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

• Attractive borrowing rates: 1%-5% effective interest rate

• Issuer gets 3%-4% subsidy from Treasury

• 15 to 22-year term

Initially created by Congress in 2008; greatly expanded by ARRA Total national allocation is $3.2 billion; Tennessee allocation is $64,676,000 Issued for qualified energy efficiency, renewable energy, and energy conservation 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 electricity produced from renewable

energy resources

• Energy-related research facilities and research grants

• Mass commuting facilities

• Demonstration projects (for energy-related processes)

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 (prevailing) wage and benefit requirements apply to projects funded with QECBs. Other ARRA requirements, such as Buy American, monitoring and audits, may apply Issued as revenue bonds or general obligation bonds

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Large Local Jurisdictions Allocations

Large Local Jurisdictions in TN received 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

Additional $9.9 million from original LLJ total intended for

issuance, for total of $18 million

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QECB 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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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

year 1 and up to $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 42,000 streetlights

• $2.0 million annual savings in operation and maintenance

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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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Next Steps:

Utilization and Competitive Sub-Allocation

• OEP 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 state government allocation.

• Total allocation will be available to all qualified local

governments, public universities, 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;

anticipated total is $45,295,100

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Next Steps (continued):

Utilization and Competitive Sub-Allocation

• OEP will evaluate requests for QECB allocations through

a competitive process; guidelines in development.

• RFP will be released in Fall 2013.

• Competitive sub-allocation process will still require

adherence to appropriate regulations and conditions of

original allocation.

• End result: more places across TN saving money!

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Next Steps:

Workshops to Assist Eligible Entities

• Workshops will be held showcasing QECBs:

– September 3: Nashville

– September 6: Knoxville

– September 11: Jackson

– September 12: Chattanooga

All workshops will be from 10:30-1:30 local time. Locations and

registration will be available at http://tnenergy.org/events/

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