Qualified Energy Conservation Bonds (QECBs)


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Qualified Energy Conservation Bonds (QECBs)

  1. 1. Qualified Energy Conservation Bonds Pete Westerholm Program Manager TDEC Office of Energy Programs
  2. 2. 2 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
  3. 3. 3 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
  4. 4. 4 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
  5. 5. 5 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
  6. 6. 6 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
  7. 7. 7 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
  8. 8. 8 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
  9. 9. 9 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
  10. 10. 10 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
  11. 11. 11 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.
  12. 12. 12 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.
  13. 13. Thank You 13 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