SB1337 101ST GENERAL ASSEMBLY

LRB101 00173 RJF 45173 b

101ST GENERAL ASSEMBLY
State of Illinois
2019 and 2020
SB1337

Introduced 2/7/2019, by Sen. Chapin Rose

SYNOPSIS AS INTRODUCED:

New Act
30 ILCS 500/20-60
30 ILCS 500/40-25
30 ILCS 500/25-45 rep.

Creates the Energy Performance Contracting Act. Requires each governmental unit to 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. Provides that any governmental unit may enter into an energy performance contract with a qualified energy service provider to produce utility savings or operating and maintenance cost-savings. Designates the Smart Energy Design Assistance Center as the lead agency for the development and promotion of a program of performance contracts in governmental units under the Act, and provides requirements and duties for that agency. Provides for the selection process of qualified energy service providers. Provides for audits, payments, and term requirements for energy performance contracts entered into under the Act. Provides for the monitoring and reporting of energy consumption and cost-savings under an energy performance contract. Provides for the use of savings from performance contracts. Provides that the provisions of the Act shall prevail and control over conflicting provisions of law, and that any conflicting provisions of any statute enacted prior to the Act are hereby repealed. Defines terms. Amends the Illinois Procurement Code to make conforming changes. Effective immediately.

FISCAL NOTE ACT MAY APPLY

A BILL FOR

AN ACT concerning finance.

Be it enacted by the People of the State of Illinois, represented in the General Assembly:

Section 1. Short title. This Act may be cited as the Energy Performance Contracting Act.

Section 5. Purpose. The purpose of this Act is to obtain long-term energy and cost-savings for all governmental units by facilitating prompt incorporation of energy conservation improvements or energy production equipment, or both, in connection with buildings or facilities owned, operated, or under the supervision and control of all governmental units, in cooperation with providers of such services and associated materials from the private sector. These arrangements will improve and protect the health, safety, security, and welfare of the people of this State by promoting energy conservation and independence, developing alternate sources of energy, and fostering business activity.

Section 10. Definitions. As used in this Act:

"Cost-effective" means that the present value to a governmental unit 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, 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.

"Cost-savings measure" means any facility improvement, repair or alteration, or any equipment, fixture, or furnishing to be added or used in any facility that is designed to reduce energy consumption and operating costs or increase the operating efficiency of facilities for their appointed functions that are cost effective. "Cost-savings measure" includes, but is not limited to, one or more of the following:

(1) replacement or modification of lighting components, fixtures, and systems;

(2) renewable energy and alternate energy systems;

(3) cogeneration systems that produce steam or forms of energy, such as heat or electricity, for use primarily within a building or complex of buildings;

(4) devices that reduce water consumption or sewer charges, including water-conserving fixtures, appliances, and equipment, water-conserving landscape irrigation equipment, or the substitution of non-water using fixtures, appliances, and equipment;

(5) landscaping measures that reduce watering demands and capture and hold applied water and rainfall, including landscape contouring, including the use of berms, swales, and terraces, the use of soil amendments that increase the water-holding capacity of the soil, including compost, and rainwater harvesting equipment and equipment to make use of water collected as part of a storm- water system installed for water quality control;

(6) equipment for recycling or reuse of water originating on the premises or from other sources, including treated municipal effluent;

(7) equipment needed to capture water from nonconventional, alternate sources, including air conditioning condensate or graywater, for non-potable uses;

(8) metering equipment needed to segregate water use in order to identify water conservation opportunities or verify water savings;

(9) changes in operation and maintenance practices;

(10) indoor air quality improvements that conform to applicable building code requirements;

(11) daylighting systems;

(12) insulating the building structure or systems in the building;

(13) storm windows or doors, caulking or weather stripping, multi-glazed windows or door systems, heat-absorbing or heat-reflective glazed and coated window and door systems, additional glazing, reductions in glass area, or other window and door system modifications that reduce energy consumption;

(14) automated or computerized energy control systems;

(15) heating, ventilation, or air conditioning system modifications or replacements;

(16) indoor air quality improvements that conform to applicable building code requirements;

(17) energy recovery systems;

(18) steam trap improvement programs that reduce operating costs;

(19) building operation programs that reduce utility and operating costs including, but not limited to, computerized energy management and consumption tracking programs, staff and occupant training, and other similar activities;

(20) any life safety measures that provide long-term operating cost reductions and are in compliance with State and local statute;

(21) any life safety measures related to compliance with the federal Americans with Disabilities Act that provide long-term operating cost reductions and are in compliance with State and local statute;

(22) a program to reduce energy costs through rate adjustments, load shifting to reduce peak demand, and use of alternative energy suppliers, such as, but not limited to:

(A) changes to more favorable rate schedules; and

(B) negotiation of lower rates, same supplier or new suppliers, where applicable; and

(C) auditing of energy service billing and meters;

(23) services to reduce utility costs by identifying utility errors and optimizing existing rate schedules under which service is provided; and

(24) any other installation, modification of installation, or remodeling of building infrastructure improvements that produce utility or operational cost savings for their appointed functions in compliance with applicable State and local building codes.

"Energy performance contract" or "energy services agreement" means a contract between the governmental unit and a qualified energy service provider for evaluation, recommendation, and implementation of one or more cost-savings measures. A performance contract may be structured as either:

(1) a guaranteed energy savings performance contract, which shall include, at a minimum, the design and installation of equipment, and, if applicable, operation and maintenance of any of the measures implemented, and guaranteed annual savings which must meet or exceed the total annual contract payments made by the governmental unit for that contract, including financing charges to be incurred by the governmental unit over the life of the contract; or

(2) a shared savings contract, which shall include provisions mutually agreed upon by the governmental unit and the qualified provider or qualified energy service company as to the negotiated rate of payments based upon energy and operational cost-savings and a stipulated maximum energy consumption level over the life of the contract.

"Governmental unit" means any State agency, authority, or any political subdivision of State or local government, including, but not limited to, county, city, township, village or municipal government, local school districts and institutions of higher education, any State-supported institution, or a joint action agency composed of political subdivisions.

"Investment grade audit" means a study by the qualified energy services provider selected for a particular energy performance contract project which includes detailed descriptions of the improvements recommended for the project, the estimated costs of the improvements, and the utility and operations and maintenance cost-savings projected to result from the recommended improvements.

"Operation and maintenance cost-savings" means a measurable decrease in operation and maintenance costs, and future replacement expenditures, that are a direct result of the implementation of one or more utility cost-savings measures. These savings shall be calculated in comparison with an established baseline of operation and maintenance costs.

"Person" means any corporate or non-corporate entity or individual of any type.

"Public building" means any structure, building, or facility, including its equipment, furnishings, or appliances that is owned or operated by a governmental unit.

"Qualified energy service provider" means a person with a record of successful energy performance contract projects or a person who: (1) is experienced in the design, implementation, and installation of energy efficiency and facility improvement measures; (2) has the technical capabilities to ensure such measures generate energy and operational cost-savings; and (3) has the ability to secure the financing necessary to support energy savings guarantees.

"Utility cost-savings" means any utility expenses that are eliminated or avoided on a long-term basis as a result of equipment installed or modified, or services performed by a qualified energy service provider. "Utility cost-savings" does not include merely shifting personnel costs or similar short-term cost-savings.

Section 15. Authorization.

(a) Each governmental unit 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 governmental unit shall undertake an energy audit and implement cost-effective conservation measures. Energy performance contracting shall be the preferred method for completing energy audits and implementing cost-effective conservation measures.

(b) Any governmental unit may enter into an energy performance contract with a qualified energy service provider to produce utility savings or operating and maintenance cost savings. Cost-savings measures implemented under such contracts shall comply with State or local building codes. Any governmental unit may implement other capital improvements in conjunction with a performance contract so long as the measures that are being implemented to achieve energy and operations and maintenance cost-savings are a significant portion of an overall project. A governmental unit may enter into an energy savings performance contract for a period of more than one year only if the governmental unit finds that the amount the governmental unit would spend on the energy or water conservation measures will not exceed the amount to be saved in energy, water, wastewater, and operating costs over 20 years from the date of installation.

Section 20. Smart Energy Design Assistance Center (SEDAC).

(a) The Smart Energy Design Assistance Center (SEDAC) based at the University of Illinois at Urbana-Champaign is hereby designated to be the lead agency for the development and promotion of a program of performance contracts in governmental units. SEDAC will coordinate its activities with the Capital Development Board. SEDAC, under the direction of the Governor, will have the following duties with respect to this program:

(1) assistance to the Capital Development Board to assemble a list of qualified energy service providers and to negotiate master service contracts and pricing schedules with such qualified energy service providers;

(2) development of a standardized energy performance contract process and standard energy performance contract documents, including request for qualifications, request for proposals, investment grade audit contract, energy services agreement, including the form of the project savings guarantee, and project financing agreement; and

(3) promotion of the energy performance contract program to all governmental units.

(b) SEDAC shall establish guidelines and an approval process for awarding energy performance contracts. The guidelines adopted under this subsection (b) must require that the cost-savings projected by a qualified provider be reviewed by a licensed professional engineer who has a minimum of 3 years of experience in energy calculation and review, is not an officer or employee of a qualified provider for the contract under review, and is not otherwise associated with the contract. In conducting the review, the engineer shall focus primarily on the proposed improvements from an engineering perspective, the methodology and calculations related to cost savings, increases in revenue, and, if applicable, efficiency or accuracy of metering equipment. An engineer who reviews a contract shall maintain the confidentiality of any proprietary information the engineer acquires while reviewing the contract.

(c) SEDAC shall assist governmental units in identifying, evaluating, and implementing cost-effective conservation projects at their facilities. The assistance shall include: (1) notifying governmental units of their responsibilities under this Act; (2) apprising governmental units of opportunities to develop and finance energy performance contracting projects; (3) providing technical and analytical support, including procurement energy performance contracting services; (4) reviewing verification procedures for energy savings; and (5) assisting in the structuring and arranging of financing for energy performance contracting projects.

(d) SEDAC is authorized to fix, charge, and collect reasonable fees, not to exceed 2% of the total cost of the energy performance contract project, for any administrative support and resources or other services provided by SEDAC, or its designee, under this subsection (d) from the governmental units that use its technical support services. Governmental units are authorized to add the costs of these fees to the total cost of the energy performance contract.

(e) The Governor is encouraged to develop and submit to the General Assembly a regular or supplemental budget request for the additional funds and staffing required by the Smart Energy Design Assistance Center to fulfill the duties required under this Section.

Section 25. Selection of a qualified energy service provider. The State process of implementing energy performance contracts for governmental units shall be as provided in this Section.

(a) Regarding requests for qualifications, the Capital Development Board is authorized to assemble a list of qualified energy service providers, in accordance with the provisions of the Illinois Procurement Code. The Capital Development Board shall attempt to use objective criteria in the selection process. The criteria for evaluation shall include substantive factors to assess the capability of the qualified energy service company or qualified provider in the areas of design, engineering, installation, maintenance, and repairs associated with performance contracts. The substantive factors shall be as follows: (1) experience in conversions to a different energy or fuel source, so long as it is associated with a comprehensive energy efficiency retrofit; (2) post-installation project monitoring, data collection, and reporting of savings; (3) overall project experience and qualifications; (4) management capability; (5) ability to access long-term financing; (6) experience with projects of similar size and scope; and (7) other factors determined by the governmental unit to be relevant and appropriate and relate to the ability to perform the project.

(b) Regarding requests for proposals, before entering into a performance contract under this Section, a governmental unit shall issue a request for proposals from up to 3 qualified energy service providers. A governmental unit may thereafter award the performance contract to the qualified energy service company or qualified provider that best meets the needs of the governmental unit, which need not be the lowest cost provided. A cost-effective feasibility analysis shall be prepared in response to the request for proposals. The feasibility analysis included in the response to the request for proposals shall serve as the selection document for purposes of selecting a qualified energy service provider to engage in final contract negotiations. Factors to be included in selecting among the selected energy service providers include contract terms, comprehensiveness of the proposal, comprehensiveness of cost-savings measures, experience, quality of technical approach, and overall benefits to the governmental unit.

Section 30. Investment grade audit and contract execution.

(a) One qualified energy service provider selected as a result of the process provided under subsection (b) of Section 25 shall prepare an investment grade energy audit, which, upon acceptance, shall be part of the final energy performance contract or energy services agreement which shall be executed with the governmental unit. The investment grade energy audit shall include estimates of the amounts by which utility cost-savings and operation and maintenance cost-savings would increase and estimates of all costs of such utility cost-savings measures or energy-savings measures, including, but not limited to, itemized costs of design, engineering, equipment, materials, installation, maintenance, repairs, and debt service.

(b) Notwithstanding the provisions of subsection (a), if after preparation of the investment grade energy audit the governmental unit decides not to execute an energy services agreement, and the costs and benefits described in the energy audit are not materially different from those described in the feasibility study submitted in response to the request for proposals, then the costs incurred in preparing the investment grade energy audit shall be paid to the qualified energy service provider by the governmental unit. Otherwise, the costs of the investment grade energy audit shall be deemed part of the costs of the energy performance contract or energy services agreement.

Section 35. Installment payment and lease-purchase agreements.

(a) A governmental unit may use designated funds, bonds, or master lease for any energy performance contract, including purchases using installment payment contracts or lease-purchase agreements, so long as that use is consistent with the purpose of the appropriation.

(b) A guaranteed energy performance savings contract may provide for financing, including tax-exempt financing, by a third party. The contract for third party financing may be separate from the energy performance contract. A separate contract for third party financing must include a provision that the third party financier must not be granted rights or privileges that exceed the rights and privileges available to the guaranteed energy performance savings contractor.

Section 40. Payment schedule and savings. Each performance contract shall provide that all payments between parties, except obligations on termination of the contract before its expiration, shall be made over time, and the objective of each energy performance contract is implementation of cost-savings measures and energy and operational cost-savings.

Section 45. Term of Contracts. An energy performance contract, and payments provided thereunder, may extend beyond the fiscal year in which the energy performance contract became effective, subject to appropriation of moneys, if required by law, for costs incurred in future fiscal years. The energy performance contract may extend for a term not to exceed 25 years. The allowable length of the contract may also reflect the useful life of the cost-savings measures. Energy performance contracts may provide for payments over a period of time not to exceed deadlines specified in the energy performance contract from the date of the final installation of the cost-saving measures.

Section 50. Allocation of obligations. Subject to appropriations as provided in Sections 30 and 35 of this Act, each governmental unit shall allocate sufficient moneys for each fiscal year to make payment of any amounts payable by the governmental unit under performance contracts during that fiscal year.

Section 55. Use of moneys; reconciliation.

(a) The governmental unit engaging in the performance contract shall retain the savings achieved by entering into the performance contract. In no event shall the governmental unit utilize those savings to supplant otherwise appropriated funds for the governmental unit.

(b) Unless otherwise provided by law or ordinance, a governmental unit may use funds designated for operating and capital expenditures or utilities for any performance contract, including, without limitation, contracts entered into under Section 25 of this Act.

(c) The energy performance contract may provide that reconciliation of the amounts owed under an energy performance contract shall occur in a period beyond one year with final reconciliation occurring within the term of the performance contract.

(d) The energy performance contract shall require the qualified provider to provide to the governmental unit an annual reconciliation of the guaranteed energy cost-savings. If the reconciliation reveals a shortfall in annual energy cost savings, the qualified provider is liable for that shortfall. If the reconciliation reveals an excess in annual energy cost savings, the excess savings may be used to cover potential energy cost-savings shortages in subsequent contract years.

Section 60. Monitoring; reports.

(a) During the term of each energy performance contract, the qualified energy service company or qualified provider shall monitor the reductions in energy consumption and cost-savings attributable to the cost-savings measures installed under the performance contract, and shall, no less than annually, prepare and provide a report to the governmental unit documenting the performance of the cost-savings measures to the governmental unit.

(b) The qualified provider or qualified energy service company and governmental unit may agree to make modifications in calculating savings based on any of the following occurrences:

(1) subsequent material change to the baseline energy consumption identified at the beginning of the performance contract;

(2) changes in utility rates;

(3) changes in the number of days in the utility billing cycle;

(4) changes in the total square footage of the building;

(5) changes in the operational schedule of the facility;

(6) changes in facility temperature;

(7) material change in the weather;

(8) material changes in the amount of equipment or lighting used at the facility; or

(9) any other change which reasonably would be expected to modify energy use or energy costs.

(c) For all projects carried out under this Act, the governmental unit shall report the name of the project, the project host, the investment on the project, and the expected energy savings to the Illinois Commerce Commission, and shall file with the Illinois Commerce Commission a copy of all reconciliation reports delivered under this subsection (c). The Illinois Commerce Commission may report energy savings from these projects to the federal Energy Information Administration under the Energy Policy Act of 1992 reporting standards.

Section 65. Contingency provisions. Performance contracts shall include contingency provisions in the event that actual savings do not meet predicted savings

Section 70. Use of savings from performance contracts. Governmental units may direct savings realized under the performance contract to contract payment and other expenses as they deem necessary. Governmental units are encouraged to reinvest savings whenever practical into cost-savings measures, so long as the governmental unit is satisfying all obligations under the performance contract.

Section 75. Act takes precedence; repeal of prior conflicting statutes. In case of any conflict between the provisions of this Act and any other law, the provisions of this Act shall prevail and control. The provisions of any statute enacted prior to this Act which are inconsistent with this Act are hereby repealed. The Attorney General shall consult with the Smart Energy Design Assistance Center (SEDAC) in construing this Section.

Section 100. The Illinois Procurement Code is amended by changing Sections 20-60 and 40-25 as follows:

(30 ILCS 500/20-60)

Sec. 20-60. Duration of contracts.

(a) Maximum duration. A contract may be entered into for any period of time deemed to be in the best interests of the State but not exceeding 10 years inclusive, beginning January 1, 2010, of proposed contract renewals. Third parties may lease State-owned dark fiber networks for any period of time deemed to be in the best interest of the State, but not exceeding 20 years. The length of a lease for real property or capital improvements shall be in accordance with the provisions of Section 40-25. The length of energy conservation program contracts or energy savings contracts or leases shall be in accordance with the provisions of Section 45 of the Energy Performance Contracting Act 25-45. A contract for bond or mortgage insurance awarded by the Illinois Housing Development Authority, however, may be entered into for any period of time less than or equal to the maximum period of time that the subject bond or mortgage may remain outstanding.

(b) Subject to appropriation. All contracts made or entered into shall recite that they are subject to termination and cancellation in any year for which the General Assembly fails to make an appropriation to make payments under the terms of the contract.

(c) The chief procurement officer shall file a proposed extension or renewal of a contract with the Procurement Policy Board prior to entering into any extension or renewal if the cost associated with the extension or renewal exceeds $249,999. The Procurement Policy Board may object to the proposed extension or renewal within 30 calendar days and require a hearing before the Board prior to entering into the extension or renewal. If the Procurement Policy Board does not object within 30 calendar days or takes affirmative action to recommend the extension or renewal, the chief procurement officer may enter into the extension or renewal of a contract. This subsection does not apply to any emergency procurement, any procurement under Article 40, or any procurement exempted by Section 1-10(b) of this Code. If any State agency contract is paid for in whole or in part with federal-aid funds, grants, or loans and the provisions of this subsection would result in the loss of those federal-aid funds, grants, or loans, then the contract is exempt from the provisions of this subsection in order to remain eligible for those federal-aid funds, grants, or loans, and the State agency shall file notice of this exemption with the Procurement Policy Board prior to entering into the proposed extension or renewal. Nothing in this subsection permits a chief procurement officer to enter into an extension or renewal in violation of subsection (a). By August 1 each year, the Procurement Policy Board shall file a report with the General Assembly identifying for the previous fiscal year (i) the proposed extensions or renewals that were filed with the Board and whether the Board objected and (ii) the contracts exempt from this subsection.

(d) Notwithstanding the provisions of subsection (a) of this Section, the Department of Innovation and Technology may enter into leases for dark fiber networks for any period of time deemed to be in the best interests of the State but not exceeding 20 years inclusive. The Department of Innovation and Technology may lease dark fiber networks from third parties only for the primary purpose of providing services to (i) to the offices of Governor, Lieutenant Governor, Attorney General, Secretary of State, Comptroller, or Treasurer and State agencies, as defined under Section 5-15 of the Civil Administrative Code of Illinois or (ii) for anchor institutions, as defined in Section 7 of the Illinois Century Network Act. Dark fiber network lease contracts shall be subject to all other provisions of this Code and any applicable rules or requirements, including, but not limited to, publication of lease solicitations, use of standard State contracting terms and conditions, and approval of vendor certifications and financial disclosures.

(e) As used in this Section, "dark fiber network" means a network of fiber optic cables laid but currently unused by a third party that the third party is leasing for use as network infrastructure.

(Source: P.A. 100-23, eff. 7-6-17; 100-611, eff. 7-20-18; revised 10-11-18.)

(30 ILCS 500/40-25)

(Text of Section before amendment by P.A. 100-1047)

Sec. 40-25. Length of leases.

(a) Maximum term. Leases shall be for a term not to exceed 10 years inclusive, beginning January, 1, 2010, of proposed contract renewals and shall include a termination option in favor of the State after 5 years. The length of energy conservation program contracts or energy savings contracts or leases shall be in accordance with the provisions of Section 25-45.

(b) Renewal. Leases may include a renewal option. An option to renew may be exercised only when a State purchasing officer determines in writing that renewal is in the best interest of the State and notice of the exercise of the option is published in the appropriate volume of the Procurement Bulletin at least 60 calendar days prior to the exercise of the option.

(c) Subject to appropriation. All leases shall recite that they are subject to termination and cancellation in any year for which the General Assembly fails to make an appropriation to make payments under the terms of the lease.

(d) Holdover. Beginning January 1, 2010, no lease may continue on a month-to-month or other holdover basis for a total of more than 6 months. Beginning July 1, 2010, the Comptroller shall withhold payment of leases beyond this holdover period.

(Source: P.A. 100-23, eff. 7-6-17.)

(Text of Section after amendment by P.A. 100-1047)

Sec. 40-25. Length of leases.

(a) Maximum term. Except as otherwise provided under subsection (a-5), leases shall be for a term not to exceed 10 years inclusive, beginning January, 1, 2010, of proposed contract renewals and shall include a termination option in favor of the State after 5 years. The length of energy conservation program contracts or energy savings contracts or leases shall be in accordance with the provisions of Section 45 of the Energy Performance Contracting Act 25-45.

(a-5) Extended term. A lease for real property owned by the University of Illinois to be used by the University of Illinois at Chicago for an ambulatory surgical center, which would include both clinical services and retail space, may exceed 10 years in length where: (i) the lease requires the lessor to make capital improvements in excess of $100,000; and (ii) the Board of Trustees of the University of Illinois determines a term of more than 10 years is necessary and is in the best interest of the University. A lease under this subsection (a-5) may not exceed 30 years in length.

(b) Renewal. Leases may include a renewal option. An option to renew may be exercised only when a State purchasing officer determines in writing that renewal is in the best interest of the State and notice of the exercise of the option is published in the appropriate volume of the Procurement Bulletin at least 60 calendar days prior to the exercise of the option.

(c) Subject to appropriation. All leases shall recite that they are subject to termination and cancellation in any year for which the General Assembly fails to make an appropriation to make payments under the terms of the lease.

(d) Holdover. Beginning January 1, 2010, no lease may continue on a month-to-month or other holdover basis for a total of more than 6 months. Beginning July 1, 2010, the Comptroller shall withhold payment of leases beyond this holdover period.

(Source: P.A. 100-23, eff. 7-6-17; 100-1047, eff. 1-1-19.)

(30 ILCS 500/25-45 rep.)

Section 105. The Illinois Procurement Code is amended by repealing Section 25-45.

Section 995. No acceleration or delay. Where this Act makes changes in a statute that is represented in this Act by text that is not yet or no longer in effect (for example, a Section represented by multiple versions), the use of that text does not accelerate or delay the taking effect of (i) the changes made by this Act or (ii) provisions derived from any other Public Act.

Section 999. Effective date. This Act takes effect upon becoming law.