Qualified Energy

Conservation Bonds

Pete Westerholm Program Manager TDEC Office of Energy Programs

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QECB Background

Low interest bonds for qualified energy projects

• 1%-5% effective interest rate for issuer

• Issuer gets 3%-4% subsidy from Treasury

• 15 to 22-year term

Initially created by Congress in 2008; greatly expanded by ARRA in 2009 Total national allocation is $3.2 billion; Tennessee allocation is $64,676,000 Issued for qualified energy efficiency capital expenditures; qualified projects are broadly defined

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QECB Qualified Projects

Capital expenditures incurred for purposes of:

• Reducing energy consumption in publicly-owned buildings by at

least 20 percent

• Implementing green community programs (including the use of

loans, grants, or other repayment mechanisms to implement such

programs)

• Rural development involving the production of electricity from

renewable energy resources

• Certain research facilities and research grants

• Mass commuting facilities

• Demonstration projects

In Tennessee, bonds can only be issued if physical asset

development or improvement is critical component of project

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QECB Criteria

1. 100% of the available project proceeds from issuance must be used for one or more qualified conservation purposes,

2. Bond is issued by a state or local government, and

3. Issuer designates such bond for the eligible purposes.

Also: Up to 30% of Tennessee’s QECB allocation may be used for private activity Federal Davis-Bacon wage and benefit requirements apply to projects funded with QECBs. Other ARRA requirements, such as Buy American, monitoring and audits, may apply

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Large Local Jurisdictions Allocations

Large Local Jurisdictions in TN receive a share of the $64.7 million

based on their percentage of the population

• Cities with populations of 100,000 or more

• Counties with populations of 100,000 or more, not including any cities within

the county that are large local governments

15 entities in TN received allocations, totaling $35.9 million.

Blount County, Chattanooga, Clarksville, Hamilton County, Knox County, Knoxville, Memphis, Metro Nashville, Rutherford County, Shelby County, Sullivan County,

Sumner County, Washington County, Williamson County, Wilson County

“Allocation designees” may: • Authorize an eligible public entity such as a Development Authority to issue

QECBs

• Allocate all or a portion to an unrelated political subdivision within its jurisdiction (such as a city in a county – conduit issuer relationship)

• Reallocate to the State

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Large Local Jurisdiction Utilization:

Examples in TN

Nashville, TN

$6,440,000 allocation on energy efficiency upgrades for

downtown Arena (Aug 2012)

Chattanooga, TN

$1.7 M for streetlight upgrades (expected Fall/Winter 2013)

This represents over $8.1 million already utilized or planned

from the original $35.9 million total for LLJs in TN

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Large Local Jurisdiction Utilization:

Examples Elsewhere

Manchester, NH

$1.1 M for energy efficiency in schools; $450,900 year one savings

Littleton, CO

$1 M for hockey arena (HVAC, lighting, ice machines); 25% annual savings

Louisiana

$31 M energy efficiency upgrades (boilers, chillers, etc) for 9 state prisons, paid back over 20 years

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Allegheny County, PA (Pittsburgh):

Municipal Building Efficiency Improvements

• $9.3 million QECB for energy efficiency improvements to

County Jail and Regional Center = positive cash flow of $1.56

million annually

• Lighting & HVAC, new waste disposal system and domestic

water pumping upgrades for jail, water upgrades and new high

efficiency boilers for the regional center

Initial guaranteed energy savings agreement project (both buildings)

$14,186,509

EECBG (Energy Efficiency and Conservation Block Grant) $4,848,602

QECB $9,337,907

1st year annual guaranteed energy savings (Starting 2012) $2,107,866

1st year payment (Starting 2012) ($523,994)

Measurement and verification service payment ($24,219)

1st year annual positive cash flow $1,559,653

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Yolo County, CA:

Solar Power at Correctional Facilities

• 1 MW solar photovoltaic (PV) supplies power to both a jail and

juvenile center

• Finance was a mix of new CREBs, QECBs, a California Energy

Commission (CEC) loan, a Pacific Gas and Electric (PG&E)

rebate, and a Tax Exempt Lease Program (TELP) loan

• 3.9 percent interest rate with a 15 year tenor for QECBs

• Anticipating net positive cash flow of $100,000 per year starting

in year 1 and $600,000 per year starting in year 16 in utility

expenditures

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Las Vegas, NV:

Streetlight Retrofit Project

• Las Vegas received $5.8 million for facilities upgrades, large

portion of which was used for 52,000 streetlights

• $1.7 million in annual operational savings

• $1.0 million in annual maintenance savings, $2.7 M total

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Next Steps:

Utilization and Competitive Sub-Allocation

• OEP has requested that all 15 Large Local Jurisdictions

determine usage of QECB allocation by June 30, 2013.

• Allocations not utilized by LLJs and reallocated to the

State will be combined with unused state government

allocation.

• State allocation not used for State building projects will be

available to qualified local governments, state educational

institutions, and private entities through a competitive

sub-allocation process.

• OEP is currently evaluating the level of funding to be

dedicated to the competitive round of sub-allocations.

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Next Steps (continued):

Utilization and Competitive Sub-Allocation

• OEP will evaluate requests for QECB allocations through

a competitive application process in October 2013.

• Rules for the sub-allocation process are in development.

• Competitive sub-allocation process will still require

adherence to appropriate regulations and conditions of

original allocation.

Thank You

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OEP Energy Hotline: 615-741-2994

TDEC OEP Website

http://www.tn.gov/environment/energy/qualified-energy-conservation-bonds.shtml

Pete Westerholm Program Manager TDEC Office of Energy Programs Katie Southworth Program Manager TDEC Office of Energy Programs