MSBA GUIDANCE ON ENERGY SAVINGS CONTRACTS (ESCOs)
The MSBA has been receiving many questions from communities about whether costs associated with municipal Energy Savings Contracts (ESCOs) are eligible for reimbursement by the MSBA. ESCOs are arrangements whereby a private company makes an upfront investment in new equipment -- such as heating and cooling units, energy-efficient lighting and building control systems -- in exchange for a share of the future cost savings resulting from the improvements.
In 2006, the Massachusetts legislature amended Chapter 25A of the Massachusetts General Laws for the purpose of streamlining municipal procurements to allow for ESCOs. The goal of the ESCO legislation was to help municipalities efficiently and cost-effectively manage, maintain and repair multiple municipal building systems.
It has come to the attention of the MSBA that the State Inspector General is investigating the long-term cost for repairs covered by ESCOs. In a Massachusetts municipality, an independent cost estimate determined that boilers installed in seven school buildings under an ESCO agreement cost five times more than if they had been purchased by the Massachusetts municipality directly. It was also determined that a boiler, installed at a school in this Massachusetts municipality in 2007, should have cost approximately $400,000, but was purchased by the Massachusetts municipality -- as part of their Energy Savings Contract -- at a total cost of $1.8 million. That same year, the Massachusetts municipality paid $1 million for a boiler at another school that should have cost $150,000.
The MSBA will refrain from making any policy decisions whether it will reimburse for costs associated with locally procured Energy Savings Contracts until the State Inspector General releases his report and recommendations.
In the meantime, the MSBA has developed a robust repair program that provides funding assistance for eligible single and multiple system repairs and upgrades that are subject to the same scrutiny of cost and scope as the larger projects in our capital pipeline.