Don’t let common myths mislead you about the real benefits of implementing a Performance Contract. While a Performance Contract will result in significant energy savings without additional appropriation of tax dollars, it is a construction project. Choosing an experienced professional can make your project implementation successful.
“Performance contracting sounds too good to be true”
Performance Contracting (PC), when executed by a reputable firm will save money and significantly enhance the indoor environmental quality of your facilities. PC is the only contracting vehicle available that can be guaranteed to deliver both energy efficiency and badly needed mechanical infrastructure with no additional county appropriations, bond issuance, or county tax increase required.
“We don’t have any funds for projects like this”
Each governmental unit in North Carolina is allowed to borrow the funds directly from a finance institution as enabled by NC G.S.: 142-64. This is a major advantage of PC; no additional state, local appropriations or private dollars are required. The Energy Services Company (ESCO) you choose will assist in arranging the project’s financing that will be paid back with the guaranteed energy savings realized from the new systems and equipment. The Performance Contract and the finance agreement terms are customized to meet your needs and finance terms usually range from 10 to 15 years.
“We can’t afford to risk losing any money”
The customer is the real winner since a performance contract guarantees the amount of the project’s energy savings. The ESCO will write a check for any energy savings shortfalls as defined in the contract.
“We don’t know how to get started”
Energy Service Companies can assist in getting organized for the RFP process. You may also contact the North Carolina Department of Environmental Quality Utility Savings Initiative for additional assistance.
“What we really need is some new, modern, efficient equipment”
New, efficient equipment is one of the main benefits provided by PC. Any new equipment that is provided as part of the project is paid for over time with the guaranteed energy savings, not additional state or county appropriations. Often this is equipment that the customer could not afford to purchase due to lack of capital funds.
“Our maintenance staff can do all this work. We don’t need to hire an outside contractor and borrow the money”
Most in-house staffs don’t have the time or money to properly implement a comprehensive energy efficiency system retrofit. Additionally, delaying the decision to implement a Performance Contract almost always costs more than any construction savings that might be realized by executing an in-house program. The cost of project delay is usually much higher than the cost of financing. None of the wasted energy dollars spent during a project delay can be recovered once they are spent.
“Energy service companies do not keep their promises”
Selecting an experienced professional is an important aspect of a PC. Their associates will spend hundreds of hours preparing estimates and proposals that are based on sound engineering and industry best practices. In the unlikely event that the annual guaranteed energy savings are not achieved, the ESCO will write a check for the difference per the terms of the contract.
“Energy service companies keep too much of the savings”
Some energy savings contracts consist of very basic “behavior modification” training and other methods. These programs claim to be “risk free” as fees are not paid to the vendor unless savings are achieved. These vendors then keep up to 40% of their calculated savings and the customers are locked in to a contract for up to four years. This can cost the customer hundreds of thousands or even millions of dollars! Under a Performance Contract, the customer keeps 100% of the savings which are used to invest in the new equipment provided under the Performance Contract.
“Does the State of North Carolina support the PC process?”
Over the past several sessions, the North Carolina legislature has shown its strong support for PC by raising the cap on loans for state government Performance Contracts from zero to $50 million to $100 million and then to the current $500 million limit. Today’s PC is better and more refined than those contracts from several years ago. The PC process has undergone significant improvements and delivers real tangible and verifiable savings to state and local governmental units across North Carolina. All PC requires a performance guarantee and can only be delivered by NC Pre-Certified Energy Service Companies (ESCOs). Not only are the public Performance Contracts in NC guaranteed, these guarantees must be backed by financial instruments that are “investment grade” and all Performance Contracts are approved by the North Carolina Local Government Commission.
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