Energy performance contracting is a method of procurement that enables public entities to select a partner in making energy efficiency improvements to their facilities, without the need for capital expenditures. Enabled in Utah by the State legislature (Utah Code 11-44) this method of construction has three significant requirements:
- annual savings must exceed annual project repayment cost;
- guarantees are required to ensure savings; and,
- annual reporting is required to verify savings are being realized.
These requirements protect the interests of the public entity.
Siemens will evaluate a process and if there is an opportunity for the public entity to save money, will design, build, and operate the facilities to ensure its success. The public entity will then apply the savings from the improvements toward project repayment over the repayment term. As mentioned previously, by State statute, all projects must be cash flow positive each year during the project repayment term. The public entity will receive the difference between the annual savings and the annual project repayment costs. Upon complete payment, the public entity will take over the operation of the facilities and reap the full annual savings thereafter. The provisions of the State law protect the public entity. The State also maintains a list of pre-qualified Energy Performance Contractors.