Z-0687.1  _______________________________________________

                         SENATE BILL 5647

          _______________________________________________

State of Washington      57th Legislature     2001 Regular Session

By Senators Regala, Thibaudeau, Jacobsen, Eide, Rasmussen, Fraser, Kohl‑Welles, Hale, Winsley, Fairley, Shin, Prentice, Patterson, Constantine, Franklin, Costa, Kastama, McAuliffe, Kline, Haugen and Oke; by request of Governor Locke

Read first time 01/29/2001.  Referred to Committee on Environment, Energy & Water.

Requiring new energy efficiency measures.

    AN ACT Relating to the improvement of energy efficiency in state-funded public buildings through adoption of energy efficiency standards for new buildings, energy audits of existing state-funded public buildings, and performance-based energy service contracting; amending RCW 39.35.010, 39.35.030, 39.35.050, 39.35A.020, 39.35C.010, 39.35C.020, 43.19.668, 43.19.669, 43.19.670, 43.19.675, and 43.19.680; adding a new section to chapter 39.35A RCW; creating new sections; and declaring an emergency.

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

                              PART  I

                              INTENT

NEW SECTION. Sec. 1.  (1) The legislature hereby finds that:

    (a) The economy of the state and the health, safety, and welfare of its citizens are threatened by the current energy supply and price instabilities;

    (b) Many energy efficiency programs for public buildings launched during the 1970s and 1980s were not maintained during the subsequent sustained period of low energy costs and abundant supply; and

    (c) Conservation programs originally established in the 1970s and 1980s can be improved or updated.  New programs drawing on recently developed technologies, including demand-side energy management systems, can materially increase the efficiency of energy use by the public sector.

    (2) It is the policy of the state of Washington that:

    (a) State government is committed to achieving significant gains in energy efficiency.  Conventional conservation programs will be reviewed and updated in light of experience gained since their commencement;

    (b) State government must play a leading role in demonstrating updated and new energy efficiency technologies.  New programs or measures made possible by technological advances, such as demand-side response measures and energy management systems, shall be treated in the same manner as conventional conservation programs and will be integrated into the state's energy efficiency programs.

                              PART II

        ENERGY CONSERVATION IN DESIGN OF PUBLIC FACILITIES

    Sec. 2.  RCW 39.35.010 and 1982 c 159 s 1 are each amended to read as follows:

    The legislature hereby finds:

    (1) That major publicly owned or leased facilities have a significant impact on our state's consumption of energy;

    (2) That energy conservation practices including energy management systems and renewable energy systems adopted for the design, construction, and utilization of such facilities will have a beneficial effect on our overall supply of energy;

    (3) That the cost of the energy consumed by such facilities over the life of the facilities shall be considered in addition to the initial cost of constructing such facilities;

    (4) That the cost of energy is significant and major facility designs shall be based on the total life-cycle cost, including the initial construction cost, and the cost, over the economic life of a major facility, of the energy consumed, and of the operation and maintenance of a major facility as they affect energy consumption; and

    (5) That the use of energy systems in these facilities which utilize renewable resources such as solar energy, wood or wood waste, or other nonconventional fuels ((should)), and which incorporate energy management systems, shall be considered in the design of all publicly owned or leased facilities.

    Sec. 3.  RCW 39.35.030 and 1996 c 186 s 402 are each amended to read as follows:

    For the purposes of this chapter the following words and phrases shall have the following meanings unless the context clearly requires otherwise:

    (1) "Public agency" means every state office, officer, board, commission, committee, bureau, department, and all political subdivisions of the state.

    (2) "Department" means the state department of general administration.

    (3) "Major facility" means any publicly owned or leased building having twenty-five thousand square feet or more of usable floor space.

    (4) "Initial cost" means the moneys required for the capital construction or renovation of a major facility.

    (5) "Renovation" means additions, alterations, or repairs within any twelve-month period which exceed fifty percent of the value of a major facility and which will affect any energy system.

    (6) "Economic life" means the projected or anticipated useful life of a major facility as expressed by a term of years.

    (7) "Energy management system" means a program, energy efficiency equipment, technology, device, or other measure including, but not limited to, a management, educational, or promotional program, smart appliance, meter reading system that provides real-time pricing capability, computer software or hardware, communications equipment or hardware, thermostat or other control equipment, together with related administrative or operational programs, that allows identification and management of opportunities for improvement in the efficiency of energy use, including but not limited to a measure that allows:

(a) Public agencies to obtain information about the cost of energy before the time of consumption;

(b) Two-way interactive communication between public agencies and their energy suppliers;

(c) Public agencies to respond to price signals and to manage their purchase and use of electricity; or

(d) For other kinds of demand-side energy management.

(8) "Life-cycle cost" means the initial cost and cost of operation of a major facility over its economic life.  This shall be calculated as the initial cost plus the operation, maintenance, and energy costs over its economic life, reflecting anticipated increases in these costs discounted to present value at the current rate for borrowing public funds, as determined by the office of financial management.  The energy cost projections used shall be those provided by the department.  The department shall update these projections at least every two years.

    (((8))) (9) "Life-cycle cost analysis" includes, but is not limited to, the following elements:

    (a) The coordination and positioning of a major facility on its physical site;

    (b) The amount and type of fenestration employed in a major facility;

    (c) The amount of insulation incorporated into the design of a major facility;

    (d) The variable occupancy and operating conditions of a major facility; and

    (e) An energy-consumption analysis of a major facility.

    (((9))) (10) "Energy systems" means all utilities, including, but not limited to, heating, air-conditioning, ventilating, lighting, and the supplying of domestic hot water.

    (((10))) (11) "Energy-consumption analysis" means the evaluation of all energy systems and components by demand and type of energy including the internal energy load imposed on a major facility by its occupants, equipment, and components, and the external energy load imposed on a major facility by the climatic conditions of its location.  An energy-consumption analysis of the operation of energy systems of a major facility shall include, but not be limited to, the following elements:

    (a) The comparison of three or more system alternatives, at least one of which shall include renewable energy systems, and one of which shall comply at a minimum with the sustainable design guidelines of the United States green building council leadership in energy and environmental design silver standard or similar design standard as may be adopted by rule by the department;

    (b) The simulation of each system over the entire range of operation of such facility for a year's operating period; and

    (c) The evaluation of the energy consumption of component equipment in each system considering the operation of such components at other than full or rated outputs.

    The energy-consumption analysis shall be prepared by a professional engineer or licensed architect who may use computers or such other methods as are capable of producing predictable results.

    (((11))) (12) "Renewable energy systems" means methods of facility design and construction and types of equipment for the utilization of renewable energy sources including, but not limited to, hydroelectric power, active or passive solar space heating or cooling, domestic solar water heating, windmills, waste heat, biomass and/or refuse-derived fuels, photovoltaic devices, and geothermal energy.

    (((12))) (13) "Cogeneration" means the sequential generation of two or more forms of energy from a common fuel or energy source.  Where these forms are electricity and thermal energy, then the operating and efficiency standards established by 18 C.F.R. Sec. 292.205 and the definitions established by 18 C.F.R. 292.202 (c) through (m) as of July 28, 1991, shall apply.

    (((13))) (14) "Selected buildings" means educational, office, residential care, and correctional facilities that are designed to comply with the design standards analyzed and recommended by the department.

    (((14))) (15) "Design standards" means the heating, air-conditioning, ventilating, and renewable resource systems identified, analyzed, and recommended by the department as providing an efficient energy system or systems based on the economic life of the selected buildings.

    Sec. 4.  RCW 39.35.050 and 1996 c 186 s 403 are each amended to read as follows:

    The department, in consultation with affected public agencies, shall develop and issue guidelines for administering this chapter.  The purpose of the guidelines is to define a procedure and method for performance of life-cycle cost analysis to promote the selection of low-life-cycle cost alternatives.  At a minimum, the guidelines must contain provisions that:

    (1) Address energy considerations during the planning phase of the project;

    (2) Identify energy components and system alternatives including energy management systems, renewable energy systems, and cogeneration applications prior to commencing the energy consumption analysis;

    (3) Identify simplified methods to assure the lowest life-cycle cost alternatives for selected buildings with between twenty-five thousand and one hundred thousand square feet of usable floor area;

    (4) Establish times during the design process for preparation, review, and approval or disapproval of the life-cycle cost analysis;

    (5) Specify the assumptions to be used for escalation and inflation rates, equipment service lives, economic building lives, and maintenance costs;

    (6) Determine life-cycle cost analysis format and submittal requirements to meet the provisions of chapter 201, Laws of 1991;

    (7) Provide for review and approval of life-cycle cost analysis.

                             PART III

          PERFORMANCE-BASED CONTRACTING BY MUNICIPALITIES

    Sec. 5.  RCW 39.35A.020 and 1985 c 169 s 2 are each amended to read as follows:

    Unless the context clearly indicates otherwise, the definitions in this section shall apply throughout this chapter.

    (1) "Energy equipment and services" means energy management systems and any equipment, materials, or supplies that are expected, upon installation, to reduce the energy use or energy cost of an existing building or facility, and the services associated with the equipment, materials, or supplies, including but not limited to design, engineering, financing, installation, project management, guarantees, operations, and maintenance.

    (2) "Energy management system" has the definition provided in RCW 39.35.030.

(3) "Municipality" has the definition provided in RCW 39.04.010.

    (((3))) (4) "Performance-based contract" means one or more contracts for energy equipment and services between a municipality and any other persons or entities, if the payment obligation for each year under the contract, including the year of installation, is either:  (a) Set as a percentage of the annual energy cost savings attributable under the contract to the energy equipment and services; or (b) guaranteed by the other persons or entities to be less than the annual energy cost savings attributable under the contract to the energy equipment and services.  Such guarantee shall be, at the option of the municipality, a bond or insurance policy, or some other guarantee determined sufficient by the municipality to provide a level of assurance similar to the level provided by a bond or insurance policy.

NEW SECTION. Sec. 6.  A new section is added to chapter 39.35A RCW to read as follows:

    The state department of general administration shall maintain a registry of energy service contractors and provide assistance to municipalities in identifying available performance-based contracting services.

                              PART IV

                   ENERGY CONSERVATION PROJECTS

    Sec. 7.  RCW 39.35C.010 and 1996 c 186 s 405 are each amended to read as follows:

    Unless the context clearly requires otherwise, the definitions in this section apply throughout this chapter.

    (1) "Cogeneration" means the sequential generation of two or more forms of energy from a common fuel or energy source.  If these forms are electricity and thermal energy, then the operating and efficiency standards established by 18 C.F.R. Sec. 292.205 and the definitions established by 18 C.F.R. Sec. 292.202 (c) through (m) apply.

    (2) "Conservation" means reduced energy consumption or energy cost, or increased efficiency in the use of energy, and activities, measures, or equipment designed to achieve such results, but does not include thermal or electric energy production from cogeneration.

    (3) "Cost-effective" means that the present value to a state agency or school district of the energy reasonably expected to be saved or produced by a facility, activity, measure, or piece of equipment over its useful life, including any compensation received from a utility or the Bonneville power administration, is greater than the net present value of the costs of implementing, maintaining, and operating such facility, activity, measure, or piece of equipment over its useful life, when discounted at the cost of public borrowing.

    (4) "Energy" means energy as defined in RCW 43.21F.025(1).

    (5) "Energy audit" has the definition provided in RCW 43.19.670.

(6) "Energy efficiency project" means a conservation or cogeneration project.

    (((6))) (7) "Energy efficiency services" means assistance furnished by the department to state agencies and school districts in identifying, evaluating, and implementing energy efficiency projects.

    (((7))) (8) "Department" means the state department of general administration.

    (((8))) (9) "Performance-based contracting" means contracts for which payment is conditional on achieving contractually specified energy savings.

    (((9))) (10) "Public agency" means every state office, officer, board, commission, committee, bureau, department, and all political subdivisions of the state.

    (((10))) (11) "Public facility" means a building or structure, or a group of buildings or structures at a single site, owned by a state agency or school district.

    (((11))) (12) "State agency" means every state office or department, whether elective or appointive, state institutions of higher education, and all boards, commissions, or divisions of state government, however designated.

    (((12))) (13) "State facility" means a building or structure, or a group of buildings or structures at a single site, owned by a state agency.

    (((13))) (14) "Utility" means privately or publicly owned electric and gas utilities, electric cooperatives and mutuals, whether located within or without Washington state.

    (((14))) (15) "Local utility" means the utility or utilities in whose service territory a public facility is located.

    Sec. 8.  RCW 39.35C.020 and 1996 c 186 s 406 are each amended to read as follows:

    (1) Each state agency and school district shall implement cost-effective conservation improvements and maintain efficient operation of its facilities in order to minimize energy consumption and related environmental impacts and reduce operating costs.  Each state agency and school district shall undertake an energy audit and implement energy conservation measures pursuant to the time schedules set forth in chapter 43.19 RCW.  Performance-based contracting shall be the preferred method for implementing and completing energy audits.

    (2) The department shall assist state agencies and school districts in identifying, evaluating, and implementing cost-effective conservation projects at their facilities.  The assistance shall include the following:

    (a) Notifying state agencies and school districts of their responsibilities under this chapter;

    (b) Apprising state agencies and school districts of opportunities to develop and finance such projects;

    (c) Providing technical and analytical support, including procurement of performance-based contracting services;

    (d) Reviewing verification procedures for energy savings; and

    (e) Assisting in the structuring and arranging of financing for cost-effective conservation projects.

    (3) Conservation projects implemented under this chapter shall have appropriate levels of monitoring to verify the performance and measure the energy savings over the life of the project.  The department shall solicit involvement in program planning and implementation from utilities and other energy conservation suppliers, especially those that have demonstrated experience in performance-based energy programs.

    (4) The department shall comply with the requirements of chapter 39.80 RCW when contracting for architectural or engineering services.

    (5) The department shall recover any costs and expenses it incurs in providing assistance pursuant to this section, including reimbursement from third parties participating in conservation projects.  The department shall enter into a written agreement with the public agency for the recovery of costs.

                              PART V

               DEPARTMENT OF GENERAL ADMINISTRATION

    Sec. 9.  RCW 43.19.668 and 1993 c 204 s 6 are each amended to read as follows:

    The legislature finds and declares that the buildings, facilities, equipment, and vehicles owned or leased by state government consume significant amounts of energy and that energy conservation actions, including energy management systems, to provide for efficient energy use in these buildings, facilities, equipment, and vehicles will reduce the costs of state government.  In order for the operations of state government to provide the citizens of this state an example of energy use efficiency, the legislature further finds and declares that state government should undertake an aggressive program designed to reduce energy use in state buildings, facilities, equipment, and vehicles within a reasonable period of time.  The use of appropriate tree plantings for energy conservation is encouraged as part of this program.

    Sec. 10.  RCW 43.19.669 and 1980 c 172 s 2 are each amended to read as follows:

    It is the purpose of RCW 43.19.670 through 43.19.685 to require energy audits in state-owned buildings, to require energy audits as a lease condition in all new, renewed, and renegotiated leases of buildings by the state, to undertake such modifications and installations as are necessary to maximize the efficient use of energy in these buildings, including but not limited to energy management systems, and to establish a policy for the  purchase of state vehicles, equipment, and materials which results in efficient energy use by the state.

    Sec. 11.  RCW 43.19.670 and 1982 c 48 s 1 are each amended to read as follows:

    As used in RCW 43.19.670 through 43.19.685, the following terms have the meanings indicated unless the context clearly requires otherwise.

    (1) "Energy audit" means a determination of the energy consumption characteristics of a facility which consists of the following elements:

    (a) An energy consumption survey which identifies the type, amount, and rate of energy consumption of the facility and its major energy systems.  This survey shall be made by the agency responsible for the facility.

    (b) A walk-through survey which determines appropriate energy conservation maintenance and operating procedures and indicates the need, if any, for the acquisition and installation of energy conservation measures and energy management systems.  This survey shall be made by the agency responsible for the facility if it has technically qualified personnel available.  The director of general administration shall provide technically qualified personnel to the responsible agency if necessary.

    (c) ((A technical assistance study)) An investment grade audit, which is an intensive engineering analysis of energy conservation and management measures for the facility, net energy savings, and a cost-effectiveness determination.  This element is required only for those facilities designated in the ((technical assistance study)) schedule adopted under RCW 43.19.680(((3))) (2).

    (2) "Cost-effective energy conservation measures" means energy conservation measures that the investment grade audit concludes will generate savings sufficient to finance project loans of not more than ten years.

(3) "Energy conservation measure" means an installation or modification of an installation in a facility which is primarily intended to reduce energy consumption or allow the use of an alternative energy source, including:

    (a) Insulation of the facility structure and systems within the facility;

    (b) Storm windows and doors, multiglazed windows and doors, heat absorbing or heat reflective glazed and coated windows and door systems, additional glazing, reductions in glass area, and other window and door system modifications;

    (c) Automatic energy control systems;

    (d) Equipment required to operate variable steam, hydraulic, and ventilating systems adjusted by automatic energy control systems;

    (e) Solar space heating or cooling systems, solar electric generating systems, or any combination thereof;

    (f) Solar water heating systems;

    (g) Furnace or utility plant and distribution system modifications including replacement burners, furnaces, and boilers which substantially increase the energy efficiency of the heating system; devices for modifying flue openings which will increase the energy efficiency of the heating system; electrical or mechanical furnace ignitions systems which replace standing gas pilot lights; and utility plant system conversion measures including conversion of existing oil- and gas-fired boiler installations to alternative energy sources;

    (h) Caulking and weatherstripping;

    (i) Replacement or modification of lighting fixtures which increase the energy efficiency of the lighting system;

    (j) Energy recovery systems; ((and))

    (k) Energy management systems; and

(l) Such other measures as the director finds will save a substantial amount of energy.

    (((3))) (4) "Energy conservation maintenance and operating procedure" means modification or modifications in the maintenance and operations of a facility, and any installations within the facility, which are designed to reduce energy consumption in the facility and which require no significant expenditure of funds.

    (((4))) (5) "Energy management system" has the definition contained in RCW 39.35.030.

(6) "Energy savings performance contracting" means the process authorized by chapter 39.35C RCW by which a company contracts with a state agency to conduct no-cost energy audits, guarantee savings from energy efficiency, provide financing for energy efficiency improvements, install or implement energy efficiency improvements, and agree to be paid for its investment solely from savings resulting from the energy efficiency improvements installed or implemented.

(7) "Energy service company" means a company or contractor providing energy savings performance contracting services.

(8) "Facility" means a building, a group of buildings served by a central energy distribution system, or components of a central energy distribution system.

    (((5))) (9) "Implementation plan" means the annual tasks and budget required to complete all acquisitions and installations necessary to satisfy the recommendations of the energy audit.

    Sec. 12.  RCW 43.19.675 and 1982 c 48 s 2 are each amended to read as follows:

For each state-owned facility, the director of general administration, ((in cooperation with the director of the state energy office)) or the agency responsible for the facility if other than the department of general administration, shall conduct((, by contract or other arrangement,)) an energy audit ((for each state-owned)) of that facility.  ((All energy audits shall be coordinated with and complement other governmental energy audit programs.  The energy audit for each state-owned facility located on the capitol campus shall be completed no later than July 1, 1981, and the results and findings of each energy audit shall be compiled and transmitted to the governor and the legislature no later than October 1, 1981.))  This energy audit may be conducted by contract or by other arrangement, including appropriate agency staff.  Performance-based contracting shall be the preferred method for implementing and completing energy audits.  For ((every other)) each state-owned facility, the energy consumption surveys shall be completed no later than October 1, ((1982)) 2001, and the walk-through surveys shall be completed no later than July 1, ((1983)) 2002.

    Sec. 13.  RCW 43.19.680 and 1996 c 186 s 506 are each amended to read as follows:

    (1) Upon completion of each walk-through survey required by RCW 43.19.675, the director of general administration or the agency responsible for the facility if other than the department of general administration shall implement energy conservation maintenance and operation procedures that may be identified for any state-owned facility.  These procedures shall be implemented as soon as possible but not later than twelve months after the walk-through survey.

    (2) ((By December 31, 1981, for the capitol campus the director of general administration shall prepare and transmit to the governor and the legislature an implementation plan.)) If a walk-through survey has identified potentially cost-effective energy conservation measures, the agency responsible for the facility shall undertake an investment grade audit of the facility.  Investment grade audits shall be completed no later than December 1, 2002.  Installation of cost-effective energy conservation measures recommended in the investment grade audit shall be completed no later than June 30, 2004.

    (3) ((By December 31, 1983, for all other state-owned facilities, the director of general administration shall prepare and transmit to the governor and the legislature the results of the energy consumption and walk-through surveys and a schedule for the conduct of technical assistance studies.  This submission shall contain the energy conservation measures planned for installation during the ensuing biennium.  Priority considerations for scheduling technical assistance studies shall include but not be limited to a facility's energy efficiency, responsible agency participation, comparative cost and type of fuels, possibility of outside funding, logistical considerations such as possible need to vacate the facility for installation of energy conservation measures, coordination with other planned facility modifications, and the total cost of a facility modification, including other work which would have to be done as a result of installing energy conservation measures.  Energy conservation measure acquisitions and installations shall be scheduled to be twenty-five percent complete by June 30, 1985, or at the end of the capital budget biennium which includes that date, whichever is later, fifty-five percent complete by June 30, 1989, or at the end of the capital budget biennium which includes that date, whichever is later, eighty-five percent complete by June 30, 1993, or at the end of the capital budget biennium which includes that date, whichever is later, and fully complete by June 30, 1995, or at the end of the capital budget biennium which includes that date, whichever is later.  Each state agency shall implement energy conservation measures with a payback period of twenty-four months or less that have a positive cash flow in the same biennium.))

    For each biennium until all measures are installed, the director of general administration shall report to the governor and legislature installation progress, measures planned for installation during the ensuing biennium((, and changes, if any, to the technical assistance study schedule)).  This report shall be submitted by December 31, ((1984)) 2004, or at the end of the following year whichever immediately precedes the capital budget adoption, and every two years thereafter until all measures are installed.

    (4) ((The director of general administration shall adopt rules to facilitate private investment in energy conservation measures for state-owned buildings consistent with state law.)) Agencies may contract with energy service companies as authorized by chapter 39.35C RCW for energy audits and implementation of cost-effective energy conservation measures.  The department shall provide technically qualified personnel to the responsible agency upon request.  The department shall recover a fee for this service.

(5) Agencies that completed energy audits and implemented cost-effective energy conservation measures after December 31, 1996, and agencies that have contracted with energy service companies for energy audits and conservation measures after December 31, 1996, are deemed to have fulfilled the requirements of this chapter.

                              PART VI

                           MISCELLANEOUS

NEW SECTION. Sec. 14.  Part headings used in this act are not any part of the law.

NEW SECTION. Sec. 15.  This act is necessary for the immediate preservation of the public peace, health, or safety, or support of the state government and its existing public institutions, and takes effect immediately.

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