A "something for nothing" deal. For $24k a month for 4 years, Energy Education Inc. ("EEI") will save at least $24k a month in energy costs. See the contract here:
http://www.docstoc.com/docs/20691869/Energy-Savings-Contract (Doc takes some time to load).
Personally, when I see a contract that looks like it has been written by a sales person, I cringe. (Our sales people at EIC can testify to that.) So when I see phrases like "people driven energy conservation program" in a legal document, I am very wary of the contents of the contract. But, enough about my personal feelings about the general "We're selling you a bill of goods and you're going to like it" feel of this document - let's look at the content of the document:
Things That Make You Go "Hmm."
So, the first requirement is that the school system hire an "Energy Education Specialist" to implement the energy savings system. This new position is advertised by EEI, this person's compensation is determined by EEI, and "the district will not employ any person as energy specialist that is not acceptable to EEI." Further, upon termination of the contract, the school system will "discontinue any employee trained by EEI from performing the duties of the energy specialist." So, if the contract is terminated, no messin' with the thermostat or turnin' off lights for you, Mr. Energy Specialist. Those days are over. (We'll have to hire someone else for that.)
The good news here is that EEI waived the requirement for BCPS to hire a person specifically to run the energy savings contract. They allowed our current Custodial Director to add the Energy Conservation Duties to his current job. (And I am told this employee is doing an excellent job at all of his duties – thank you sir!)
The bad news is that the school system already had an employee who could have implemented the energy savings without entering into a contract with EEI. Take a look at these minutes from the Catawba County Board of Education:
August 23, 2004
The Energy Management Conservation Program was the first item on the agenda. Assistant Superintendent Sherrill introduced Energy Education Director Tony Cox who began employment with the school system on July 1. Energy Education Director Cox has already begun implementing ways to save energy and dollars. Dollars saved will be returned to the schools for needed expenditures. Members were given the energy management conservation program mission, goals and guiding principles. The program mission consisted of two parts: significant dollar savings through ethical energy use efficient energy delivery and responsible energy acquisition while sustaining or improving the quality of the learning environment. The program outline consisted of three core goals: energy ethic, energy efficiency and energy equity. There are also three guiding principles: keeping it simple, meeting the education mission and energy management is like safety. Energy Education Director Cox presented the two “layers” of teamwork in order to meet these energy conservation goals: the campus energy team including the building energy monitor (recommended to be the head custodian) and the Catawba County Schools’ energy team (which is the Board of Education foundation).
Energy Education Director Cox then presented a draft Board of Education policy and administrative procedures for their consideration. The floor was opened for any questions on the presentation or draft policy and administrative procedures. Mr. Sigmon asked a question regarding irrigation time portion of the draft policy and procedures. Energy Education Director Cox addressed the question. As a result of the question by Mr. Sigmon, additional language will be incorporated and the policy will be presented on first reading to members at their regular meeting the next day. Energy Education Director Cox stressed to members that the energy management plan would be a “cultural change” for most employees, but the savings would be beneficial for the students and schools in the district. Chairman Wyant extended thanks to Energy Education Director Cox for the work that he is doing for the school district.
Hmm.Back to the contract. Another requirement of the contract is that BCPS must buy third party energy saving software. This software costs $12,000 for the first year, and $1200 every year thereafter (3 years). Whether there are actual savings or not is determined by software, the Energy Specialist and EEI. The baseline that is used to compare savings is not determined until the first year of the program has been completed, and it is determined with adjustments by EEI. Seems like a shell game to me. But rather than take my word for it, take a look at what the Inspector General of Massachusetts had to say about these kinds of contracts (and coincidentally, EEI):
- EEI’s guarantee applies only if EEI is satisfied that the energy manager devotes enough time and effort to the program and that the district “substantially implements” the program.
- Cost savings achieved in any given year are considered to be recurring savings. Therefore removal of a light fixture in year one is counted as a cost savings in each year of the ten year projection.
- Our analysis confirms that, as projected by EEI, districts must continue the program for a number of years after the four year contract term in order to approach the ten year cost savings projected by EEI.
You'll note that the current funding request for operations includes funding to weatherize buildings ($$), repair chillers ($$) etc. I am not sure how those requests fit in with this contract, but it seems to me that these measures will enhance the energy savings guaranteed by this contract – muddying the waters as to what is actually responsible for saving the system energy costs. (Kind of like commingling energy savings and not being able to attribute the savings to one origin or another.) Genius, really.
Terminating the contract.
I don't know what most people call excessive liquidated damages terms in contracts, but I call them punitive. To terminate the contract before the end of the four year term without cause (the contract refers to this as "for convenience"), BCPS would have to pay $360k, $288k, $259k or $230k (each amount relates to which year the termination would occur year 1, 2, 3 or 4). Pretty inconvenient.
Another thought. It appears to me that this contract should be governed by 115C-47 (28a) and Chapter 143 of the North Carolina General Statutes regarding "Energy Savings Contracts," and that a certain protocol should have been followed – and wasn't:
This is part of the statute that lists what the Board can do:
NCGS 115C‑47. Powers and duties generally.
In addition to the powers and duties designated in G.S. 115C‑36, local boards of education shall have the power or duty:
(28) To Enter Lease Purchase and Installment Purchase Contracts. – Local boards may enter into lease purchase and installment purchase contracts as provided in G.S. 115C‑528.
(28a) To Enter Guaranteed Energy Savings Contracts for Energy Conservation Measures. – Local boards may purchase energy conservation measures by guaranteed energy savings contracts pursuant to Part 2 of Article 3B of Chapter 143 of the General Statutes.
This is one of the provisions in that Part 2 referred to above:
143‑64.17A. Solicitation of guaranteed energy savings contracts.
(a) Before entering into a guaranteed energy savings contract, a governmental unit shall issue a request for proposals. Notice of the request shall be published at least 15 days in advance of the time specified for opening of the proposals in at least one newspaper of general circulation in the geographic area for which the local governmental unit is responsible or, in the case of a State governmental unit, in which the facility or facilities are located. No guaranteed energy savings contract shall be awarded by any governmental unit unless at least two proposals have been received from qualified providers. Provided that if after the publication of the notice of the request for proposals, fewer than two proposals have been received from qualified providers, the governmental unit shall again publish notice of the request and if as a result of the second notice, one or more proposals by qualified providers are received, the governmental unit may then open the proposals and select a qualified provider even if only one proposal is received.
(b) The governmental unit shall evaluate a sealed proposal from any qualified provider. Proposals shall contain estimates of all costs of installation, modification, or remodeling, including costs of design, engineering, installation, maintenance, repairs, debt service, and estimates of energy savings.
(c) In the case of a local governmental unit, proposals received pursuant to this section shall be opened by a member or an employee of the governing body of the local governmental unit at a public opening at which the contents of the proposals shall be announced and recorded in the minutes of the governing body. Proposals shall be evaluated for the local governmental unit by a licensed architect or engineer on the basis of:
(1) The information required in subsection (b) of this section; and
(2) The criteria stated in the request for proposals.
You can go to the General Assembly website and read the definitions pertaining to these contracts - and, in my opinion, this contract meets those definitions.
Further, I would argue that this contract could be rescinded based on non-compliance with the above statutes. I have been told that I am wrong. Since I am a "client" here (the whole board is) I am not at liberty to assign my views of the legality of this contract to the board. But if any other lawyer would like to take a look at the contract and the statutes and opine, please be my guest.
There is a lot of money at stake. It seems prudent to take a hard look at this contract with the idea that the school system might benefit from some aggressive lawyering. Just my opinion.
*There are a multitude of issues that could be analyzed regarding this contract. I just chose a few to share here. To get a very good analysis of "Energy Conservation" contracts in general, and on an "EEI" contract in particular, see this report by the Inspector General of Massachusetts:
http://www.mass.gov/ig/publ/energy_srvcs_adv.pdf
See the post below (Education Week) for an article about the same company. You'll have to click on the link.
You can also google "energy education inc. contracts" and see how many contracts this company has executed in the US. You'll notice that all of the contracts are substantially the same. (You can also envision the owners of the company laughing all the way to the bank.)
Understand that I make no allegations regarding the presentation of this contract or the approval of this contract by the board. The board and superintendent were dealing with overwhelming issues when this seemingly innocuous contract was presented. You must form your own opinions as to whether any conflict of interest issues exist regarding the presentation and adoption of this contract.
For the record: I have violated no attorney/client privilege, nor compromised the board or administration by publishing the contract, minutes of board meetings or my impressions of this contract. I do have definite opinions as to issues presented here and issues that I am privy to as a board member, but publishing them would violate a code of conduct. You, on the other hand don't have that limitation. I publish this because we are facing severe budgetary concerns and we must consider every avenue for recouping our system's funds – and the public should be aware of the commitments this board has made.One more article for good measure -from the Herald Times of Bloomington Indiana:
Don't overpay for energy conservation services — a cautionary tale
By Matt Laherty December 11, 2009
This guest column is by Bloomington resident and Monroe County Community School Corp. parent Matt Laherty. Laherty is an employee of Cisco Systems, but the opinions expressed here are his own.
I want to share my experience with the Monroe County Community School Corp.’s decision to purchase energy conservation solutions from Energy Education Inc. While I think the decision made by the school board and Superintendent J.T. Coopman was in good faith and will save the school district considerable money, by rushing to approve this contract the MCCSC board passed on an opportunity likely to save over $1 million more — money that could be used to hire more teachers.
Three weeks ago, I was happy to see Herald-Times’ reporter Andy Graham’s article about plans to save energy at the MCCSC. As a parent, taxpayer and member of Bloomington’s Sustainability Commission, I supported the idea of saving money by reducing wasted energy.
As a professional energy expert, I was curious to know what Energy Education proposed. After reviewing the presentation posted on the board Web site, I had a lot of questions. The first was, “What specific services will be provided?” After reading the contract, questions remained unanswered. I shared my concerns with the school board.
I had no reason to doubt that Energy Education would provide useful consulting services to the MCCSC. I seriously doubted that those services should cost anywhere near $1.5 million in fees over four years. In the energy consulting business, it is common practice to get a part of the savings, but this deal was very unfair to the MCCSC. There are numerous Indiana-based companies and consultants that can provide outstanding solutions for a fraction of the cost.
The point of energy conservation programs is to ensure energy is used only when it’s needed. Good solutions provide end users with real-time insight; good solutions operate transparently because providers know users can’t manage what they can’t see.
Energy conservation is simple. It does require some specialized knowledge, a project plan and commitment from participants. But the bottom line for building owners considering energy conservation is to know that solutions do not need to cost a lot of money to have a big impact.
Building inspections will cost several thousand dollars per building. Building controls consultants who examine building automation settings can usually be hired for less than $5,000 per building. To ensure the building remains “tuned up,” power meters must be installed to provide real-time energy reporting and dashboards. Meters and installation will cost around $3,000 per building. An annual monitoring service should cost less than a few hundred per month. Fancier systems cost more. This back-of-the-envelope calculation shows that a building audit, reconfiguration and real-time energy monitoring can be done for about $15,000 per building. Energy programs often lead to energy reductions of 10 to 30 percent — about in the range promised by Energy Education.
To ensure you keep as much of the energy cost savings as possible when purchasing energy conservation services, get a detailed list of solutions offered — then shop around. Spend a little time learning about energy solutions. I only asked the school board to table the proposed Energy Education contract for a month so they could conduct due diligence. For the sake of students and the MCCSC budget, I still wish they had.
The lesson: get informed before spending money to save money, because you can often save even more.
