HLP C.S.H.B. 1243 75(R)BILL ANALYSIS ENERGY RESOURCES C.S.H.B. 1243 4-11-97 Committee Report (Substituted) BACKGROUND In 1992, the Legislature authorized higher education institutions to enter into performance contracts for energy conservation measures to reduce energy consumption and operating costs at institutional facilities. These contracts provide a cost-effective way to fund facilities' improvements without increasing the need for state appropriations or relying on limited state funded loan programs. Energy performance contracts do not require the institutions to cover initial costs; the contractor pays for all project engineering, equipment and construction, and is paid back from annual energy cost savings within a 10-year period. Also, the contractor guarantees that a certain level of energy savings will be achieved; if not, the contractor must return the difference. PURPOSE As proposed, C.S.H.B. 1243 would allow a county, municipality, or other political subdivision of this state to also enter into a contract for energy conservation measures. RULEMAKING AUTHORITY It is the committee's opinion that this bill does not expressly grant any additional rulemaking authority to a state officer, department, agency or institution. SECTION BY SECTION ANALYSIS SECTION 1: Amends Subtitle C, Title 9, Local Government Code, by adding Chapter 302 to read as follows: Sec. 302.001. Defines "local government". Sec. 302.002. CONTRACT FOR ENERGY CONSERVATION MEASURES (a) states that a local government may enter into an energy conservation contract in accordance with this chapter. (b) states that the contract authorizes the installation of: 1) insulation of the building structures and systems; 2) window or door modifications that reduce energy consumption; 3) automatic energy control systems; 4) heating, ventilating, or air-conditioning system modifications or replacements; 5) energy efficient lighting fixtures; 6) energy recovery systems; 7) electric systems improvements; or 8) other energy conservation-related improvements or equipment (including improvements or equipment related to renewable energy). (c) states that all energy conservation measures must comply with current local, state, and federal construction and environmental codes and regulations. Adds a restriction against any use of nonpotable water in any condensing, cooling or industrial process that the public water supply system officials do not have control over, to be returned to the potable water supply. Sec. 302.003. PAYMENT AND PERFORMANCE BOND. Allows the governing body of the local government, at its option, to require a payment and performance bond for the installation of energy conservation measures. The bond may also cover the value of the guaranteed savings on the contract. Sec. 302.004. LEASE-PURCHASE CONTRACT AUTHORIZED. States that a contract may be a lease/purchase contract with a term up to 10 years, that meets federal tax requirements for tax-free municipal leasing or long-term financing. The contract must guarantee the amount of savings. Requires that no one year's cost to the local government will exceed the year's savings. Sec. 302.005 BIDDING PROCEDURES; AWARDS OF CONTRACT. (a) states that contracts under this chapter may be let under competitive bidding procedures. Requires notice of request to be published in a manner of competitive bidding and that such requests solicit quotations and specify the relative importance of certain evaluation factors. (b) states that following negotiations the contract shall be awarded to the offerer whose proposal is determined most advantageous to the local government. (c) states that the local government may allow proposal revisions before awarding the contract. SECTION 2. Emergency Clause. Effective Date: Upon Passage. COMPARISON OF ORIGINAL TO SUBSTITUTE SECTION 1. 302.001 Adds language excluding school districts from this act. 302.002 (b)(8) is added to authorize installation of other energy conservation-related improvements including renewable energy sources. Adds (c) which requires compliance with local, state, and federal laws and regulations, and excludes devices that use and then return potable water from the public water supply for nonpotable uses. 302.003 Makes the payment and performance bond optional and provides for the option of bonding the savings and/or the installation of the measures. 302.004 Adds language requiring that the contract contain provisions guaranteeing the amount of savings. Also adds language requiring yearly reconciliation, and specifies that the contract term begins after the date of final installation. 302.005 (a) Adds the relative importance of the guaranteed savings to the list of criteria. (b) No change. New (c), (d), and (e) are added to provide for the opening of and negotiation of proposals prior to the awarding of a contract. (c) changed to (f). SECTION 2. No change.