PHA’s utility consumption quantities from before and after their executed

EPCs, the research team is able to provide rough estimates regarding the effectiveness of the

EPCs.

Public Housing Policy Inquiries

At the outset of this project, PIH requested that we explore three policy-related issues that

could be informed by the study:

1.  Whether to allow PHAs to use utility savings from EPCs for non-energy-related or non-

water-related capital improvements.

2.  Whether to provide a compensatory fee to PHAs that choose to self-manage their EPC.

3.  Whether the degree of rigor of the EPC application process is necessary to ensure the

cost-effectiveness of projects.

To address these considerations, the research team incorporated relevant content in the

questionnaire. The fol owing discussion describes feedback derived from the questionnaire and

observations proposed by the research team. However, since these observations were based

on a relatively small and therefore unrepresentative sample of PHAs, PD&R may revise these

observations based on the results of its larger, nationwide study of the EPC program.

Apply EPC Utility Savings Toward Non-Energy-Related and Non-Water-Related

Capital Improvements

The questionnaire asked participants if their housing authority would benefit if HUD al owed

achieved utility savings from EPCs to be applied toward non-energy-related and non-water-

related capital improvements.

21

Current PIH guidance specifies that any savings generated by the instal ed EPC improvements

and retained by the PHA may be used to pay for—18

1.  Any eligible operating expense.

2.  EPC debt service on other projects under the same EPC contract.

3.  Additional energy-efficient or green building improvements that can be achieved by

expanding the current project.

4.  The acceleration of debt service on the existing project, if permitted under the financing

contract.

Six of eight respondents believed that allowing excess EPC savings to be applied toward

capital improvements would be beneficial. One respondent did not believe that such change

would help, and the remaining respondent indicated that it was not sure (Q40). One of the

study’s nine participants did not respond to this question.

In terms of providing maximum flexibility for grantees and providing incentives for the further

adoption of EPCs at additional PHAs, the research team views as compelling the favorable

response by a majority of respondents to the question about allowing EPC savings to be applied

toward capital improvements.

Observation: Allow EPC savings for capital needs and provide guidance on incorporating a contingency reserve into a project’s total costs.

Based on the findings in this report, we recommend that HUD should consider whether the four

existing EPC categories of eligible uses can be expanded to al ow for savings generated to be

used for capital improvements. This fifth category of eligible use would allow for greater

flexibility for participating PHAs and provide additional incentives for additional PHAs to

consider entering into new EPC arrangements. We would also recommend that if HUD

determines it lacks the authority to make this change based on existing statutory requirements,

then HUD should consider proposing such a change to Congress. Such an observation could be

included in an annual budget request.

One constraint identified by some respondents is the requirement that the EPC’s anticipated

savings need only be sufficient to  reasonably cover al  of the debt service within 20 years of

executing the contract. Such a stipulation implies that for an EPC, in some circumstances the

achieved savings wil  not be enough to cover the debt service, in which case a housing authority

might have to use additional Operating Fund resources to make up the difference.

Such a situation may also occur as a result of a lower than expected Operating Fund al ocation,

for instance in the event of a proration. Each fiscal year, Congress has the authority to

appropriate a percentage of the requested funding level that HUD submits in support of the

funds needed to operate and maintain the nation’s public housing stock. Since FY 2005, the

18 The only exception to this specification is when the term of the EPC contract is complete and the PHA requests a regulation waiver to use excess EPC cost savings for purposes other than eligible Operating Fund expenses.

22

average Operating Fund subsidy has only been 90 percent, 19 which forces housing authorities to alter their operations and prioritize the services and maintenance they provide and the staff

they employ. Such funding levels may create a dilemma for PHAs in which the funds are

insufficient to service the EPC debt while physically maintaining public housing properties. To

guard against this potential appropriations risk, the research team recommends that future

HUD guidance should emphasize the benefit of incorporating a contingency reserve into the

project’s total costs. Such a reserve could be used to cover EPC debt service in the event of a

reduced appropriation. Such a provision might be an important incentive for smaller PHAs that

have a low margin for error in a limited annual Operating Fund environment.

Provide a Compensatory Fee to PHAs That Self-Manage an EPC

Participants also were asked whether a PHA that chooses to self-manage an EPC should be

compensated for this effort.

Six of nine respondents specified that they do believe that a PHA should be compensated for

the effort of self-managing an EPC; the other three respondents indicated that they do not

believe compensation should be provided for such actions (Q51).

In addition to the complexities associated with applying to the EPC program, self-managing an

EPC requires the housing authority to serve as general contractor, which can be complex and

cumbersome regardless of the type of improvements that are instal ed. Self-managing PHAs

must take on the additional burden of coordinating and overseeing all of the work performed

by their subcontractors.

Observation: Allow compensatory incentives.

Considering the chal enges of meeting the additional requirements of self-managing an EPC, the

research team believes that instead of being provided a compensatory fee, this subgroup of

PHAs should be compensated for their efforts by being provided greater flexibility in how a

project’s resultant cost savings may be used. Such flexibility may include broadening the ways

in which the cost savings may be used20 or decreasing the required percentage of annual cost savings paid toward EPC debt services (HUD, 2011). 21

PD&R is cognizant that the initial intent of this policy-related issue was to inquire about

whether to provide PHAs a compensatory fee for EPC self-management. However, after careful

consideration, the research team is hesitant to recommend a fee that will take away from the

bottom-line dol ar amount that PHAs can use toward financing improvements and other

project-related expenses.

19 On December 23, 2015, HUD’s Real Estate Assessment Center provided a historical proration table (1981–2015) of the Public Housing Operating Fund.

20 As described earlier in the report, any savings generated by the installed improvements may be used to pay for: (1) eligible operating expenses, (2) EPC debt service on other projects under the same EPC contract, (3) additional energy-efficiency or green building improvements, or (4) accelerating the debt service of the existing project.

21 PIH guidance specifies that 75 percent of the annual utility savings must be utilized toward the payment of EPC project costs.

In cases in which less than 75 percent of the savings is used for debt service, HUD wil  retain the amount of the difference by reducing the project’s subsidy by that amount.

23

Providing such incentives would likely encourage more PHAs to self-manage their EPCs, which

wil  promote greater oversight and overal  efficiency of the funded project because the

participating housing authorities would be more vested in the executed contracts and an

innovative Department incentive aimed at reducing the public housing portfolio’s utility

consumption would be il ustrated.

Is the Rigor of the Application Process Necessary To Ensure a Cost-Effective Project?

Participants were asked if they thought that the rigor of the EPC application process was

necessary for HUD to ensure the cost-effectiveness of the project.

Seven of nine respondents indicated their belief that the present degree of rigor on HUD’s

part is necessary to ensure the cost-effectiveness of a given project is (Q60).

The research team finds this viewpoint to be wel  founded, given the large sums of money

involved, 22 the technical documentation that must be submitted, and the risks inherent in complex EPC agreements. As previously stated, process flow diagrams (under “EPC Process

Review” on the PIH EPC webpage)23 have been developed that outline the multiple steps that PHA applicants and HUD must complete before an application can receive approval.

Observation: Maintain the rigor of the EPC application requirements.

The research team has observed that thorough application reviews are key in the success of the

EPC program, and that these reviews benefit both the PHAs and HUD. Therefore, this report

recommends maintaining the rigor of the current application process requirements, as the

benefits outweigh the costs of complying with those requirements.

The team observed a data limitation that affects the measurement of how rigorous the EPC

review efforts are, however. The ideal approach to analyzing applications would assess

approval times relative to achieved savings. As described in more detail in the “Observations”

section that fol ows, data on achieved savings are not currently col ected. Data on achieved

savings could support a new evidence-based metric on cost-effectiveness of review efforts. This

limitation and an observation to address it are discussed in the fol owing section.

22 Of the 315 EPCs listed within the PIH Excel data sets, 294 had a plausible “Total Cost of EPC Project” quantity. The research team found that the EPC project costs ranged from $63,400,000 to $38,000, wherein the average EPC Project Cost was $4,800,000.

23 http://portal.hud.gov/hudportal/HUD?src=/program_offices/public_indian_housing/programs/ph/phecc/eperformance.

24

Summary

The goal of this pilot study was to conduct an initial inquiry into the value and effectiveness of

PIH’s EPC program to inform a more comprehensive nationwide study of the use of energy

performance contracts by PHAs. EPCs are a regulatory tool providing flexible financing options

for PHAs to use resultant utility cost savings to fund utility-related capital improvements. By

providing enhanced financial flexibility to PHAs, EPCs encourage them to make more strategic

and comprehensive utility upgrades than they could undertake with limited capital funds.

As HUD administers the EPC program to promote long-term benefits, a core aspect is ensuring

regulatory compliance and minimizing risks to the Department and taxpayers. A successful EPC

program will reduce utility consumption within the federally assisted housing stock, ease the

financial burden on taxpayers, al eviate negative impacts on the environment, and create green

jobs.

The study’s survey demonstrated that the EPCs for this set of PHAs were a success. The

fol owing findings support this contention—

•  Eight of nine respondents stated that their performance contract was of benefit to their

housing authority (Q55).

•  Eight of nine respondents indicated that only a portion of installed improvements would

have been made without the flexibility provided by the EPC program (Q62).

•  Five of nine respondents noted having achieved cost savings after paying the annual

debt services on their EPC (Q38).

•  Eight of nine respondents stated that their executed performance contract was either

overperforming or performing as projected (Q35).

•  Six of seven respondents believe they would not have been able to achieve the same

amount of savings in the absence of the EPC (Q63).

•  Six of eight respondents believe that al owing excess EPC savings to be applied toward

capital improvements would be beneficial (Q40).

•  Six of nine respondents believe that a PHA should be compensated for the effort of self-

managing an EPC (Q51).

•  Seven of nine respondents believe that rigorous review on HUD’s part is necessary to

ensure the cost-effectiveness of projects (Q60).

25

Observations Supporting EPC Program Objectives

The preceding section summarized the research team’s findings and observations related to the

three policy questions posed by PIH. In the fol owing section the team offers five additional

observations on the basis of this research. However, because these observations were based on

a relatively small and therefore unrepresentative sample of PHAs, PD&R may revise these

observations based on the results of its larger, nationwide study of the EPC program.

In proposing these observations, the research team kept these four EPC program objectives in

mind—

1.  Reducing the approval time of an EPC application.

2.  Providing more transparency in the Department’s application review efforts.

3.  Providing PHAs with further guidance on the collaborative use of an EPC and RAD.

4.  Providing more transparency in the realized savings of an EPC.

Objective: Reducing the Approval Time of an EPC Application

Observation: Develop a PHA-EPC working group.

Establish a PHA-EPC working group to al ow PHAs that have executed an EPC to serve as

champions of the EPC program and as mentors to housing authorities that are new to the EPC

application process. Such a working group would serve as a peer-review mechanism that can be

beneficial to the Department and participating housing authorities by establishing a cost-

effective strategy to promote the EPC program and provide assistance and guidance from a

more hands-on perspective, and to reduce the overal  burden placed on HUD staff during

application review.

As noted previously, results from the questionnaire indicate that, from a utility performance

perspective, eight of nine participants had executed an EPC that was performing as projected or

above the initial estimated savings projections (Q35). In addition, five of the nine participants had

executed at least a second phase of their existing EPC. Taken together, these results indicate that

the program is of value from a utility performance perspective, and that many of the participating

PHAs can be considered wel  versed in the intricacies of the application process.

Considering that only approximately 10 percent of the public housing stock (approximately

20 percent of the overal  public housing unit count) has been covered by an EPC since the

program’s inception, an important opportunity lies in leveraging the first-hand knowledge and

experiences of participating PHAs to strengthen the EPC program by establishing a working

group. Such a collaborative approach would entail ongoing, reciprocal communication among

the PHAs and HUD’s EPC staff, and would likely encourage more housing authorities to inquire

about and apply to the program. Gaining active support among members of the PHA

community would also be likely to encourage buy-in from the representative trade groups that

advocate for the PHA community—primarily the Public Housing Authorities Directors

Association (PHADA), National Association of Housing and Redevelopment Officials (NAHRO),

and Council of Large Public Housing Authorities (CLPHA).

26

Such a working group could also prove beneficial in light of the limited programmatic resources

currently available to housing authorities in the EPC application process. During the site visits

and interviews with subject matter experts, the research team observed that a significant

programmatic hurdle encountered by many participants is the time required to receive EPC

approval. The research team is aware that the application process is highly complex, given the

number of factors that must be taken into account. In analyzing the approval times for the

participating PHAs, the team found that for seven of the nine housing authorities, the average

approval time took 250 calendar days24 (roughly 8 months) and included the time in which PHAs or ESCos made revisions to the applications.

By instituting a peer-review mechanism for PHAs that are new to the EPC application process,

the potential exists to substantial y reduce the amount of time the Department spends in

assuring that all required application forms are appropriately submitted. This in turn would

al ow the Department to focus its resources toward reviewing the technical aspects of an EPC

application and to providing more detailed technical support and guidance when necessary.

Objective: Providing Greater Transparency in the Department’s Application

Review Efforts

Observation: Revise the duration metric of the EPC application approval time.

For this effort, the research team measured the overall approval time for an EPC application

from the date when the application package was received to the date when the

corresponding EPC approval letter was sent to the subject PHA. For the study’s nine

participating PHAs, the average approval time was 250 calendar days24 (approximately 8

months) and included the time in which PHAs or ESCos made revisions to the applications.

Within the past 3 years, the Department has further refined this metric to account separately

for the time HUD is reviewing the application and the time the PHA is revising the application.

Although it is logical for accounting purposes to measure how long the Department has the

EPC application and how long the PHA has it, this approach doesn’t ful y take into account the

level of effort the Department expends in reviewing the application. The research team

recommends supplementing the approval time metric with a metric and additional discussion

that captures the Department’s review efforts related to an approved EPC’s total project

costs.

Results from the questionnaire indicate that seven of nine respondents believed the rigor

associated with the application process was necessary to make sure that the EPC was cost-

24 For the purposes of this analysis, the approval times were calculated as the difference between the dates listed in the

“Package Received” and “Date FO sent Approval/Disapproval to PHA” columns of the Contract_Status_Database.xlsx spreadsheet. These dates were chosen to illustrate the  overal  time that it takes for an EPC application package to receive approval, including the time in which PHAs or ESCos made revisions to the applications. The spreadsheet did not contain any information pertaining to the North Little Rock Housing Authority (AR002), and the Housing Authority of the County of Chester (PA046) did not have a date listed in the “Date FO sent Approval/Disapproval to PHA” column. In total, the spreadsheet listed 133 EPCs on its “ESA” (Energy Service Agreement) tab, wherein 72 of the entities had plausible “Package Received” and “Date FO sent Approval/Disapproval to PHA” dates. For these 72 entities, the research team found that the approval times ranged from 9 to 1,013 calendar days, wherein the average approval time was 193 calendar days (roughly 6 months).

27

effective (Q60). The research team believes that this viewpoint is wel  founded, considering the

large sums of money involved25 and the risks inherent in complex EPC contractual agreements.

For an EPC, the PHA is held accountable for the total project costs of the contract: debt service

payments, M&V fees, and equipment replacement costs.

As previously mentioned, the Department conducts multiple stages of review during the EPC

application process to ensure compliance with HUD regulations and guidance and to minimize

risk to the Department. During these review periods, HUD may require adjustments to the PHA

applicant’s cost and saving estimates, which in turn have an effect, either directly or indirectly,

on the total project costs for which the housing authority will be held accountable.

To account for the level of effort the Department invests in reviewing each application to

ensure cost-effectiveness, minimize associated risks, and ensure adherence to HUD regulations

and guidance, PIH should supplement the approval time metric to take into account changes in

total project costs relative to the proposed EPC, as well as the overall duration of the

application process. 26 Instituting a policy that employs such metrics would assist PIH in justifying (and being more transparent about) the duration and level of effort involved in the

EPC application review process.

Objective: Providing Further Guidance on the Collaborative Use of an EPC

and RAD

Observation: Develop a decision logic tree in support of using an EPC in conjunction with RAD.

HUD recently released a FAQ27 document that describes the use of an EPC in

conjunction with RAD. RAD al ows PHAs to leverage public and private debt and equity

in order to reinvest in the public housing stock. Through RAD, units move to a Section 8

platform with a long-term contract that, by law, must be renewed periodically. This

renewal clause ensures that the units remain permanently affordable to low-income

households, thus removing the units from HUD’s public housing inventory and possibly

from the EPC funding stream.

As previously mentioned, if a PHA wishes to convert all or a portion of its EPC-related

properties to RAD, it must first determine how it plans to satisfy the existing EPC

obligation. Housing authorities have the option of either paying off the EPC debt or

assuming the debt and continuing to make the EPC debt payment after conversion to

25 Of the 315 EPCs listed within the PIH Excel data sets, 294 had a plausible “Total Cost of EPC Project” quantity. The research team found that the EPC project costs ranged from $63,400,000 to $38,000, wherein the average EPC Project Cost was $4,800,000.

26 For example, a PHA submitted, on April 1, an EPC application that spanned 12 years and consisted of $100,000 in total project costs. During the PIH review process, it is determined that incorrect utility rates were used to estimate the instal ed improvement’s projected savings, resulting in a decrease in total project costs by $5,000. As a result, the application is approved on August 15 and consists of a total project costs amount of $95,000. The Revised Duration Metric would consist of an approval time of 136 calendar days (~ 4.5 months) and a change in total project costs of -$5,000 (5 percent decrease in total project costs).

27 http://portal.hud.gov/hudportal/documents/huddoc?id=RAD_EPC_FAQs_030316.pdf.

28

RAD. In instances such as this, PHAs must notify the Field Office of their intent and

establish a new baseline utility consumption measurement for the portion of the project

that remains in public housing and continues to receive EPC incentives.

The research team is hopeful that the FAQ document will be wel  received by the PHA

community, because several PHAs that participated in the study stated that they did not

clearly understand whether a RAD conversion would benefit them. In addition, during

preliminary discussions with potential study participants, several of the non-selected

PHAs declined or were hesitant to participate in this study because they were

considering a RAD conversion. Given both the complexities and the level of effort that

PHA and HUD staff invest in preparing and approving an EPC application, the research

team recommends that the FAQ document be expanded to include a logic-based

decision tree (similar to the flow diagrams necessary for application approval) that wil

assist PHAs in working through the decisions that should be taken into account when

considering a conversion of EPC-related PHA units (Section 9) to RAD units (Section 8).

Objective: Providing More Transparency in the Realized Savings of an EPC

Observation: Annually update cash flow spreadsheets.

A PHA’s finalized cash flow spreadsheet for an EPC establishes benchmarks in the form of

annual costs and savings that can be expected to accrue on the PHA’s behalf. Embedded within

these projections are critical assumptions about factors that are beyond the PHA’s control and

that can affect actual cost savings.

Examples of critical assumptions include the escalation rates associated with future energy

savings and the annual maintenance costs of replacement equipment. A typical assumption for

electrical service rates is that the rates will increase 3 percent per year. In many localities these

rates are not fixed and may periodically observe either reductions or modest increases over the

course of the performance contract. Similarly, the replacement costs for EPC-installed

equipment are generally correlated to the equipment’s useful life expectancy and scheduled

maintenance intervals. As a performance contract unfolds, multiple factors may cause this

equipment to be replaced more frequently than projected in the life expectancy developed by

the manufacturer. Due to actual versus projected energy savings and maintenance costs, the

PHA that has executed the EPC may retain smaller annual excess cash-flow amounts than those

initially projected.

To assist both the Department and the PHAs in evaluating the performance of EPCs, the

research team recommends that PIH should require annual y updating the spreadsheets’

projected costs and savings with realized quantities. Instituting such a policy would substantiate

the EPC program’s inherent benefits and would provide a valuable comparison of the

performance contract’s projected and actual savings.

29

Observation: Align the reporting periods of the annual M&V reports with annual UEL quantities.

HUD’s EPC guidance requires PHAs to submit annual M&V reports to HUD field offices for

reconciliation of estimated savings amounts. The submitted reports display the annual

consumption and cost quantities, typical y on a monthly basis, for the project’s affected

properties. The reporting periods for the respective reports are dependent on the completion

of the instal ed EPC improvements and may not coincide with HUD’s UEL reporting period of

July 1 to June 30.

While analyzing the submitted M&V reports, the research team consistently encountered

difficulties in verifying reported savings quantities relative to annual UEL quantities submitted

by the PHAs. During site visits, several PHAs noted this same difficulty.

The research team recommends requiring that the reporting periods for the submitted annual

M&V reports align with the annual cycle in which PHAs report UEL quantities (July 1 to June 30);

in this way the proposed EPC savings can be verified. PD&R is cognizant of the different

reporting periods for the varying EPC incentives (July 1  to June 30 for the FRB and RPU

incentives and January 1 to December 31 for the AOS incentive) but believes that a uniform

M&V reporting period will be beneficial to the EPC program.

Key benefits stemming from such an approach would include creating greater transparency in

the savings reported by the serving ESCo or third-party consultant while providing an additional

QC measure for the submitted M&V reports. For PHAs that receive the AOS incentive, the

research team does not believe that it wil  be too burdensome for the servicing ESCo or third-

party consultant to approximate or combine savings quantities from adjacent AOS reporting

periods.

30

Conclusion

Even with a small sample of PHAs, the pilot research described in this report provided

numerous observations about the relative strengths and weaknesses, regulatory intent, and

general effectiveness of the EPC program. The responses and viewpoints of the participating

public housing staff were central to the development of the study’s major observations.

Although participating PHAs were fairly diverse in size and location, they are in no way

representative of all PHAs. PD&R’s fol owup study of the EPC program will be a more

representative, nationwide effort intended to provide a more complete picture, definitive

understanding, and comprehensive evaluation of the EPC program.

31

References

Board of Trustees of the University of Illinois. 2015. Applied Research Demonstration To Test

Self-Managed Energy Performance Contracting for Small to Medium Size Public Housing

Authorities. Unpublished paper. Champaign, IL: Office of Sponsored Programs and Research

Administration. Unpublished paper.

ICF International and National Association of Energy Services Companies. 2007.  Introduction to

Energy Performance Contracting. Washington, DC: U.S. Environmental Protection Agency.

https://www.energystar.gov/ia/partners/spp_res/Introduction_to_Performance_Contracting.pdf.

National Renewable Energy Laboratory. 2002.  International Performance Measurement &

Verification Protocol: Concepts and Options for Determining Energy and Water Savings, Volume I.

Washington, DC: U.S. Department of Energy.  http://www.nrel.gov/docs/fy02osti/31505.pdf.

Oak Ridge National Laboratory. 1992.  Energy Performance Contracting for Public and Indian

Housing: A Guide for Participants. Washington, DC: U.S. Department of Energy; U.S.

Department of Housing and Urban Development.

http://www.huduser.gov/portal/Publications/pdf/energy.pdf.

U.S. Department of Housing and Urban Development (HUD). 2013.  Energy Performance

Contract Section 30 Reviews and Approvals Guidebook. Washington, DC: U.S. Department of

Housing and Urban Development.

http://portal.hud.gov/hudportal/documents/huddoc?id=Section30Guidebook.pdf.

———. 2011.  Guidance on Energy Performance Contracts. Washington, DC: U.S. Department of

Housing and Urban Development.

https://portal.hud.gov/hudportal/documents/huddoc?id=pih2011-36.pdf.

———. 2014.  Guidance on On-Site Utility Technologies and the Rate Reduction Incentive in

Public Housing. Washington, DC: U.S. Department of Housing and Urban Development.

http://portal.hud.gov/hudportal/documents/huddoc?id=pih2014-18.pdf.

32

Appendix A

Questionnaire Administered to Study Participants

Evaluation of Energy Performance Contracts

in Public Housing Authorities

Pre-Site Visit Questionnaire

INTRODUCTION

Welcome to the Evaluation of Energy Performance Contracts (EPCs) in Public Housing

Authorities (PHAs). This questionnaire is part of research being conducted by the U.S.

Department of Housing and Urban Development (HUD), Office of Policy Development and

Research (PD&R), which provides reliable and objective research to help the Department make

policy decisions.

HUD’s Office of Public and Indian Housing (PIH) reports that the Department has approved over

250 EPCs, totaling nearly $1 bil ion in investments since this type of financing technique began

in the 1980s1.  EPCs have been executed in al  10 HUD regions and in PHAs ranging from very small (fewer than 250 units) to very large (6,600 units or more). To date, however, there is

limited research on the effectiveness and value of these contracts.

PD&R’s current research is a preliminary examination and documentation of the savings,

benefits, and lessons learned from the EPC program at a small number of PHAs. In addition to

this questionnaire, PD&R intends to conduct site visits and in-person discussions with PHA staff,

examine installed utility improvements, and collect other EPC-related data.

This baseline study wil provide a better understanding of the costs incurred by participating

PHAs as they have implemented their PHAs. Furthermore, the study wil  be used to design a

more informed and comprehensive cost-benefit analysis proposed to begin in FY16.

These research efforts will be key to HUD’s long-term strategies, in part because the EPC

program is being affected by the advent of HUD’s Rental Assistance Demonstration2 (RAD), which removes projects from HUD’s public housing inventory and possibly from the EPC funding

stream.

1 U.S. Department of Housing and Urban Development, “EPC Database: Summary Statistics,”

http://portal.hud.gov/huddoc/2011EPCInventory.xls.

2 U.S. Department of Housing and Urban Development, “Rental Assistance Demonstration,”

http://portal.hud.gov/hudportal/HUD?src=/RAD.

33

Please submit (via email) your completed survey to: michael.j.early@hud.gov and

michael.d.blanford@hud.gov.

If you have questions regarding the questionnaire and/or the study, please contact Mr. Michael

J. Early, Research Engineer, Office of Policy Development and Research, HUD at: (202) 402-2566

or michael.j.early@hud.gov or Mr. Michael D. Blanford, Research Engineer, Office of Policy Development and Research, HUD at: (202) 402-5728 or michael.d.blanford@hud.gov.

BACKGROUND

EPCs are an innovative financing technique designed to provide customers with cost-effective

improvements—energy conservation measures (ECMs)—that are instal ed without up-front

expenditures. The costs of the improvements are borne by the performance contractor and

repaid using a portion of the cost savings resulting from the improvements. Due to the

complexities and risks associated with estimating the savings and acquiring the improvements,

EPCs are often performed by Energy Service Companies (ECSOs)—firms that provide a broad

range of energy services, including design, acquisition, installation, testing, operation, and

measurement and verification (M&V) of the instal ed improvements.

An ESCo’s business model is driven by the upfront cost of the instaled improvements and

estimated flow of savings that will accrue during the improvement’s payback period. As a

result, ESCos may have incentives not to favor projects with high initial costs and long payback

periods, but instead, to focus on ‘low hanging fruit’ (i.e., those of low cost, simpler complexity,

and shorter payback periods).

HUD’s EPC program provides PHAs with four incentives3 to fund energy conservation

improvements: Frozen Rolling Base Incentive (FRB), Add-On Subsidy Incentive (AOS), Resident-

Paid Utility Incentive (RPU), and Rate Reduction Incentive (RRI). The FRB, AOS, and RPU

incentives are designed to reduce PHA utility consumption relative to an established baseline,

while the RRI allows PHAs to collect resultant cost savings from actions aimed at reducing the

utility rate paid. Each of these incentives consists of unique requirements. But in total, they are

designed to provide PHAs cost savings that enable them to al ocate more of their operating

subsidy toward needed repairs and other eligible expenses.

GUIDE TO THE QUESTIONNAIRE

Your housing authority is being asked to complete this questionnaire because you have

expressed an interest and availability to participate and PD&R has selected your PHA for this

study.

3 U.S. Government of Publishing Office. Code of Federal Regulations. Title 24, Section 990.185. Utilities expense level: Incentives for energy conservation/rate reduction. 2011.

34

This questionnaire wil examine PHAs that have executed an EPC and examine: 1) the achieved

long-term utility savings; 2) how the resultant cost savings have been utilized; 3) the process,

time, and workload, from the PHA’s perspective, associated with applying to the EPC program,

and 4) the identified barriers to entering the EPC program.

There are a total of 4 sections to this questionnaire.

•  Section A asks about general EPC-related questions.

•  Section B asks about utility conservation and cost savings.

•  Section C asks about developing and managing an EPC.

•  Section D asks about resident-related matters pertaining to the executed EPC.

To respond to the questionnaire, the respondents wil need to have an understanding of the

EPC that has been executed at your housing authority.

Generally, respondents should provide information about their housing authority’s EPC and

viewpoints as they exist today. Some questions, however, will specifically ask for historical

information (e.g., a question may include a phrase such as “in hindsight”) or projected

information (e.g., a question may include a phrase such as “in the future”).

Please answer the questions by providing a response that comes closest to describing details

related to  your Housing Authority’s perspective on the executed EPC.

A response is required for all questions marked with an  asterisk (*).

If your EPC has performed multiple phases for the executed EPC, please provide your responses

relative to the information described in the Summary of Energy Performance Contracts (EPC)

table listed on page. 4.

PD&R will use responses to this questionnaire only for research purposes. No information

provided for this study wil  be used for compliance monitoring.

Following collection and analysis, aggregated results wil be published for al interested parties (independent of participation in the col ection) to use. The published data wil  consist of

aggregated results and NOT contain information that can be used to identify specific housing

authorities.

35

SUMMARY OF ENERGY PERFORMANCE CONTRACTS (EPCS)

For the purposes of this study, Departmental records indicate the folowing information related to your PHA’s executed EPC. Please review the information below to ensure that the PD&R Research Team has an accurate account of the executed EPC.

If any of this information is incorrect or missing, please select this box ☐ and provide the correct information further below.

Public Housing Authority

PHA Characteristics

Total Contract Costs:

HUD Incentives

(% of Project Costs)

M&V Risk

# of Affected Units

Financing Costs

Frozen Rol ing Base

Measured

# of Developments

(Projects / Sites)

M&V Costs

Add-On Subsidy

Stipulated

ESCo

Maintenance Costs

Resident Paid Utilities

Contract Term (yrs)

Replacement Costs

Rate Reduction

1st Year

Est. Savings

EPC Phase

Total Other Costs

Proj. Savings

(over EPC term)

Total Project Costs

In the area below, please describe any necessary corrections to the information listed above.

36

Section A: General EPC-Related Questions

*1. For the executed EPC, who performed the investment grade energy audit (IGEA)?

☐  ESCo that managed/managing the EPC

(SKIP TO Question 3)

☐  3rd-party Consultant

☐  Other

2. Please identify the entity that performed the IGEA.

*3. Is your PHA satisfied with the completed IGEA?

☐  Yes  (SKIP TO Question 6)

☐  No

4. If you were not satisfied with the completed IGEA, what are the reasons for your

dissatisfaction? (Check al  that apply)

☐  Audit didn’t correctly scope out the necessary work

☐  Audit didn’t reveal any information that wasn’t

already known

☐  Other

(GO TO Question 5)

5. If you selected “Other” for Question 4, please identify the other reasons for your

dissatisfaction with the IGEA.

*6. During the development process of the executed EPC, who developed the list of

recommended improvements? (Check al  that apply)

☐  ESCo that managed/managing the EPC

☐  Third-party Consultant

☐  PHA staff

☐  Other

(GO TO Question 7)

37

7. If you selected “Other” for Question 6, please identify the other entities that developed the

list of recommended improvements for your executed EPC?

*8. What factors were considered when developing the list of recommended improvements?

(Check al  that apply)

☐  Findings from the performed IGEA

☐  Capital Fund Program Five-Year Action Plan

☐  REAC Physical Inspection

☐  Routine inspections performed by PHA staff

☐  Concerns raised by residents

☐  Other

(GO TO Question 9)

9. If you selected “Other” for Question 8, please identify the other factors that were considered

when the recommended list of improvements was developed.

*10. Were all of the recommended improvements incorporated in to the Energy Service

Agreement (ESA) and instal ed under the executed EPC?

☐  Yes  (SKIP TO Question 13)

☐  No

11. If only a portion of the recommended improvements were instaled, why was that? (Check

al  that apply)

☐  Lack of funding

☐  Additional improvements were or will be performed

using other funds (e.g., Capital Improvement)

☐  Additional improvements were or will be deferred to a

subsequent period of time

☐  Executed EPC would not have been cost-effective if

additional improvements were installed

38

☐  Other

(GO TO Question 12)

12. If you selected “Other” for Question 11, please identify the other reasons for installing only

a portion of the recommended improvements.

*13. Was or wil the total cost of the executed EPC be within the Energy Service Agreement’s

(ESA) initial estimated budget?

☐  Yes  (SKIP TO Question 17)

☐  No

14. If cost overruns occurred, how much more was or wil the total cost of the executed EPC be

relative to the contract’s initial estimated budget?

☐  <25%

☐  26-50%

☐  51-75%

☐  >75%

15. What were the reasons for the cost overruns? (Check al that apply)

☐  Incorrect improvements were bought or instal ed

☐  Changes in the type or quantity of installed improvements

☐  Initial cost of improvements or services changed

☐  Other

(GO TO Question 16)

16. If you selected “Other” for Question 15, please identify the other reasons why cost overruns

occurred.

39

*17. Was the work associated with the construction phase of the executed EPC completed on

schedule?

☐  Yes  (SKIP TO Question 20)

☐  No

18. If schedule (construction phase) delays occurred, what were the reasons for the delays?

(Check al  that apply)

☐  Incorrect improvements were installed

☐  IGEA did not correctly scope out the work

☐  EPC work could not be performed until other improvements

(e.g., capital improvements) were completed

☐  Other

(GO TO Question 19)

19. If you selected “Other” for Question 18, please identify the other reasons why the schedule

(construction phase) delays occurred.

Currently, HUD guidance specifies that the term of an EPC, including any applicable extensions,

can be no more than 20 years.  Questions 20-23 ask questions related to this limit.

*20. If permissible under HUD guidelines, would your PHA consider completing another phase

of the executed EPC?

☐  Yes

☐  No

*21. If HUD extended the maximum term of an EPC beyond 20 years, would your PHA consider

adding another phase to your executed EPC?

☐  Yes

☐  No

*22. In hindsight, if the maximum term of an EPC was extended beyond 20 years, would your

PHA have instal ed improvements that would have been more cost effective over the term of

the EPC (i.e., provided greater long-term savings)?

40

☐  Yes

☐  No

*23. Does your PHA believe that extending the maximum term of an EPC beyond 20 years

would encourage more PHAs to participate in the EPC program?

☐  Yes

☐  No

☐  Don’t Know

*24 Is your PHA satisfied with the EPC incentives used?

☐  Yes

☐  No

*25. Does your PHA wish that other EPC incentives were used?

☐  Yes

☐  No  (SKIP TO Question 27)

26. Excluding the incentives used in your executed EPC, what additional incentives would your

PHA have used? (Check al  that apply)

☐  Frozen-Rolling Base

☐  Add-On Subsidy

☐  Resident Paid Utility

☐  Rate Reduction Incentive

*27. Did your PHA leverage funds other than EPC funds to instal additional improvements in

conjunction with the executed EPC?

☐  Yes

☐  No  (SKIP TO Question 30)

28. If other funds were leveraged, what type of funds were they? (Check al that apply)

☐  Capital Funds / Capital Reserves

☐  Direct Purchase

☐  Third-Party Leasing

☐  Power Purchase Agreement (PPA)

☐  Rebate Program

☐  Grant Program

☐  Bond Program

☐  Other

(GO TO Question 29)

41

29. If you selected “Other” for Question 28, please identify the other leveraged funds.

Section B: Energy Conservation and Cost Savings

*30. How does your PHA monitor the performance of your executed EPC? (Check al that apply)

☐  Annual ESCo provided measurement and

verification (M&V) reports

☐  PHA-based monitoring

☐  Independent third-party monitoring

☐  Other

(GO TO Question 31)

31. If you selected “Other” for Question 30, please identify the other approaches toward

monitoring your executed EPC.

32. If performance monitoring occurs in addition to the annual ESCo provided M&V reports,

how frequently does this monitoring occur?

☐  Monthly

☐  Quarterly

☐  Every 6 months

☐  Randomly

*33. What is monitored and reported during the M&V process? (Check al that apply)

☐  Utility Consumption

☐  Utility Expenditures

☐  Equipment Life Expectancy

42

☐  Operation and Maintenance (O&M) Practices

☐  Other

(GO TO Question 34)

34. If you selected “Other” for Question 33, please identify any other elements that are

monitored during the M&V process.

*35. Since the completion of the construction phase for your executed EPC, how are the actual

utility savings compared to the initial estimated savings?

☐  Performing as Projected

(SKIP TO Question 38)

☐  Under Performing

☐  Over Performing

(SKIP TO Question 37)

36. Please explain, to the best of your knowledge, why the improvements are  Under

Performing.

SKIP TO Question 38

37. Please explain, to the best of your knowledge, why the improvements are  Over Performing.

*38. After paying the annual debt services on your executed EPC, does your PHA realize any

excess savings?

43

☐  Yes

☐  No

(SKIP TO Question 40)

39. How has your PHA used the achieved annual cost savings? (Check al that apply)

☐  Instal ed additional improvements by expanding the current EPC

☐  Accelerated debt service on the executed EPC

☐  Paid eligible operating expenses

*40. If HUD permitted PHAs to apply achieved utility savings from EPCs toward capital

improvements, would this be of benefit to your PHA?

☐  Yes

☐  No

HUD guidance on the payment of EPC debt specifies that at least 75 percent of cost savings

must be paid toward annual EPC debt services and project costs.  Questions 41-43 ask questions

related to this requirement.

*41. Would your PHA have undertaken different or additional improvements if it was not

required to pay 75 percent of the cost savings toward EPC debt services and project costs?

☐  Yes

☐  No

*42. Would lowering the amount (percentage) of cost savings that must be paid toward the

debt service of an executed EPC be of benefit to your PHA?

☐  Yes

☐  No

*43. Similarly, do you think that lowering this amount (percentage) would encourage more

PHAs to participate in the EPC program?

☐  Yes

☐  No

☐  Don’t Know

Section C: Developing and Managing an EPC

*44. What selection factors did your PHA use to select the ESCo to develop and manage your

executed EPC? (Check al  that apply)

☐  Performed prior work for your PHA

44

☐  Performed prior work for your PHA

☐  Referred by another PHA

☐  Well known / established company

☐  PHA does not have the technical capacity to develop

and manage an EPC

☐  N/A, the executed EPC is self-managed by our PHA

(SKIP Question 46)

☐  Other

(GO TO Question 45)

45. If you selected “Other” for Question 44, please identify the other factors that were used in

choosing the selected ESCo.

SKIP TO Question 51

46. What were your reasons for self-managing the executed EPC? (Check al that apply)

☐  PHA staff is very knowledgeable of the known

problems

☐  Prior experience with ESCos has il ustrated that

they are not of benefit

☐  Executed EPC consisted of improvements that do

not require advanced technical skill

☐  PHA possess the necessary technical capacity to

develop and manage an EPC

☐  Other

(GO TO Question 47)

47. If you selected “Other” for Question 46, please identify the other reasons why your PHA

chose to self-manage the executed EPC.

48. Was or is self-managing the executed EPC a burdensome process?

☐  Yes

☐  No

45

49. Were there any other issues related to self-managing the executed EPC that were

particularly a positive or negative experience?

☐  Yes

☐  No  (SKIP TO Question 51)

50. Please describe your positive or negative experiences related to self-managing your EPC

(please be sure to specify whether you view each experience as positive or negative).

*51. If a PHA chose to self-manage an executed EPC, do you believe that the PHA should be

compensated for this effort?

☐  Yes

☐  No  (SKIP TO Question 54)

52. Please specify your recommended approach toward compensating a PHA for self-managing

an executed EPC.

☐  Percentage ___ % (write-in) of the total cost of the

executed EPC

☐  Percentage ___ % (write-in) of the total annual

federal subsidy that the PHA receives from HUD

☐  Other

(GO TO Question 53)

53. If you selected “Other” for Question 52, please identify the other recommended

approaches for compensating a PHA for self-managing an EPC.

*54. If your PHA were to add an additional phase to your existing EPC or execute a new EPC in

the future, would your PHA hire an ESCo or self-manage the contract?

46

☐  Hire an ESCo

☐  Self-manage

In order for a PHA’s EPC to be approved, HUD must have determined that the contract’s

projected cost savings will reasonably cover the project’s costs.  The application process for

applying to the EPC program requires PHAs to complete a Completeness Review Checklist and

Technical Review Checklist.  Reponses to these two checklists provide necessary information that

is required for HUD to review an Energy Service Agreement (ESA).  Questions 20-23 ask

questions related to the benefit of executing and effort associated with applying to the EPC

program.

*55. Overall, do you believe that your executed EPC was of an actual benefit to your PHA?

☐  Yes  (SKIP TO Question 58)

☐  No

56. Please specify the reasons why the executed EPC was not of benefit to your PHA. (Check all

that apply)

☐  Additional EPC debt made it more difficult to

manage our PHA

☐  After paying annual debt services, our PHA did or

does not realize any excess savings.

The realized cost savings are insignificant or

minimal relative to the time and effort that was

☐  put in to applying to and managing the executed

EPC.

☐  Other

(GO TO Question 57)

57. If you selected “Other” for Question 56, please specify the reasons why the EPC was not of

benefit to your PHA.

*58. In terms of the EPC application process, did your PHA keep record of the workload (i.e.,

labor hours) associated with applying to the program?

☐  Yes

☐  No  (SKIP TO Question 60)

47

59. Please specify the aggregate amount of time (write-in) or range of time that your PHA staff

dedicated to the executed EPC during the application process?

☐  ______ hours

☐  <160 hours (<4 weeks)

☐  160 - 320 hours (4-8 weeks)

☐  320 - 640 (8 - 16 weeks)

☐  >640 hours (>16 weeks)

*60. Do you think the rigor of the EPC application process is necessary for HUD to ensure that

the project is cost effective?

☐  Yes

☐  No

*61. In hindsight, has it or would it have been, of benefit to your PHA to hire a staff member

whose sole responsibility was to develop, apply to, and manage the executed EPC?

☐  Yes

☐  No

*62. In the absence of the executed EPC, would your PHA have made the instal ed

improvements anyway?

☐  Yes

☐  No

(GO TO Question 64)

☐  Only a portion

63. Would your PHA have expected to achieve a similar amount of savings?

☐  Yes

☐  No

*64. In terms of installing additional utility improvements in the future, has the executed EPC

enabled such work to be performed or hindered it?

☐  Enabled

☐  Hindered

*65. Please describe the ways in which the executed EPC has enabled or hindered future

improvements.

48

*66. Has your PHA staff observed any specific issues with your executed EPC that you would

advise other PHAs to avoid?

☐  Yes

☐  No

(SKIP TO Question 68)

67. Please describe the issues that your PHA staff has observed.

*68. Does your PHA have any ‘lessons learned’ relating to the executed EPC?

☐  Yes

☐  No

(SKIP TO Question 70)

69. Please describe the ‘lessons learned.’

*70. Does the executed EPC have any specific clauses that were of benefit to your PHA?

☐  Yes

☐  No

(SKIP TO Question 72)

71. Please describe the clauses and their benefit.

49

*72. Does the executed EPC have any specific clauses that were harmful or financially

burdensome to your PHA?

☐  Yes

☐  No

(SKIP TO Question 74)

73. Please describe the clauses that were harmful or financially burdensome.

*74. Is your PHA considering a conversion under the Rental Assistance Demonstration (RAD)

program that involves EPC units?

☐  Yes

☐  No

(SKIP TO Question 77)

75. From a utility performance and management perspective, does your PHA believe that the

RAD conversion wil  be of benefit to your PHA?

☐  Yes

☐  No

☐  Don’t Know

(SKIP TO Question 77)

76. Please describe the reasons as to why the RAD conversion with EPC units wil or wil not be

beneficial to your PHA.

50

Section D: Resident-Related Matters

*77. Were residents affected by the EPC informed of it (i.e., performance contract) significantly

in advance of the contract’s construction phase?

☐  Yes

☐  No

*78. Did the residents voice any concern about the improvements that were made under

executed EPC?

☐  Yes

☐  No

(SKIP TO Question 81)

79. What concerns did the residents raise?

80. Did your PHA have the necessary resources (e.g., money, staff time) to address residents’

concerns?

☐  Yes

☐  No

81. To encourage greater utility conservation, were any resident outreach or training programs

provided?

☐  Yes

☐  No

(SKIP TO Question 90)

82. Who provided the outreach or training programs? (Check al that apply)

☐  PHA

☐  ESCo

☐  Third-party Consultant

☐  Other

(GO TO Question 83)

83. If you selected “Other” for Question 82, please identify the other entities that provided the

outreach or training programs.

51

84. How were the affected residents notified about the outreach or training programs?

☐  Posting of flyers

☐  PHA newsletters

☐  Resident meetings

☐  Other

(GO TO Question 85)

85. If you selected “Other” for Question 84, please describe the other methods that were used

to notify the affected residents about the provided outreach or training programs?

86. What percentage of the affected residents took part in the provided outreach or training

programs?

☐  <10%

☐  11-25%

☐  26-50%

☐  51-75%

☐  >75%

☐  Don’t Know

87. Did the outreach or training programs assist the affected residents in their understanding of

the importance of utility conservation?

☐  Yes

☐  No

☐  Don’t Know

88. Since providing the outreach or training programs, has your PHA observed any changes in

resident utility usage?

52

☐  Yes

☐  No

☐  Don’t Know

89. Has your PHA found that the outreach or training programs resulted in supplemental

savings relative to the improvements instal ed under the executed EPC?

☐  Yes

☐  No

☐  Don’t Know

90. Would your PHA have an interest in participating in future HUD research about influencing

resident behavior for utility conservation?

☐  Yes

☐  No

Thank you for completing this questionnaire! Your input is valuable to us, and we are grateful

that you have shared your time and expertise.

53

Appendix B

Aggregate and Open-Ended Questionnaire Responses

Section A: General EPC-Related Questions

NOTE: For the purpose of confidentiality, the names of the respondents and their responses

have been modified so that the information below cannot be used to identify specific housing

authorities.

*1. For the executed EPC, who performed the investment grade energy audit (IGEA)?

Response

% (N)

ESCo that managed/managing the EPC

66.7 (6)

3rd-party Consultant

22.2 (2)

Other

11.1 (1)

Total

100.0 (9)

2. Please identify the entity that performed the IGEA.

Response

(N)

Entity identified (see below)

(3)

Public Housing Authority

Response

PHA 1

Company A

PHA 2

Company B

PHA 3

We had multiple audits.  Company C & Company

D.

*3. Is your PHA satisfied with the completed IGEA?

Response

% (N)

Yes

88.9 (8)

No

11.1 (1)

Total

100.0 (9)

4. If you were not satisfied with the completed IGEA, what are the reasons for your

dissatisfaction? (Check al  that apply)

Response

% (N)

Audit didn’t correctly scope out the necessary work

0 (0)

Audit didn’t reveal any information that wasn’t already known

0 (0)

Other

100.0 (1)

Total

100.0 (1)

Note: Percentages may not equal 100.0 because multiple responses could be selected.

54

5. If you selected “Other” for Question 4, please identify the other reasons for your

dissatisfaction with the IGEA.

Response

(N)

Other reasons for dissatisfaction with IGEA (see below)

(1)

Public Housing Authority

Response

The initial effort to start the instal ation, the change in

PHA 4

equipment proposed, and the resulting cost to ESCo

vs. charges to PHA 4.

*6. During the development process of the executed EPC, who developed the list of

recommended improvements? (Check al  that apply)

Response

% (N)

ESCo that managed/managing the EPC

77.8 (7)

Third-party Consultant

33.3 (3)

PHA staff

100.0 (9)

Other

0.0 (0)

Note: Percentages may not equal 100.0 because multiple responses could be selected.

Response

(N)

Additional comments (see below)

(1)

Public Housing Authority

Response

PHA 1

Third-party Consultant - selected high return ECMs

PHA staff - selected high value ECMs

7. If you selected “Other” for Question 6, please identify the other entities that developed the

list of recommended improvements for your executed EPC?

Response

(N)

Other reasons for other entities that developed the list of

recommended improvements

(0)

*8. What factors were considered when developing the list of recommended improvements?

(Check al  that apply)

Response

% (N)

Findings from the performed IGEA

100.0 (9)

Capital Fund Program Five-Year Action Plan

100.0 (9)

REAC Physical Inspection

77.8 (7)

Routine inspections performed by PHA staff

77.8 (7)

Concerns raised by residents

44.4 (4)

Other

11.1 (1)

Note: Percentages may not equal 100.0 because multiple responses could be selected.

55

9. If you selected “Other” for Question 8, please identify the other factors that were considered

when the recommended list of improvements was developed.

Response

(N)

Other factors that were considered when the recommended

improvements were developed (see below)

(1)

Public Housing Authority

Response

PHA 1

Utility Conservation

*10. Were all of the recommended improvements incorporated in to the Energy Service

Agreement (ESA) and instal ed under the executed EPC?

Response  % (N)

Yes

14.3 (1)

No

85.7 (6)

Total

100.0 (7)

Response

(N)

Additional comments (see below)

(1)

Public Housing Authority

Response

PHA 1

N/A.  No ESA was in place

11. If only a portion of the recommended improvements were instaled, why was that? (Check

al  that apply)

Response

% (N)

Lack of funding

33.3 (3)

Additional improvements were or wil  be performed using

other funds (e.g., Capital Improvement)

22.2 (2)

Additional improvements were or will be deferred to a

subsequent period of time

22.2 (2)

Executed EPC would not have been cost-effective if

additional improvements were installed

66.7 (6)

Other

11.1 (1)

Note: Percentages may not equal 100.0 because multiple responses could be selected.

12. If you selected “Other” for Question 11, please identify the other reasons for installing only

a portion of the recommended improvements.

Response

(N)

Other reasons for instal ing only a portion of the

recommended improvements (see below)

(1)

56

Public Housing Authority

Response

The then Executive Director made decisions alone

PHA 5

without input of others including staff and Board.  This

was a big mistake.

*13. Was or wil the total cost of the executed EPC be within the Energy Service Agreement’s

(ESA) initial estimated budget?

Response

% (N)

Yes

100.0 (8)

No

0.0 (0)

Total

100.0 (8)

Response

(N)

Additional comments (see below)

(1)

Public Housing Authority

Response

PHA 1

N/A.  No ESA - but project was under budget.

14. If cost overruns occurred, how much more was or wil the total cost of the executed EPC be

relative to the contract’s initial estimated budget?

Response

% (N)

<25%

11.1 (1)

26-50%

0.0 (0)

51-75%

0.0 (0)

>75%

0.0 (0)

Total

100.0 (1)

15. What were the reasons for the cost overruns? (Check al that apply)

Response

% (N)

Incorrect improvements were bought or instal ed

0.0 (0)

Changes in the type or quantity of installed improvements

0.0 (0)

Initial cost of improvements or services changed

0.0 (0)

Other

11.1 (1)

Note: Percentages may not equal 100.0 because multiple responses could be selected.

16. If you selected “Other” for Question 15, please identify the other reasons why cost overruns

occurred.

Response

(N)

Other reasons why cost overruns occurred (see below)

(1)

Public Housing Authority

Response

57

A contingency was incorporated in the agreement to

PHA 6

address issues with unknowns (i.e., rotted floors needing

replacement prior to instal ation of toilets, problems

with instal ation of HVAC equipment, etc.)

*17. Was the work associated with the construction phase of the executed EPC completed on

schedule?

Response

% (N)

Yes

66.7 (6)

No

33.3 (3)

Total

100.0 (9)

18. If schedule (construction phase) delays occurred, what were the reasons for the delays?

(Check al  that apply)

Response

% (N)

Incorrect improvements were installed

11.1 (1)

IGEA did not correctly scope out the work

11.1 (1)

EPC work could not be performed until other improvements

(e.g., capital improvements) were completed

0.0 (0)

Other

22.2 (2)

Note: Percentages may not equal 100.0 because multiple responses could be selected.

19. If you selected “Other” for Question 18, please identify the other reasons why the schedule

(construction phase) delays occurred.

Response

(N)

Other reasons why schedule (construction phase) overruns

occurred (see below)

(2)

Public Housing Authority

Response

The project was delayed due to the planting and

establishment of draught tolerant/water efficient

grasses, an ECM.  During the construction period there

PHA 1

was a drought and the water company placed water

restricting on landscape irrigation.  Therefore the

planting of water efficient grasses had to be postponed

until drought restrictions were lifted.

PHA 4

…related to the manner in which instal ation start was

attempted/delayed.

Currently, HUD guidance specifies that the term of an EPC, including any applicable extensions,

can be no more than 20 years.  Questions 20-23 ask questions related to this limit.

58

*20. If permissible under HUD guidelines, would your PHA consider completing another phase

of the executed EPC?

Response

% (N)

Yes

77.8 (7)

No

22.2 (2)

Total

100.0 (9)

Response

(N)

Additional comments (see below)

(1)

Public Housing Authority

Response

PHA 4

Not necessary.

*21. If HUD extended the maximum term of an EPC beyond 20 years, would your PHA consider

adding another phase to your executed EPC?

Response  % (N)

Yes

66.7 (6)

No

33.3 (3)

Total

100.0 (9)

Response

(N)

Additional comments (see below)

(1)

Public Housing Authority

Response

PHA 4

Not necessary.

*22. In hindsight, if the maximum term of an EPC was extended beyond 20 years, would your

PHA have instal ed improvements that would have been more cost effective over the term of

the EPC (i.e., provided greater long-term savings)?

Response  % (N)

Yes

77.8 (7)

No

22.2 (2)

Total

100.0 (9)

Response

(N)

Additional comments (see below)

(2)

Public Housing Authority

Response

PHA 1

Potentially

PHA 2

Solar

59

*23. Does your PHA believe that extending the maximum term of an EPC beyond 20 years

would encourage more PHAs to participate in the EPC program?

Response

% (N)

Yes

62.5 (5)

No

12.5 (1)

Don’t Know

25.0 (2)

Total

100.0 (8)

Response

(N)

Additional comments (see below)

(1)

Public Housing Authority

Response

PHA 1

But I think it would drive new/additional phases of

existing EPCs

*24 Is your PHA satisfied with the EPC incentives used?

Response  % (N)

Yes

100.0 (9)

No

0.0 (0)

Total

100.0 (9)

*25. Does your PHA wish that other EPC incentives were used?

Response  % (N)

Yes

25.0 (2)

No

75.0 (6)

Total

100.0 (8)

26. Excluding the incentives used in your executed EPC, what additional incentives would your

PHA have used? (Check al  that apply)

Response

% (N)

Frozen-Rolling Base

11.1 (1)

Add-On Subsidy

11.1 (1)

Resident Paid Utility

11.1 (1)

Rate Reduction Incentive

33.3 (3)

Note: Percentages may not equal 100.0 because multiple responses could be selected.

*27. Did your PHA leverage funds other than EPC funds to instal additional improvements in

conjunction with the executed EPC?

Response

% (N)

Yes

62.5 (5)

60

No

37.5 (3)

Total

100.0 (8)

28. If other funds were leveraged, what type of funds were they? (Check al that apply)

Response

% (N)

Capital Funds / Capital Reserves

44.4 (4)

Direct Purchase

0.0 (0)

Third-Party Leasing

22.2 (2)

Power Purchase Agreement (PPA)

0.0 (0)

Rebate Program

44.4 (4)

Grant Program

11.1 (1)

Bond Program

0.0 (0)

Other

11.1 (0)

Note: Percentages may not equal 100.0 because multiple responses could be selected.

29. If you selected “Other” for Question 28, please identify the other leveraged funds.

Response

(N)

Other leveraged funds (see below)

(1)

Public Housing Authority

Response

PHA 7

ARRA Funds

Section B: Energy Conservation and Cost Savings

*30. How does your PHA monitor the performance of your executed EPC? (Check al that apply)

Response

% (N)

Annual ESCo provided measurement and verification (M&V) reports

77.8 (7)

PHA-based monitoring

66.7 (6)

Independent third-party monitoring

33.3 (3)

Other

11.1 (1)

Note: Percentages may not equal 100.0 because multiple responses could be selected.

31. If you selected “Other” for Question 30, please identify the other approaches toward

monitoring your executed EPC.

Response

(N)

Other approaches toward monitoring (see below)

(1)

Public Housing Authority

Response

Annual third-party M&V report issued.  Also, the EPC

PHA 1

funded an Energy Manager position which provides

continual oversight over the EPC, utility consumption,

61

and other energy and water conservation measures.

32. If performance monitoring occurs in addition to the annual ESCo provided M&V reports,

how frequently does this monitoring occur?

Response

% (N)

Monthly

33.3 (3)

Quarterly

11.1 (1)

Every 6 months

0.0 (0)

Randomly

33.3 (3)

*33. What is monitored and reported during the M&V process? (Check al that apply)

Response

% (N)

Utility Consumption

88.9 (8)

Utility Expenditures

88.9 (8)

Equipment Life Expectancy

33.3 (3)

Operation and Maintenance (O&M) Practices

77.8 (7)

Other

22.2 (2)

Note: Percentages may not equal 100.0 because multiple responses could be selected.

Response

(N)

Additional comments (see below)

(1)

Public Housing Authority

Response

PHA 6

Equipment Life Expectancy -- completed at

the energy audit phase

34. If you selected “Other” for Question 33, please identify any other elements that are

monitored during the M&V process.

Response

(N)

Other elements that were monitored (see below)

(2)

Public Housing Authority

Response

PHA 1

Resident engagement programs focused on

energy and water conservation

Physical Inspections are conducted to ensure

PHA 2

EMC are stil  in place (aerators!) and operating

according to specs, especially pressurized toilets.

*35. Since the completion of the construction phase for your executed EPC, how are the actual

utility savings compared to the initial estimated savings?

Response

% (N)

62

Performing as Projected

77.8 (7)

Under Performing

11.1 (1)

Over Performing

11.1 (1)

Total

100.0 (9)

Response

(N)

Additional comments (see below)

(1)

Public Housing Authority

Response

PHA 8

Overall performance is to spec however

individual ECMs are under/over performing

36. Please explain, to the best of your knowledge, why the improvements are  Under

Performing.

Response

(N)

Why improvements are Under Performing (see below)

(1)

Public Housing Authority

Response

Under performing due to not receiving ful

subsidy from HUD. Resident interference.

PHA 6

Equipment control issues. Contract design

establishes that saving at the beginning of

contract is to be small and increase

throughout term of contract.

SKIP TO Question 38

37. Please explain, to the best of your knowledge, why the improvements are  Over Performing.

Response

(N)

Why improvements are Over Performing (see below)

(1)

Public Housing Authority

Response

PHA 1

1) Aggressive O&M procedures and 2) Resident

engagement program

*38. After paying the annual debt services on your executed EPC, does your PHA realize any

excess savings?

Response

% (N)

Yes

55.6 (5)

No

44.4 (4)

Total

100.0 (9)

63

Response

(N)

Additional comments (see below)

(1)

Public Housing Authority

Response

PHA 6

Not yet due to subsidy issues and contract

design

39. How has your PHA used the achieved annual cost savings? (Check al that apply)

Response

% (N)

Instal ed additional improvements by expanding the current EPC

33.3 (3)

Accelerated debt service on the executed EPC

11.1 (1)

Paid eligible operating expenses

33.3 (3)

Note: Percentages may not equal 100.0 because multiple responses could be selected.

Response

(N)

Additional comments (see below)

(2)

Public Housing Authority

Response

Other - annual savings which exceed

PHA 1

debt service fund EPC program costs

including M&V activities and

replacement equipment reserves

PHA 5

Into a subsequent phase

*40. If HUD permitted PHAs to apply achieved utility savings from EPCs toward capital

improvements, would this be of benefit to your PHA?

Response

% (N)

Yes

85.7 (6)

No

14.3 (1)

Total

100.0 (7)

Response

(N)

Additional comments (see below)

(2)

Public Housing Authority

Response

PHA 1

Although energy related capital improvements are

best - savings offset costs

PHA 3

Not sure

HUD guidance on the payment of EPC debt specifies that at least 75 percent of cost savings

must be paid toward annual EPC debt services and project costs.  Questions 41-43 ask questions

related to this requirement.

64

*41. Would your PHA have undertaken different or additional improvements if it was not

required to pay 75 percent of the cost savings toward EPC debt services and project costs?

Response

% (N)

Yes

33.3 (3)

No

66.7 (6)

Total

100.0 (9)

Response

(N)

Additional comments (see below)

(1)

Public Housing Authority

Response

PHA 1

Potentially

*42. Would lowering the amount (percentage) of cost savings that must be paid toward the

debt service of an executed EPC be of benefit to your PHA?

Response

% (N)

Yes

75.0 (6)

No

25.0 (2)

Total

100.0 (8)

*43. Similarly, do you think that lowering this amount (percentage) would encourage more

PHAs to participate in the EPC program?

Response

% (N)

Yes

71.4 (5)

No

0.0 (0)

Don’t Know

28.6 (2)

Total

100.0 (7)

Section C: Developing and Managing an EPC

*44. What selection factors did your PHA use to select the ESCo to develop and manage your

executed EPC? (Check al  that apply)

Response

% (N)

Performed prior work for your PHA

11.1 (1)

Referred by another PHA

33.3 (3)

Well known / established company

44.4 (4)

PHA does not have the technical capacity to develop and manage an EPC  33.3 (3)

N/A, the executed EPC is self-managed by our PHA

22.2 (2)

Other

44.4 (4)

Note: Percentages may not equal 100.0 because multiple responses could be selected.

65

45. If you selected “Other” for Question 44, please identify the other factors that were used in

choosing the selected ESCo.

Response

(N)

Other factors used in choosing the selected ESCo (see below)

(4)

Public Housing Authority

Response

PHA 9

Request for proposals.  Evaluation

committee.

PHA 3

Firm selected through RFQ process.  With

other authorities.

The selection process was as fol ows:

The Housing Authority was contacted by

an ESCo to determine if an EPC was

possible, after a brief investigation it was

determined that an EPC is possible.  A

Request for Proposal was prepared and

PHA 6

advertised and seven responses were

received.  Those seven proposals were

evaluated and scored using a set of

criteria which includes the items checked

in #44 above.  The top three were

interviewed and following the interview

process the top three were scored again.

The top scoring firm was then selected.

PHA 8

Stated they were primarily interested in

small PHAs.

SKIP TO Question 51

46. What were your reasons for self-managing the executed EPC? (Check al that apply)

Response

% (N)

PHA staff is very knowledgeable of the known problems

11.1 (1)

Prior experience with ESCos has il ustrated that they are not of benefit

11.1 (1)

Executed EPC consisted of improvements that do not require advanced technical skil   11.1 (1)

PHA possess the necessary technical capacity to develop and manage an EPC

11.1 (1)

Other

22.2 (2)

Note: Percentages may not equal 100.0 because multiple responses could be selected.

47. If you selected “Other” for Question 46, please identify the other reasons why your PHA

chose to self-manage the executed EPC.

Response

(N)

66

Other factors why your PHA choose to self-manage the executed

EPC (see below)

(2)

Public Housing Authority

Response

Prior experience with ESCos has illustrated that

they are not of benefit too expensive

1) Significantly lower project soft costs which

allowed for a greater investment in capital

improvements throughout the portfolio.

PHA 1

2) The self-managed EPC allowed for a greater

involvement with Maintenance staff and

residents which ultimately makes a stronger

project with more durable savings.

3) Project scope can be more customized to

meet the PHA's needs.

Reduction in Admin Cost of project.  EPC Phase

I was successful and had a much more complex

PHA 2

scope.  In-house staff was qualified to deliver

the subsequent phase’s scope so no need to

incur substantial ESCo fees.

48. Was or is self-managing the executed EPC a burdensome process?

Response  % (N)

Yes

100.0 (1)

No

0.0 (0)

Total

100.0 (1)

Response

(N)

Additional comments (see below)

(1)

Public Housing Authority

Response

PHA 1

Developing a self-managed EPC takes a significant amount

of staff time, however it is well worth the investment.

49. Were there any other issues related to self-managing the executed EPC that were

particularly a positive or negative experience?

Response  % (N)

Yes

100.0 (2)

No

0.0 (0)

Total

100.0 (2)

50. Please describe your positive or negative experiences related to self-managing your EPC

(please be sure to specify whether you view each experience as positive or negative).

67

Response

(N)

Positive or negative experiences related to self-managing an EPC (see below)

(2)

Public Housing Authority

Response

Positive - Explained in question #47.

PHA 1

Negative -It does take a large amount of staff time,

however the staff involvement is the exact reason the

benefits in question #47 are achieved.

Positive - Reduction in soft costs was substantial down

from more than 55% of hard cost for the initial phase to

PHA 2

projected 29% in the subsequent phase.  Negative - HUD

Review took a very long time in securing financing at a

good rate was chal enging without ESCo partner.

*51. If a PHA chose to self-manage an executed EPC, do you believe that the PHA should be

compensated for this effort?

Response

% (N)

Yes

66.7 (6)

No

33.3 (3)

Total

100.0 (9)

Response

(N)

Additional comments (see below)

(1)

Public Housing Authority

Response

PHA 1

PHA 1 was

compensated

52. Please specify your recommended approach toward compensating a PHA for self-managing

an executed EPC.

Response

% (N)

Percentage ___ % (write-in) of the total cost of the executed EPC

44.4 (4)

Percentage ___ % (write-in) of the total annual federal subsidy that the PHA

receives from HUD

0.0 (0)

Other

11.1 (1)

Total

100.0 (5)

Response

(N)

Additional comments (see below)

(4)

Public Housing Authority

Response

15 - 10% of the total cost

PHA 1

Similar to capital fund projects

and/or development fees from

68

self-development activities

PHA 4

10% of the total cost

PHA 5

18% of the total cost

PHA 7

10% of the total cost

53. If you selected “Other” for Question 52, please identify the other recommended

approaches for compensating a PHA for self-managing an EPC.

Response

(N)

Other recommended approaches for compensating a PHA self-managing an EPC

(see below)

(1)

Public Housing Authority

Response

PHA 2

15% of hard cost fee to the COCC.

*54. If your PHA were to add an additional phase to your existing EPC or execute a new EPC in

the future, would your PHA hire an ESCo or self-manage the contract?

Response

% (N)

Hire an ESCo

62.5 (5)

Self-manage

37.5 (3)

Total

100.0 (8)

In order for a PHA’s EPC to be approved, HUD must have determined that the contract’s projected

cost savings will reasonably cover the project’s costs.  The application process for applying to the EPC program requires PHAs to complete a Completeness Review Checklist and Technical Review

Checklist.  Reponses to these two checklists provide necessary information that is required for

HUD to review an Energy Service Agreement (ESA).  Questions 20-23 ask questions related to the

benefit of executing and effort associated with applying to the EPC program.

*55. Overall, do you believe that your executed EPC was of an actual benefit to your PHA?

Response

% (N)

Yes

88.9 (8)

No

11.1 (1)

Total

100.0 (9)

56. Please specify the reasons why the executed EPC was not of benefit to your PHA. (Check all

that apply)

Response

% (N)

Additional EPC debt made it more difficult to manage our PHA

0.0 (0)

After paying annual debt services, our PHA did or does not realize any

excess savings.

0.0 (0)

The realized cost savings are insignificant or minimal relative to the time

11.1 (1)

69

and effort that was put in to applying to and managing the executed EPC.

Other

0.0 (0)

Note: Percentages may not equal 100.0 because multiple responses could be selected.

57. If you selected “Other” for Question 56, please specify the reasons why the EPC was not of

benefit to your PHA.

Response

(N)

Other reasons why the EPC was not of benefit to your PHA

(0)

*58. In terms of the EPC application process, did your PHA keep record of the workload (i.e.,

labor hours) associated with applying to the program?

Response

% (N)

Yes

11.1 (1)

No

88.9 (8)

Total

100.0 (9)

59. Please specify the aggregate amount of time (write-in) or range of time that your PHA staff

dedicated to the executed EPC during the application process?

Response

% (N)

______ hours

0.0 (0)

<160 hours (<4 weeks)

0.0 (0)

160 - 320 hours (4-8 weeks)

0.0 (0)

320 - 640 (8 - 16 weeks)

100.0 (1)

>640 hours (>16 weeks)

0.0 (0)

Total

100.0 (1)

*60. Do you think the rigor of the EPC application process is necessary for HUD to ensure that

the project is cost effective?

Response  % (N)

Yes

77.8 (7)

No

22.2 (2)

Total

100.0 (9)

Response

(N)

Additional comments (see below)

(1)

Public Housing Authority

Response

HUD approval for our

PHA 7

subsequent phase took

9 months.

70

*61. In hindsight, has it or would it have been, of benefit to your PHA to hire a staff member

whose sole responsibility was to develop, apply to, and manage the executed EPC?

Response  % (N)

Yes

44.4 (4)

No

55.5 (5)

Total

100.0 (9)

Response

(N)

Additional comments (see below)

(3)

Public Housing Authority

Response

PHA 1

PHA 1 has such staff member which

was funded through the EPC

PHA 5

Too Costly

PHA 8

If funding was available

*62. In the absence of the executed EPC, would your PHA have made the instal ed

improvements anyway?

Response

% (N)

Yes

0.0 (0)

No

11.1 (1)

Only a portion

88.9 (8)

Total

100.0 (9)

Response

(N)

Additional comments (see below)

(1)

Public Housing Authority

Response

PHA 7

Would not have done marginal y

cost effective measures.

63. Would your PHA have expected to achieve a similar amount of savings?

Response  % (N)

Yes

14.3 (1)

No

85.7 (6)

Total

100.0 (7)

*64. In terms of installing additional utility improvements in the future, has the executed EPC

enabled such work to be performed or hindered it?

Response

% (N)

Enabled

87.5 (7)

71

Hindered

12.5 (1)

Total

100.0 (8)

Response

(N)

Additional comments (see below)

(1)

Public Housing Authority

Response

PHA 8

Neither

*65. Please describe the ways in which the executed EPC has enabled or hindered future

improvements.

Response

(N)

Other reasons why the EPC enabled or hindered future improvements (see below)

(9)

Public Housing Authority

Response

PHA 9

Future improvements were not enabled or

hindered but the question had to be answered.

The EPC enhanced our staff's engagement and

PHA 1

recommendations with utility improvements and

funding from local utilities assisted in such

improvements.

Have developed a good working relationship with

Company E who also serves as the authority's bank

of record for other business lines.  Self-managed

PHA 2

EPC made them more aware of our various

programs and should make future financing easier

to obtain.  Also made staff and residents more

aware of energy/utility impact on operations and

cash flow.

PHA 4

The enhancement of an understanding of energy-

savings potential.

We have a clear understanding of what

PHA 3

opportunities are available and the methodology

to move forward.

The EPC enabled improvements to be instal ed

quicker than if financed with capital fund dol ars.

With the installation of the new equipment sooner

PHA 6

additional operational cost savings is realized by

the reduction in cost to operate the more efficient

equipment.  Also feeing up additional capital fund

dol ars for other much needed improvements.

Freed up capital funds that otherwise might have

PHA 5

been needed to do some or al  of the work funded

by EPC.

PHA 8

No further improvements have been installed

because of the EPC.  ADA compliance and

72

replacing aging systems is priority.

Knowledge gained through EPC project was used

PHA 7

to develop energy standards for future

construction projects.

*66. Has your PHA staff observed any specific issues with your executed EPC that you would

advise other PHAs to avoid?

Response

% (N)

Yes

88.9 (8)

No

11.1 (1)

Total

100.0 (9)

Response

(N)

Additional comments (see below)

(1)

Public Housing Authority

Response

PHA 4

Maybe

67. Please describe the issues that your PHA staff has observed.

Response

(N)

Other issues that your PHA staff has observed (see below)

(8)

Public Housing Authority

Response

PHA 9

Making sure the ESCo is monitoring and

conducting the M&V appropriately.

PHA 2

Not sharing EPC plan with entire organization,

including residents.

PHA 4

Temperature-control ed thermostats

PHA 3

Always question and review costs thoroughly.

Problems with automated building control issues

PHA 6

proper operation.

Resident tampering with controls on the heating

and cooling of their units.

PHA 5

Overhead percentage calculating of the vender

should be careful y examined.

PHA 8

Think beyond just the systems being improved.

Other related systems may be adversely impacted.

Certain installed measures were maintenance

PHA 7

intensive and highly technical. Also, single zone

VRV system was not appropriate for multi-tenant

building.

*68. Does your PHA have any ‘lessons learned’ relating to the executed EPC?

73

Response

% (N)

Yes

100.0 (9)

No

0.0 (0)

Total

100.0 (9)

69. Please describe the ‘lessons learned.’

Response

(N)

Described lessons learned (see below)

(9)

Public Housing Authority

Response

PHA 9

We updated units slated for redevelopment with

major improvements.

PHA 1

Multiple.  Would like to discuss in person.

Be sure to have potential lenders engaged early in

process.  We invested a lot of time in the project

before determining if a lender would be

PHA 2

comfortable with the self-managed program.

Fortunately our "regular" bank also finances EPC

contracts.  The "niche" lenders for this type of

work are not the most economically feasible to

ensure a positive outcome.

PHA 4

The many facets of the process from procurement

to completion.

PHA 3

Again always question costs.  Also always seek

alternative sources of funding.

The need for more resident training and energy

PHA 6

awareness.

Too much reliance on the ESCo for everything.

PHA 5

See above.

PHA 8

See 67.

PHA 7

Energy savings can easily be offset by increased

maintenance costs for some measures

*70. Does the executed EPC have any specific clauses that were of benefit to your PHA?

Response  % (N)

Yes

22.2 (2)

No

77.8 (7)

Total

100.0 (9)

71. Please describe the clauses and their benefit.

Response

(N)

The described clauses and their benefit. (see below)

(3)

74

Public Housing Authority

Response

PHA 4

The annual increase in funds to satisfy the

indebtedness

The Housing Authority procured legal

PHA 6

counsel to review al  contract documents to

ensure our interest was protected.

Frozen base

PHA 7

Cost savings applied to debt

Duration of contract term

*72. Does the executed EPC have any specific clauses that were harmful or financially

burdensome to your PHA?

Response  % (N)

Yes

22.2 (2)

No

77.8 (7)

Total

100.0 (9)

Response

(N)

Additional comments (see below)

(1)

Public Housing Authority

Response

PHA 4

Not that I recal .

73. Please describe the clauses that were harmful or financially burdensome.

Response

(N)

The described clauses that were harmful or financially burdensome. (see below)

(2)

Public Housing Authority

Response

PHA 5

M&V were excessive

1) Original EPC had a shared savings

provision

2) Monitoring of stipulated savings

PHA 7

seemed unnecessary

3) Requirement that excess savings be

used primarily for further energy

measures

*74. Is your PHA considering a conversion under the Rental Assistance Demonstration (RAD)

program that involves EPC units?

Response  % (N)

Yes

62.5 (5)

No

37.5 (3)

75

Total

100.0 (8)

Response

(N)

Additional comments (see below)

(1)

Public Housing Authority

Response

PHA 1

Unsure

75. From a utility performance and management perspective, does your PHA believe that the

RAD conversion wil  be of benefit to your PHA?

Response

% (N)

Yes

33.3 (2)

No

16.7 (1)

Don’t Know

50.0 (3)

Total

100.0 (6)

76. Please describe the reasons as to why the RAD conversion with EPC units wil or wil not be

beneficial to your PHA.

Response

(N)

Reasons why the RAD conversion with EPC units will or will not be beneficial to

your PHA. (see below)

(3)

Public Housing Authority

Response

The EPC work did not modernize the PHA

PHA 9

stock to make it more attractive to renters.

The intended work to be done in

conjunction with the RAD conversion wil .

RAD conversion does not provide any

PHA 2

specific benefits in terms of utilities or

management.  Some RAD conversions will

however produce a financial benefit.

Lower utility costs or allowances. Frozen

PHA 7

utility base benefit will survive term of EPC

by being factored into contract rents.

Section D: Resident-Related Matters

*77. Were residents affected by the EPC informed of it (i.e., performance contract) significantly

in advance of the contract’s construction phase?

Response

% (N)

Yes

88.9 (8)

No

11.1 (1)

Total

100.0 (9)

76

*78. Did the residents voice any concern about the improvements that were made under

executed EPC?

Response

% (N)

Yes

77.8 (7)

No

22.2 (2)

Total

100.0 (9)

79. What concerns did the residents raise?

Response

(N)

Concerns raised by residents. (see below)

(7)

Public Housing Authority

Response

PHA 9

Residents were upset about the limiting

thermostats.

Residents were involved in project design

and execution so the majority of the ECMs

were favorable for the residents.  Residents

PHA 1

did show concerns on the fol owing ECMs:

1) CFL bulbs - comments were received on

the brightness and temperature

2) Native grasses - the look and feel are

different than other grasses

Concerns that increased amenities like

PHA 2

central air would actually raise utility costs

for them.

PHA 4

Temperature-control ed thermostats.  Bulbs

for light fixtures.

Limited control of thermostats in their units

PHA 6

which affected the ability to control the

temperature in their unit. (the unit is either

too cold or too hot).

PHA 5

Reduced heat in winter.

Felt that energy savings measures would

PHA 7

impinge on their comfort - light intensity,

ability to control thermostats, low-flow

showers, etc.

80. Did your PHA have the necessary resources (e.g., money, staff time) to address residents’

concerns?

Response  % (N)

Yes

100.0 (8)

No

0.0 (0)

Total

100.0 (8)

77

81. To encourage greater utility conservation, were any resident outreach or training programs

provided?

Response  % (N)

Yes

100.0 (9)

No

0.0 (0)

Total

100.0 (9)

82. Who provided the outreach or training programs? (Check all that apply)

Response

% (N)

PHA

66.7 (6)

ESCo

66.7 (6)

Third-party Consultant

22.2 (2)

Other

0.0 (0)

Note: Percentages may not equal 100.0 because multiple responses could be selected.

Response

(N)

Additional comments (see below)

(1)

Public Housing Authority

Response

PHA 7

Provided consultant

83. If you selected “Other” for Question 82, please identify the other entities that provided the

outreach or training programs.

Response

(N)

Other entities that provided the outreach or training programs.

(0)

84. How were the affected residents notified about the outreach or training programs?

Response

% (N)

Posting of flyers

100.0 (9)

PHA newsletters

33.3 (3)

Resident meetings

88.9 (8)

Other

22.2 (2)

Note: Percentages may not equal 100.0 because multiple responses could be selected.

85. If you selected “Other” for Question 84, please describe the other methods that were used

to notify the affected residents about the provided outreach or training programs?

Response

(N)

Other methods that were used to notify the affected residents about the

provided outreach or training programs. (see below)

(2)

78

Public Housing Authority

Response

PHA 1

Energy Fairs / Outreach programs

PHA 3

Phone calls via our robo system.

86. What percentage of the affected residents took part in the provided outreach or training

programs?

Response

% (N)

<10%

22.2 (2)

11-25%

55.6 (5)

26-50%

11.1 (1)

51-75%

0.0 (0)

>75%

11.1 (1)

Don’t Know

0.0 (0)

Note: Percentages may not equal 100.0 because multiple responses could be selected.

87. Did the outreach or training programs assist the affected residents in their understanding of

the importance of utility conservation?

Response

% (N)

Yes

88.9 (8)

No

0.0 (0)

Don’t Know

11.1 (1)

Total

100.0 (9)

88. Since providing the outreach or training programs, has your PHA observed any changes in

resident utility usage?

Response

% (N)

Yes

22.2 (2)

No

33.3 (3)

Don’t Know

44.4 (4)

Total

100.0 (9)

Response

(N)

Additional comments (see below)

(1)

Public Housing Authority

Response

PHA 7

Due to turnover of residents

since program began

79

89. Has your PHA found that the outreach or training programs resulted in supplemental

savings relative to the improvements instal ed under the executed EPC?

Response

% (N)

Yes

11.1 (1)

No

22.2 (2)

Don’t Know

66.7 (6)

Total

100.0 (9)

90. Would your PHA have an interest in participating in future HUD research about influencing

resident behavior for utility conservation?

Response  % (N)

Yes

88.9 (8)

No

11.1 (1)

Total

100.0 (9)

Thank you for completing this questionnaire! Your input is valuable to us, and we are grateful

that you have shared your time and expertise.

80

Appendix C

Utility Expense Level Quantities

The tables below il ustrate the Utility Expense Level (UEL) quantities for each of the study’s

participating PHAs. These quantities span from Funding Years 200–2015 (actual consumption

spanning July 1, 2003 to June 30, 2014) and represent the annual self-reported, owner-paid

utilities—electricity, natural gas, sewer, and water.

Because the UEL data are self-reported, multiple assumptions were made to correct for missing

data and inconsistent units of consumption. For purposes of consistency, electricity and natural

gas quantities are reported in kilowatt-hours (kWh) and sewer and water quantities are

reported in gallons (gal). In addition, each table consists of notes describing the Funding Year in

which the respective EPC(s) was initially observed, types of improvements installed, and

incentives used.

Table 11: DE001a

Funding

Actual Consumption

Electrical Consumption

Natural Gas Consumption

Sewer/Water Consumption

Year

Timeframe

{kWh}

{kWh}

{gal}

2005

7/1/2003 to 6/30/2004

5,042,802

148,729

131,446,000

2006

7/1/2004 to 6/30/2005

5,124,513

141,611

87,225,000

2007

7/1/2005 to 6/30/2006

4,566,268

127,802

98,313,000

2008

7/1/2006 to 6/30/2007

4,947,819

119,443

95,016,000

2009

7/1/2007 to 6/30/2008

3,567,527

80,535

94,037,000

2010

7/1/2008 to 6/30/2009

3,717,188

97,734

66,274,000

2011

7/1/2009 to 6/30/2010

3,642,395

73,146

80,027,000

2012

7/1/2010 to 6/30/2011

4,516,718

84,172

86,717,000

2013

7/1/2011 to 6/30/2012

3,118,544

49,741

65,812,000

2014

7/1/2012 to 6/30/2013

4,647,884

59,795

72,797,000

2015

7/1/2013 to 6/30/2014

5,292,764

85,734

80,848,000

a DE001 executed two EPC phases; the first being in Funding Year 2009 and the second in Funding Year 2015. During these phases, building envelope, HVAC, water, and appliance improvements were installed, and the FRB, AOS, and RPU incentives were used.

81

Table 12: PA04a

Funding

Actual Consumption

Electrical Consumption

Natural Gas Consumption

Sewer Consumption

Water Consumption

Year

Timeframe

{kWh}

{kWh}

{gal}

{gal}

2005

7/1/2003 to 6/30/2004

2,150,271

7,395,838

17,237,630

17,237,630

2006

7/1/2004 to 6/30/2005

2,213,064

7,628,810

18,603,220

18,603,220

2007

7/1/2005 to 6/30/2006

2,258,598

7,164,654

19,699,140

19,699,140

2008

7/1/2006 to 6/30/2007

2,215,474

6,840,533

15,569,880

15,569,880

2009

7/1/2007 to 6/30/2008

2,254,639

6,851,876

16,034,786

16,034,786

2010

7/1/2008 to 6/30/2009

2,316,832

6,990,621

16,801,364

16,801,364

2011

7/1/2009 to 6/30/2010

2,296,816

6,336,694

18,541,200

18,287,739

2012

7/1/2010 to 6/30/2011

2,483,074

6,391,940

19,645,543

19,657,493

2013

7/1/2011 to 6/30/2012

2,431,951

5,918,992

14,454,000

14,454,000

2014

7/1/2012 to 6/30/2013

1,915,528

5,105,305

8,705,000

8,705,000

2015

7/1/2013 to 6/30/2014

2,333,529

7,178,370

8,121,000

8,221,000

a PA040 executed one EPC phase in Funding Year 2013. During this phase, lighting, water, building envelope, and HVAC

improvements were installed, and the FRP and RPU incentives were used.

Table 13: MS107a

Funding

Actual Consumption

Electrical Consumption

Natural Gas Consumption

Sewer/Water Consumption

Year

Timeframe

{kWh}

{kWh}

{gal}b

2005

7/1/2003 to 6/30/2004

38,256

476

0

2006

7/1/2004 to 6/30/2005

18,474

149

0

2007

7/1/2005 to 6/30/2006

10,776

134

0

2008

7/1/2006 to 6/30/2007

20,339

149

0

2009

7/1/2007 to 6/30/2008

9,550

118

0

2010

7/1/2008 to 6/30/2009

22,199

277

0

2011

7/1/2009 to 6/30/2010

22,070

342

0

2012

7/1/2010 to 6/30/2011

32,518

253

0

2013

7/1/2011 to 6/30/2012

27,939

307

0

2014

7/1/2012 to 6/30/2013

32,001

350

0

2015

7/1/2013 to 6/30/2014

30,560

440

0

a MS107 executed one EPC phase in Funding Year 2011. During this phase, lighting, water, and HVAC improvements were installed, and the AOS incentive was used.

b The UEL data sets do not contain any measurements for owner-paid sewer and water quantities.

82

Table 14: AR002a

Funding

Actual Consumption

Electrical Consumption

Natural Gas Consumption

Sewer/Water Consumption

Year

Timeframe

{kWh}

{kWh}

{gal}

2005

7/1/2003 to 6/30/2004

5,898,816

5,856,919

56,937,760

2006

7/1/2004 to 6/30/2005

5,889,920

8,104,750

61,084,672

2007

7/1/2005 to 6/30/2006

6,317,221

4,565,772

65,013,916

2008

7/1/2006 to 6/30/2007

5,969,673

4,936,117

61,303,088

2009

7/1/2007 to 6/30/2008

5,899,154

4,448,505

58,456,948

2010

7/1/2008 to 6/30/2009

5,780,815

4,579,103

53,973,436

2011

7/1/2009 to 6/30/2010

5,935,368

3,184,701

46,803,108

2012

7/1/2010 to 6/30/2011

5,948,630

2,803,869

38,139,024

2013

7/1/2011 to 6/30/2012

5,961,980

1,993,523

39,067,292

2014

7/1/2012 to 6/30/2013

5,578,305

2,542,907

40,866,232

2015

7/1/2013 to 6/30/2014

5,830,196

3,086,401

35,880,812

a AR002 executed one EPC phase in Funding Year 2009. During this phase, lighting, water, building envelope, and HVAC improvements were installed, and the AOS and RPU incentives were used.

Table 15: KS001a

Funding

Actual Consumption

Electrical Consumption

Natural Gas Consumption

Sewer Consumption

Water Consumption

Year

Timeframe

{kWh}

{kWh}

{gal}

{gal}

2005

7/1/2003 to 6/30/2004

10,870,732

26,359,222

68,955,128

80,045,724

2006

7/1/2004 to 6/30/2005

9,810,105

26,478,532

67,141,228

78,674,640

2007

7/1/2005 to 6/30/2006

10,999,419

37,983,274

54,260,668

78,180,212

2008

7/1/2006 to 6/30/2007

10,670,481

24,661,756

62,380,956

76,624,372

2009

7/1/2007 to 6/30/2008

11,102,241

21,033,928

76,313,204

75,693,860

2010

7/1/2008 to 6/30/2009

11,044,655

20,692,567

79,878,920

76,845,032

2011

7/1/2009 to 6/30/2010

11,195,548

20,992,049

79,248,356

78,080,728

2012

7/1/2010 to 6/30/2011

12,145,311

22,643,719

91,580,632

92,976,400

2013

7/1/2011 to 6/30/2012

10,409,304

17,677,864

49,366,504

49,267,020

2014

7/1/2012 to 6/30/2013

9,573,033

20,761,864

52,262,760

55,734,228

2015

7/1/2013 to 6/30/2014

10,831,402

28,679,452

63,476,776

74,025,820

a KS001 executed one EPC phase in Funding Year 2012. During this phase, building envelope, HVAC, lighting, water, appliances, renewable energy, and miscel aneous improvements were installed, and the FRB, AOS, and RPU incentives were used.

83

Table 16: CO001a

Funding

Actual Consumption

Electrical Consumption

Natural Gas Consumption

Sewer/Water Consumption

Year

Timeframe

{kWh}

{kWh}

{gal}

2005

7/1/2003 to 6/30/2004

46,298,257

148,176,055

594,958,000

2006

7/1/2004 to 6/30/2005

45,273,665

186,349,678

557,665,000

2007

7/1/2005 to 6/30/2006

44,390,600

141,590,621

663,058,000

2008

7/1/2006 to 6/30/2007

46,781,675

136,385,756

666,901,000

2009

7/1/2007 to 6/30/2008

25,161,237

62,318,142

312,728,000

2010

7/1/2008 to 6/30/2009

24,282,647

58,051,143

286,425,000

2011

7/1/2009 to 6/30/2010

25,489,072

66,714,068

262,354,000

2012

7/1/2010 to 6/30/2011

24,352,108

59,929,484

335,776,000

2013

7/1/2011 to 6/30/2012

23,909,289

53,765,006

338,305,000

2014

7/1/2012 to 6/30/2013

24,366,741

56,546,630

309,952,000

2015

7/1/2013 to 6/30/2014

22,603,605

56,060,346

277,238,000

a CO001 executed two EPC phases; the first in Funding Year 2008 and the second in Funding Year 2012. During these phases, lighting, water, HVAC, appliances, and building envelope improvements were installed, and the AOS incentive was used.

Table 17: PA046a

Funding

Actual Consumption

Electrical Consumption

Natural Gas Consumption

Sewer/Water Consumption

Year

Timeframe

{kWh}

{kWh}

{gal}

2005

7/1/2003 to 6/30/2004

1,684,918

4,530,973

14,156,449

2006

7/1/2004 to 6/30/2005

1,496,684

5,358,827

16,796,515

2007

7/1/2005 to 6/30/2006

1,798,230

5,888,735

17,361,489

2008

7/1/2006 to 6/30/2007

1,665,293

4,542,724

13,219,194

2009

7/1/2007 to 6/30/2008

3,728,914

7,523,170

22,929,549

2010

7/1/2008 to 6/30/2009

1,956,295

5,108,545

22,453,115

2011

7/1/2009 to 6/30/2010

1,950,257

3,932,763

14,635,134

2012

7/1/2010 to 6/30/2011

2,011,619

3,516,200

17,576,756

2013

7/1/2011 to 6/30/2012

1,753,170

2,638,875

13,315,092

2014

7/1/2012 to 6/30/2013

1,761,880

2,729,382

15,533,128

2015

7/1/2013 to 6/30/2014

2,256,947

2,583,317

11,939,043

a PA046 executed two EPC phases; the first in Funding Year 2010 and the second in Funding Year 2015. During these phases, lighting, water, building envelope, appliances, and HVAC improvements were installed, and the FRB and AOS

incentives were used.

84

Table 18: TN005a

Funding

Actual Consumption

Electrical Consumption

Natural Gas Consumption

Sewer/Water Consumption

Year

Timeframe

{kWh}

{kWh}

{gal}

2005

7/1/2003 to 6/30/2004

62,325,731

33,483,153

565,211

2006

7/1/2004 to 6/30/2005

60,515,937

31,909,397

532,351

2007

7/1/2005 to 6/30/2006

58,439,496

32,971,232

477,206

2008

7/1/2006 to 6/30/2007

56,268,782

31,839,257

263,952

2009

7/1/2007 to 6/30/2008

57,639,174

31,342,521

492,868

2010

7/1/2008 to 6/30/2009

57,653,281

31,313,296

496,867

2011

7/1/2009 to 6/30/2010

55,375,849

36,125,794

270,747

2012

7/1/2010 to 6/30/2011

53,540,620

29,995,305

211,918

2013

7/1/2011 to 6/30/2012

49,217,029

25,212,724

221,581

2014

7/1/2012 to 6/30/2013

50,027,105

29,409,206

220,149

2015

7/1/2013 to 6/30/2014

51,374,298

31,462,374

223,298

a TN005 executed three EPC phases; the first in Funding Year 1998, the second in Funding Year 2009, and third in Funding Year 2013. During these phases, building envelope, appliances, lighting, water, renewable energy, and HVAC

improvements were installed, and the FRB and RPU incentives were used.

Table 19: NY025

Funding

Actual Consumption

Electrical Consumption

Natural Gas Consumption

Sewer/Water Consumption

Year

Timeframe

{kWh}

{kWh}

{gal}

2005

7/1/2003 to 6/30/2004

470,498

4,052,931

0

2006

7/1/2004 to 6/30/2005

499,593

4,000,586

0

2007

7/1/2005 to 6/30/2006

469,099

3,596,542

0

2008

7/1/2006 to 6/30/2007

391,097

4,783,353

0

2009

7/1/2007 to 6/30/2008

457,186

3,153,664

0

2010

7/1/2008 to 6/30/2009

480,829

3,113,130

0

2011

7/1/2009 to 6/30/2010

468,163

2,896,717

0

2012

7/1/2010 to 6/30/2011

512,518

2,811,460

0

2013

7/1/2011 to 6/30/2012

465,479

2,208,382

0

2014

7/1/2012 to 6/30/2013

490,054

2,232,122

0

2015

7/1/2013 to 6/30/2014

473,932

2,298,359

0

a NY025 executed two EPC phases; the first in Funding Year 2008 and the second in Funding Year 2011. During these phases, building envelope, HVAC, lighting, and appliance improvements were installed, and the FRB and RPU incentives were used.

b The UEL data sets do not contain any measurements for owner-paid sewer and water quantities.

85

Appendix D

Sidebars and Photos

Lighting Systems

Indoor lighting systems, composed of compact fluorescent lamps (CFL) and light-emitting

diodes (LED), were the most common improvement performed by the PHAs visited. These

lighting systems employ bulbs that are available in a wide range of colors and light levels.

ENERGY STAR-qualified CFL bulbs use about 75 percent less energy and can last up to 10 times

longer than traditional incandescent bulbs. ENERGY STAR-qualified LEDs use even less energy

than CFLs and can last up to 25 times longer than traditional incandescent bulbs.

Figure 3: CFL Lighting, Nashville Site Visit

Figure 4: Energy-Efficient Lighting, North Little Rock Site Visit

86

Water and Water Heating

Saving water is an important part of any EPC. Installing low-flow faucets and showerheads is an

effective way to conserve water, reduce water heating costs, and save energy. The U.S.

Environmental Protection Agency uses the WaterSense® label to identify water-efficient

products such as showerheads, bathroom faucets, and toilets. WaterSense®-labeled products

use a minimum of 20 percent less water compared with conventional products.

Figure 5: Natural Gas Water Heater, Denver Site Visit

Figure 6: Dual Flush Water-Efficient Toilet, Greenwood Site Visit

Figure 7: Tankless Water Heater, Watervliet Site Visit

87

Appliances

ENERGY STAR-certified appliances are often specified in EPCs. These appliances help save on

operating costs by reducing energy use without sacrificing performance. For example, a new

ENERGY STAR refrigerator will be about 30 percent more energy efficient than a comparably

sized 20-year-old model.

Figure 8: Energy-Efficient Dryers, Clinton Site Visit

Figure 9: Energy-Efficient Refrigerator, Denver Site Visit

88

HVAC

While not as commonly installed as lighting and water systems, improved heating, ventilation,

and air-conditioning (HVAC) systems hold great energy saving potential. High-efficiency heat

pumps and boilers were installed at several sites. The ENERGY STAR label can be used to

identify energy-efficient HVAC equipment suitable for single family or individual dwel ing units.

A qualified engineer should be consulted when specifying energy-efficient equipment in more

complex, multifamily buildings, as HVAC product selection must be based on demand.  ENERGY

STAR-qualified room and central air conditioners use about 15 percent less energy compared with conventional air conditioner systems.  ENERGY STAR-qualified furnaces and boilers are often substantial y more efficient than their conventional counterparts, with  oil boilers  having annual fuel utilization efficiency (AFUE)  ratings  of 87 percent or greater and  gas boilers having AFUE of 90 percent or greater .

Figure 10: Residential Unit Mini-Split Heat Pump System, Nashville Site Visit

Figure 11: Energy-Efficient Natural Gas Boiler, Wilmington Site Visit

89

Programmable Thermostats and Controls

Programmable thermostats can be set to reduce heating or air conditioning operations when residents are sleeping or not at home; for maximum efficiency, these periods of reduced

operation should be at least 4 hours in duration. Programmable thermostats are capable of

storing six or more daily temperature settings that can be manual y overridden without

affecting the other daily or weekly programs.

Figure 12: Programmable Thermostat, Clinton Site Visit

Figure 13: HVAC Control Panel, Nashville Site Visit

90

Renewable Energy Sources

In residential applications, the most common renewable energy systems are solar photovoltaic

power, solar thermal energy, geothermal heating and cooling, and wind power. Biomass,

biofuel, and hydroelectric (water turbine) systems are less commonly used in conjunction with

an EPC but are not unknown. A qualified engineer with a background in renewable energy in

the built environment should be consulted when considering the use of less common

renewable sources, because some sources may yield better results in certain climates.

Figure 14: These Townhouse-Style Apartments Rely on Geothermal Heat Pumps To Substantial y Reduce Both Demand and Associated Costs; Chester Site Visit

91

Figure 15: Geothermal Heat Pump, Chester Site Visit

Figure 16: Solar Panels Used for Domestic Hot Water, Chester Site Visit

92

Figure 17: Rooftop Solar Photovoltaic Panels, Kansas City Site Visit

Figure 18: Solar Water Heaters, Kansas City Site Visit

Figure 19: Rooftop Solar Photovoltaic Array, Watervliet Site Visit

93

U.S. Department of Housing and Urban Development

Office of Policy Development and Research

Washington, DC 20410-6000

June 2017

Document Outline

- Cover

- TItle Page

- Acknowledgments

- Disclaimer

- Preface

- Contents

- List of Tables

- List of Figures

- Executive Summary

- Introduction

- Objective

- History

- Overview of the Program

- Federal Incentives for Funding Energy Conservation in Public Housing

- Frozen Rolling Base Incentive

- Add-On Subsidy Incentive

- Resident-Paid Utility Incentive

- Rate Reduction Incentive

- Key Aspects of an Energy Performance Contract

- Energy Audit

- Design Engineering

- Construction Management and Commissioning

- Operations and Maintenance

- Savings Measurement and Verification

- EPC Financing

- Arrangement of Long-Term Project Financing

- Third-Party Financing Marketplace

- Available Capital

- Typical Rates and Terms

- HUD’S EPC Approval Process

- Methodology

- PHA EPC Data Set

- Selection of Participating PHAs

- Questionnaire

- Site Visits Performed

- EPC-Related Data

- Participants in the Field of Energy Performance Contracting

- Discussion

- Results of the Questionnaire

- EPC Benefits and Savings

- Use of Excess Savings

- Level of Effort on Application Process

- Resident Training and Awareness

- Analysis of Measurement and Verification, Utilities Expense Level Data, and HUD Assessment Data

- Normalizing Utility Consumption Data

- Methodology and Limitations

- Average Percentage Change Estimates

- Example Calculation

- Public Housing Policy Inquiries

- Apply EPC Utility Savings Toward Non-Energy-Related and Non-Water-Related Capital Improvements

- Provide a Compensatory Fee to PHAs That Self-Manage an EPC

- Is the Rigor of the Application Process Necessary To Ensure a Cost-Effective Project?

- Summary

- Observations Supporting EPC Program Objectives

- Objective: Reducing the Approval Time of an EPC Application

- Observation: Develop a PHA-EPC working group.

- Objective: Providing Greater Transparency in the Department’s Application Review Efforts

- Observation: Revise the duration metric of the EPC application approval time.

- Objective: Providing Further Guidance on the Collaborative Use of an EPC  and RAD

- Observation: Develop a decision logic tree in support of using an EPC in conjunction with RAD.

- Objective: Providing More Transparency in the Realized Savings of an EPC

- Observation: Annually update cash flow spreadsheets.

- Observation: Align the reporting periods of the annual M&V reports with annual UEL quantities.

- Conclusion

- References

- Appendix A

- Questionnaire Administered to Study Participants

- Appendix B

- Aggregate and Open-Ended Questionnaire Responses

- Appendix C

- Utility Expense Level Quantities

- Appendix D

- Sidebars and Photos

- Lighting Systems

- Water and Water Heating

- Appliances

- HVAC

- Programmable Thermostats and Controls

- Renewable Energy Sources

- Back Cover

Table of Contents

Cover

TItle Page

Acknowledgments

Disclaimer

Preface

Contents

List of Tables

List of Figures

Executive Summary

Introduction

Objective

History

Overview of the Program

Federal Incentives for Funding Energy Conservation in Public Housing

Frozen Rolling Base Incentive

Add-On Subsidy Incentive

Resident-Paid Utility Incentive

Rate Reduction Incentive

Key Aspects of an Energy Performance Contract

Energy Audit

Design Engineering

Construction Management and Commissioning

Operations and Maintenance

Savings Measurement and Verification

EPC Financing

Arrangement of Long-Term Project Financing

Third-Party Financing Marketplace

Available Capital

Typical Rates and Terms

HUD’S EPC Approval Process

Methodology

PHA EPC Data Set

Selection of Participating PHAs

Questionnaire

Site Visits Performed

EPC-Related Data

Participants in the Field of Energy Performance Contracting

Discussion

Results of the Questionnaire

EPC Benefits and Savings

Use of Excess Savings

Level of Effort on Application Process

Resident Training and Awareness

Analysis of Measurement and Verification, Utilities Expense Level Data, and HUD Assessment Data

Normalizing Utility Consumption Data

Methodology and Limitations

Average Percentage Change Estimates

Example Calculation

Public Housing Policy Inquiries

Apply EPC Utility Savings Toward Non-Energy-Related and Non-Water-Related Capital Improvements

Provide a Compensatory Fee to PHAs That Self-Manage an EPC

Is the Rigor of the Application Process Necessary To Ensure a Cost-Effective Project?

Summary

Observations Supporting EPC Program Objectives

Objective: Reducing the Approval Time of an EPC Application

Observation: Develop a PHA-EPC working group.

Objective: Providing Greater Transparency in the Department’s Application Review Efforts

Observation: Revise the duration metric of the EPC application approval time.

Objective: Providing Further Guidance on the Collaborative Use of an EPC and RAD

Observation: Develop a decision logic tree in support of using an EPC in conjunction with RAD.

Objective: Providing More Transparency in the Realized Savings of an EPC

Observation: Annually update cash flow spreadsheets.

Observation: Align the reporting periods of the annual M&V reports with annual UEL quantities.

Conclusion

References

Appendix A

Questionnaire Administered to Study Participants

Appendix B

Aggregate and Open-Ended Questionnaire Responses

Appendix C

Utility Expense Level Quantities

Appendix D

Sidebars and Photos

Lighting Systems

Water and Water Heating

Appliances

HVAC

Programmable Thermostats and Controls

Renewable Energy Sources

Back Cover