Since the late-1980s the State Energy Conservation Office of the Texas Comptroller’s Office has managed the LoanSTAR Revolving Loan Program that provides loans to finance energy and water efficiency measures for public facilities (state, public school districts, public colleges and universities and public hospital taxing districts). One of the contracting mechanisms that borrowers utilize to repay the loans is a guaranteed energy savings performance contract (GESPC) vehicle where the energy cost savings realized by the projects repay the prinicple and interest.
Since its inception, LoanSTAR has funded more than 290 loans totaling more than $460 million. These projects have a total cumulative energy savings exceeding $528 million.
Typical of a LoanSTAR project, is the City of Tyler’s GESPC. In 2001 the City of Tyler replaced more than 31,000 water meters. The project saved on average $500,000 a year more than financing cost. The loan was repaid from the energy savings in 2013 – and since that time the city is realizing $2 million annually in energy cost savings and new revenue generated by meter accuracy.
The terms for a LoanSTAR performance contracting project differ from the state laws that govern all GESPC projects. Any public entity in Texas may participate in a GESPC independent of the LoanSTAR program. The state has separate statutes for these GESPC projects, with separate requirements for each market sector. The maximum length of contract allowed by statute is 20 years (15 years for LoanSTAR). State statute allows more flexibility in the scope of work that is included in a GESPC project versus a LoanSTAR project. GESPC projects can include any and all measures that pay for themselves in energy savings alone, in addition to allowing for operational savings, use of water and renewable technologies that save or generate revenue.
The state’s GESPC statutes have been amended in recent years to incorporate new provisions. In 2013, SB 533 provided new guidance for the review of cost savings to state agencies and institutions of higher education. In 2015, the legislature passed HB 1184 that authorized alternative fuel for fleet vehicles as eligible for local government energy savings performance contracts.
State statutes require a savings guarantee and allows that the guarantee can be satisfied by stipulation. While energy savings are diverted to pay the cost of the energy improvement, agencies are not allowed to keep or retain savings in excess of the contract as part of their department’s budget.
Over the years Texas state agencies, municipalities, universities, schools and hospitals have produced a number of success stories demonstrating the benefits of a Guaranteed Energy Savings Performance Contract. A sampling of these successes include:
- The City of Dallas has used the state’s GESPC statues numerous times to benefit its citizens. The city entered its first GESPC in 2001, targeting traffic lights. In 2003 City Hall entered a GESPC for the municipal airport at Love Field and the downtown Convention Center. In 2006 the city’s water meters were replaced through a GESPC, and in 2007 the city's museum was made more energy efficient through a performance contract, and the following year additional savings resulted from a bio gas project at the city’s water plant. All of these GESPC projects have exceeded 30 percent energy savings – some achieving 40 to 50 percent savings.
- In 2017 the Point Isabel Independent School District’s GESPC project was honored for its leadership and commitment to energy initiatives that have procured sustained impacts over time. The school district pursued a $4.3 million GESPC as part of a long-term economic growth and sustainability plan after recognizing a long list of deferred maintenance projects due to tight budgets and rising utility costs. The energy improvements will generate over $4.5 million in guaranteed energy savings over the term of the contract and is expected to reduce the district’s annual energy cost by 36 percent, saving on average $225,319 per year.
- In 2017 the Texoma Childress Regional Medical Center’s GESPC saved the Texoma hospital $189,219 in operational savings.
- After years of deferred maintenance due to tight budgets and rising utility costs, the Gunter Independent School District entered a GESPC in 2016. The total cost of the project was $2.1 million but the guaranteed savings for the district is $2.3 million. The project is expected to reduce the district’s utility budget by 37 percent, saving more than $112,564 in annual energy costs.
- In 2015, the Water Environment Research Foundation recognized the City of Fort Worth's Village Creek Water Reclamation Facility (VCWRF) with its Award for Excellence in Innovation for the implementation of a series of sustainable facility upgrades. VCWRF executed a $35-million 12-year GESPC with the goal of energy neutrality through improving electrical facilities. To date, this project has reduced electrical consumption by an additional 39 percent, allowing VCWRF to meet up to 75 percent of its energy demand. The contract is guaranteed to reduce electrical cost by approximately $2.5 million annually.
- In 2014, the city of Clute signed a $5.7 million GESPC that includes lighting upgrades and water meter replacements, as well as the installation of a new wastewater treatment plant. Clute’s existing metering system had numerous inefficiencies amounting to more than $250,000 per year in lost water revenue.
The LoanSTAR program provides oversight of GESPC projects funded under its auspices, but Texas does not have a GESPC program administrator responsible for independent project oversight. Still, any state agency entering a GESPC must use the standardized contract instruments that have been preapproved for state facilities. The standardized instruments are posted on a publicly available website.
Although the state benchmarks energy consumption for state facilities, university facilities and cities and towns, it does not receive M&V reports nor does it track or maintain a list of GESPC projects in the state independent of the LoanSTAR revolving loan program.
Texas has established the nation's largest ESC Chapter and is meeting on a regular basis. Check the Chapter's upcoming events for dates and times of Chapter meetings.