Performance-Based Contracting for Energy Conservation Projects. Municipalities, including cities, counties, and port districts, may negotiate performance-based contracts with companies that offer water conservation, solid waste reduction, or energy equipment and services.
Performance-based contracts for energy conservation have payment terms that are:
A state agency or school district may work through the Department of Enterprise Services (DES) to develop and finance energy conservation projects, enter into performance-based contracts for energy services, and contract to sell energy savings from a conservation project.
Conservation projects may be funded through DES Energy Savings Performance Contracting process through utility savings, capital funding, grants, or loans. Conservation includes reduced energy consumption, energy demand, energy cost, greenhouse gas emissions, and reduced use or cost of water, wastewater, or solid waste.
Certificate of Participation Program. Real property and major equipment acquisitions for state agencies and local governments may be financed through the Certificate of Participation (COP) programs administered by the Office of the State Treasurer (OST). COP programs combine borrowing into larger offerings to reduce the overall cost of financing. For state projects, debt incurred under COP programs does not fall under the state debt limit.
OST has adopted policy guidance for COP program financing for energy upgrade projects and for financing contracts for state agency agreements. Under the COP program, OST executes a financing contract agreement between OST and the agency when the COP program issuance occurs. State agencies may use financing contracts to provide all or part of the funding for conservation projects. Except for financing contracts entered into by state and regional universities, the State Finance Committee approves the form of all financing contracts of the state.
Clean Buildings Performance Standard. In 2019 the State Energy Performance Standard (Standard) for commercial buildings was established. The Standard requires the Department of Commerce (Commerce) to establish rules for energy performance standards for covered buildings, collect data on compliance, and report on outcomes. With certain exemptions, there are two tiers of covered buildings under the Standard:
Dates of compliance with the Standard are phased in based on building size. Commerce may impose administrative penalties for building owners who fail to document compliance with the Standard by the compliance deadlines.
Either independently or through DES, state agencies or school districts may finance energy conservation projects at public facilities, enter into performance-based contracts for energy services, and contract to sell energy savings from a conservation project.
State agencies, public school districts, public universities, and municipalities are authorized to enter into energy as service contracts. A state agency, public school district, public university, or municipality may, whether acting independently or through DES :
Any contract for energy as a service is subject to the following conditions:
Direct financial grants and incentives received on behalf of the state agency, public school district, public university, or municipality will be passed on to the state agency, public school district, public university, or municipality.
In addition to financing contracts, a state agency, public school district, public university, or municipality may use performance-based contracts to provide all or part of the funding for conservation projects.
The committee recommended a different version of the bill than what was heard. PRO: This bill provides energy as a service to public buildings, which is common for private buildings. A company comes in and provides upfront capital to school districts that may not have the funds for needed improvements. Every tool is needed to help the public sector meet the Clean Buildings Performance Standard goals as there are high costs associated with compliance. The need for this policy is great because of progressive climate policy in this state, which requires significant investment. There are ongoing discussions with agencies and stakeholders to address concerns.
CON: This introduces a new funding paradigm, energy as a service. The funding model should have some guardrails in it before the policy proceeds. The bill may open the door to agencies being taken advantage of because they may not understand long term financing. The implications of the bill are unknown at this time so we are asking for more time. We need to make sure this does not impact the state debt limit as counsel tells us that contracts under this bill could contribute to the state debt. The extra tool is appreciated but it is a more expensive option.
OTHER: There are concerns that bill, without further protections, could lead to the displacement of jobs. We are working with the sponsor to protect members in public service.
The committee recommended a different version of the bill than what was heard. PRO: We need to address and support the aging infrastructure of this state. We cannot continue to do it with old tools. There is federal money available through the Inflation Reduction Act that this bill will be allowed to leverage. The bill follows existing RCW programs and has been collaborated on by the different agencies involved. The bill has oversight. The bill helps with projects are not minor works or major remodels. We already use energy savings measures, and this will help more.