This document provides an overview of energy savings performance contracting and the energy services company (ESCO) process. It defines key terms like ESCO, ESPC, and EMSA. It explains that an ESPC is a long-term contract, usually 20 years, where an ESCO identifies and implements energy efficiency projects, guarantees energy savings, and uses the savings to repay upfront costs. It outlines the typical performance contracting process and cash flows, noting that the town secures financing and pays the ESCO as projects are completed. Savings are measured, verified, and reconciled against guarantees. The document also describes a regional procurement of an ESCO by 14 Massachusetts communities to provide comprehensive energy services.

1. ESCO & Performance
Contracting 101
Municipal Energy Efficiency Finance Workshop
November 15, 2012
For more information, contact:
Helen Aki, Energy Services Coordinator,
haki@mapc.org / (617) 451-2770 X 2054

2. Key Terms
 ESCO = Energy Services Company
 ESPC = Energy Savings Performance
Contract
 EMSA = Energy Management
Services Agreement
 ESPC = EMSA

3. What is ESPC?
 Up to 20 year term
Performance
 Guaranteed energy savings contracting is a
mechanism for
 ESCO identifies and installs project capital
improvements
measures; monitors savings and asset
modernization.
 Upfront investment in projects
repaid through savings over term of (more than energy
contract savings)
 Annual savings must exceed debt
services

4. Performance
Contracting Process
IGA ESCO Town Town
ESCO chooses
procured Agreement completes proceeds
Signed PEA; IGA with
through projects;
25A RFQ -Breakage identifies EMSA OR
fee potential ESCO
or RFP completes pays for
identified projects IGA
IGA
IGA = Investment Grade Audit
PEA = Preliminary Energy Audit
EMSA = Energy Management
Services Agreement

5. Cash Flows
1) Town secures project financing COSTS
• Common misconception: “the ESCO • IGA breakage
fee ($10-50k)
pays for the projects.” This is false.
• Owner’s Agent
2) ESCO is paid as projects are completed fee ($10-50k)
3) Energy savings should exceed debt service • Financing for full
EMSA (total
• Important: keep utility line flat! project cost)
4) Savings are measured and verified
5) Actual savings reconciled against
guarantees

6. Regional ESCO 2011
Objective: To select a single Energy Services Company (ESCO) to
provide comprehensive energy services to all 14 participating
communities.
 Arlington  Norwell  Procurement funded under the
MA District Local Technical
 Ashland  Rockport Assistance (DLTA) program in
2011
 Chelsea  Sharon
 Satisfies public contracting
 Everett  Sherborn requirements under M.G.L. Ch.
25A §11i
 Framingham  Sudbury
 Gloucester  Topsfield Bold = approved
IGA agreements
 Melrose  Wayland as of 10/2012