ATTACHMENT 1

TOWN OF CHAPEL HILL

ENERGY BANK

POLICIES and PROCEDURES MANUAL

I.  Introduction

(a) The purpose of this manual is to publish policies and procedures for the administration of the Town of Chapel Hill Energy Bank.

(b) In the November 4, 2003 bond referendum, the citizens of the Town of Chapel Hill voted in favor of a $500,000 (current balance is $475,000) bond for creation of an Energy Bank. The purpose of these bond funds is to acquire, construct, equip and install energy efficient facilities in certain existing public buildings, including, without limitation, the acquisition of lighting, heating, ventilating, air conditioning and related fixtures, machinery and equipment.  It is envisioned that the documented savings attributable to projects completed with these funds will be used to reimburse the fund for the cost of the project.

(c) The physical plant of the Town of Chapel Hill includes about 470,000 square feet in 47 buildings and 336 units of public housing.   The total annual cost of the utility bills (electricity, natural gas and water) for these facilities is about $1,538,000 which represents about 57 percent of the Town’s total energy bill.  The remaining 43 percent of the Town’s energy bill is for fuel for the automotive fleet and transit buses.

(d) The Town of Chapel Hill recognizes that energy use associated with the operation of its physical plant exacerbates local air quality problems.

(e) The Town of Chapel Hill recognizes that it has a significant role to play in improving local air quality and reducing emissions by improving the energy efficiency of its buildings.

(f) The Town of Chapel Hill recognizes that by improving the energy efficiency of its buildings, significant monetary savings will result in the long term.

(g) The Town of Chapel Hill wishes to exercise its power as a participant in the marketplace to ensure that purchases and expenditures of public funds are made in a manner consistent with the policy of improving local air quality, reducing harmful emissions and conserving public resources.  To that end, the Town Council adopted the Leadership in Energy and Environmental Design (LEED) Commercial Green Building Rating System as the Town’s standard for the construction and renovation of Town owned facilities on May 9, 2005.

II.   Energy Bank Policy

(a) It shall be the policy of the Town of Chapel Hill to operate and maintain an “Energy Bank” fund with a beginning balance of $475,000 provided by a bond sale subsequent to the November 4, 2003 bond referendum.  The purpose of this fund shall be to provide financing for energy efficiency projects on Town owned facilities that meet the criteria set forth herein.

(b) The Town Manager shall establish a three-person “Energy Bank Management Committee” for the purpose of reviewing project proposals and submitting recommendations for project approval to the Town Manager.  The members of the “Energy Bank Management Committee” shall be as follows:

(1) Public Works Director (Committee Chairperson) (or designee).  The Public Works Director will be supported and assisted by staff members of the Sustainability and Facilities Management Division.

(2) Planning Director (or designee).  The Planning Director will be supported and assisted by a Planner with staff cognizance over the Energy Bank Program.

(3) Finance Director (or designee).  The Finance Director will be supported and assisted by an Accountant with staff cognizance over the Energy Bank Program.    

(c) It shall be the policy of the Town of Chapel Hill that, for projects costing $100,001 or above, the Town Manager shall require an “energy audit” to be performed by a qualified engineering consultant to compare the costs and benefits of the project and to determine the estimated pay back period for the project.  For projects of $100,000 or less, the Town Manager may employ an engineering consultant or may elect to have a cost-benefit analysis performed by qualified members of the Town staff.

(d) It shall be the policy of the Town of Chapel Hill that, funds allocated from the Energy Bank shall be repaid by transfers from the beneficiary fund(s) over a period not to exceed seven years.  It is anticipated that there would be offsetting reductions in the utility accounts of the beneficiary fund.  The repayments schedule will be in a specified number of equal annual payments negotiated at the time of project approval.   

(e) It shall be the policy of the Town of Chapel Hill that in order to qualify for project funds from the Energy Bank, a project must meet the following criteria:

(1)  The project must be an improvement to existing facilities.  Projects for the construction of new facilities are not eligible.

(2) Energy Bank funds must be expended on the design, acquisition and installation of actual energy saving improvements.  Energy studies/audits, and energy measuring/monitoring equipment are not eligible expenses.

(3) The payback period for the project may not exceed seven years for those projects approved by the Town Manager, the Energy Bank Management Committee or the Public Works Director.  Only the Town Council may approve projects with payback periods in excess of seven years.

(4) Projects with payback periods of one year or less are eligible for Energy Bank funding; however, such projects should generally be funded directly from the operating budget of the affected department.

III. Energy Bank Administrative Procedures

(a) Staff  Responsibilities

(1) Town Manager. The Town Manager will have overall responsibility for the administration of the Energy Bank.

(2) Public Works Director.  The Public Work Director shall serve as the Chairperson of the “Energy Bank Management Committee” and shall have staff cognizance over that portion of Energy Bank Management that relates to project development, project management, engineering analysis of candidate projects and measurement of the resultant savings from completed projects.  This shall include providing assistance to other departments in the preparation of project nominations and cost-benefit analysis for projects under $100,000.

(3) Finance Director. The Finance Director shall be a member of the “Energy Bank Management Committee” and shall have staff cognizance over that portion of Energy Bank management that relates to dispersing of project funding from the Energy Bank fund, transfer of payments to the Energy Bank fund, and general budgeting/accounting for the assets of the Energy Bank.

(4) Planning Director. The Planning Director shall be a member of the “Energy Bank Management Committee.”

(5) Applicant. Applicants for Energy Bank project funding shall be responsible for preparing a project nomination memorandum including the information outlined in paragraph III (b) (2) i through v below. 

(b) Project Initiation. An Energy Bank Project may be initiated by any of the following means:

(1) Department heads may request Energy Bank funding to supplement facility renovation projects as part of the annual Capital Improvement Budget submission process.  A cost-benefit analysis must be submitted with the project budget to support the request.  Paragraph II. (c) applies.   

(2) Department heads may request Energy Bank funding for specific projects at any time during the year by submitting a project nomination memorandum to the Energy Bank Management Committee via the Public Works Director.  At a minimum, the project nomination memorandum should include:

i.  A statement of the scope of work (project description).

ii. A project budget showing all funding sources and indicating what percentage of the project will be paid for using Energy Bank funds.

iii.  A cost-benefit analysis and estimated simple pay back period.  Paragraph II. (c) applies.   

iv.  A recommended payment schedule.  The schedule should be expressed in a specific number of equal annual payments over a period not to exceed seven years.

v. A description of the methodology for measuring and reporting the resultant energy savings attributable to the project.

(3) Any Town employee may nominate a project for Energy Bank funding by submitting a project nomination to their department head.  The department head may process employee generated projects by including them in the next regular Capital Improvement Budget submission or by forwarding them to the Energy Bank Management Committee for consideration with a recommendation for approval.  The department head also has the option to reject employee generated requests and return them to the originator with a reason for disapproval of the request.            

(c) Project Review and Approval Process.  

(1) Projects of $5,000 or less.  Projects of $5,000 or less may be approved by the Public Works Director.  The Public Works Director will notify the requesting party of his approval or rejection of the project by memorandum or e-mail with a copy to the Finance Director and the Planning Director.  Upon receiving approval for the project, the designated project manager may proceed to submit the required purchase order requisitions and/or contract documents in accordance with the Town’s purchasing and contracting polices and procedures. The Finance Director will assign project accounting codes to the project as appropriate under existing purchasing and contracting polices and procedures. The Public Works Director will include information on approved projects in a quarterly report to the Council Committee on Sustainability, Energy and Environment.

(2) Projects of $5,001 to $50,000.   The “Energy Bank Management” Committee shall meet as needed to consider project applications for Energy Bank projects of $5,001 or greater.  The committee may elect to simply review the written project proposal or may call upon the designated project manager to brief the committee on the project.  The Energy Bank Management Committee may approve project funding requests of $50,000 or less without further review.  The committee’s decision on each project proposal shall be communicated in the minutes of the meeting.  A copy of the minutes shall be the project manager’s authority to proceed on approved projects.  The Public Works Director will provide a copy of the minutes to the Council Committee on Sustainability, Energy and Environment and will include information on approved projects in a quarterly report to the Council Committee on Sustainability, Energy and Environment.

(3) Projects of $50,001 to $100,000.  For project proposal of $50,001 to $100,000, the Energy Bank Management Committee will submit their recommendations for approval or rejection of the project to the Town Manager.  The Town Manager may approve requests of $100,000 or less without further review.  The Manager’s decision on each project proposal shall be communicated by memorandum to the requesting party.  A copy of the memorandum reporting the Manager’s approval of the project shall be the project manager’s authority to proceed with the project. The Town Manager will prepare an information report to the Mayor and Town Council for each approved project prior to initiation of the project.  

(4) Projects of $100,001 or more.   For projects of $100,001 or more, the Energy Bank Management Committee will submit their recommendations for approval or rejection of the project to the Town Manager along with a draft Town Council agenda item when a project is recommended for approval.  Upon the Manager’s approval, the agenda item recommending project approval will be forwarded to the Town Council for final approval at their next regular business meeting.  If the project is approved, a copy of the minutes of the Council meeting shall be the project manager’s authority to proceed with the project.    

(d) Accounting and Financial Procedures.  It shall be the responsibility of the Finance Director to provide accounting and financial services for the administration of the Energy Bank.

(1) Disbursement of Project Funding.  Upon approval of an Energy Bank project, the Finance Director shall provide the designated project manager with an account number (organization code, object code and project code) against which approved project expenses may be charged.

(2) Energy Bank Fund Replenishment.  The Finance Director shall establish an Energy Bank Fund and provide a system to allow funds to reimburse the Energy Bank Fund for the cost of completed projects over a period of no more than seven years.  The cost of completed projects will be divided by the reinvestment period to establish how much should be repaid each year.  We anticipate that the cost of utilities will decrease by an amount at least equal to the annual transfers.

(3) Energy Bank Financial Reports.  The Finance Director shall be responsible for including a report of the status of Energy Bank accounts in the Manager’s quarterly report to the Town Council.  At minimum, the report will show:

i. The available balance of the Energy Bank.

ii. The total amount of funds outstanding.

iii. A list of outstanding projects with the original project funding amount, and remaining balance due.

IV. Monitoring Performance of Energy Bank Projects

(a) Measuring Results. In order to evaluate the success of this program, it is essential that each Energy Bank funded project include a plan for measuring energy consumption before and after the project.  For projects with a large impact, it may be sufficient to compare the overall consumption of utilities before and after the project for a one year period.  This data can be collected directly from utility bills.  For smaller scope projects, it may be necessary to install metering devices that isolate the affected area of a building.  The utility consumption baseline for projects related to heating and cooling should be establish for one full year to account for seasonal differences.  For projects where utilities consumption rates are less weather dependent and less variable, the baseline measurement period may be reduced to a much shorter period.  In these cases, the data collected over the shorter monitoring period may be used to calculate an estimated annual consumption and an estimated annual savings.

(b) Reporting Results. The Public Works Director shall be responsible for including a report on the resultant saving attributable to each completed Energy Bank project in the Manager’s quarterly report to the Town Council.  Each report should include a graphical representation of the results and a brief narrative discussion of the results.  Each project will appear in five successive quarterly reports beginning with the first report after project completion.  At minimum, the report will show:

i. Baseline utility consumption before the project.

ii. Utility consumption after project completion

iii. Measured or estimated savings in Kwh of electricity, CCF of natural gas or gallons of water.

iv. Measured or estimated savings in dollars.

v. Carbon emissions reductions attributable to the project.

vi. Weather related reports will be normalized using heating/cooling degree day data for the period covered.

vii. Reports showing dollar savings will be normalized to account for utility rate changes.

viii. The final report on each project will recommend corrective actions for those projects that do not demonstrate the expected level of savings.

      (c) Renegotiation of Project Funding Agreements.  At the end of the one-year evaluation period, some projects will meet or exceed performance expectations and some will not meet performance expectations.  In those cases where performance exceeds expectations, the Manager may elect to renegotiate the terms of the project funding agreement and accelerate the repayment schedule. In those cases where performance falls short of expectations, the Manager may elect to renegotiate the terms of the project funding agreement and grant relief in the form of extending the term of the repayment schedule or forgiving a portion of the financing.