Energy Your Largest Controllable Expense

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1 Energy Your Largest Controllable Expense Combat shrinking budgets Make the most of your energy Avoid future capital costs Presented by: Michelle Simon and Gregg Baty May 9, 2012 &

2 Agenda Florida s Fiscal Conditions Energy Landscape in US and FL Economics of Energy Efficiency Strategic Opportunity Defined

3 Introduction Schneider Electric (Michelle Simon, LEED AP) Global leader in energy management Works with public entities to stretch budget dollars and help make the most of their energy Over 75 years of experience in Florida Have guaranteed over $75 million in savings to public entities Grant Capital (Gregg Baty) Leading provider of financing to the public sector with 3 decades of experience and has been awarded over $3.5 Billion in public financings nationally. Finances almost any type of essential-use capital equipment, vehicles, real property and Energy Performance Contract projects. Designs lease-purchase agreements, operating leases with terms up to 17 years and transaction size from $500,000 to $50million.

sector with 3 decades of experience and has been awarded over $3.5 Billion in public financings nationally.

4 Out of clutter, find simplicity. From discord, find harmony. In the middle of difficulty lies Opportunity. - Albert Einstein

5 A Continued Growing Concern Property Tax (Millions) 2,000,000 1,800,000 1,600,000 1,400,000 1,200,000 1,000, ,000 Property Tax Values in Florida Slow economic recovery: Reduction in taxable values Cents per kwh U.S. Average Retail Electricity Price Year Operating costs are increasing: Greater need for public services Top five utility providers increased rates 32% from Aging current assets 1 Department of Revenue Property Tax Oversight 2 Florida Public Service Commission

ow economic recovery: Reduction in taxable values Cents per kwh 12 11 10 9 8 7 6 U.S.

6 The Effects on Local Government Heightened scrutiny on spending Maintaining and expanding assets (buildings and water/waste water) will become more difficult Less dollars available to advance city initiatives Common Expendite Reduction Tactics among Cities Across the Nation, Hiring freeze/layoffs Delay/cancel capital projects Cuts in other services Modify employee health benefits Across-the-board cut Cuts in public safety Renegotiate debt Cuts in human services 17% 14% 12% 11% 25% 33% 62% 67% Series1 0% 10% 20% 30% 40% 50% 60% 70% 1 University of North Carolina - School of Government, Budget-Balancing Tactics in Local Government

capital projects Cuts in other services Modify employee health benefits Across-the-board cut Cuts in public safety Renegotiate debt Cuts in human services 17%

7 Energy Posing a Challenge Energy Consumption by Source

8 Energy Landscape in Florida Florida is home to 3rd largest consumer of energy Rates have increased 32% since 2004 $48,000 $43,000 $38,000 $33,000 $28,000 FPL TECO Gulf Power Progress Energy $23,000 $18,

$48,000 $43,000 $38,000 $33,000 $28,000 FPL TECO Gulf Power

9 Impact of Energy on Budgets Buildings represent a huge area of energy consumption 3 rd to 5 th Largest Budget Item Largest Unverified Expense This represents a significant item in your budget which is largely controllable

Item Largest Unverified Expense This represents a

10 Project Funding Highly Scrutinized Increasing list of projects being deferred Only high priority projects being funded When will there be funding allotted for the deferred projects? When will there be funding allotted for energy efficiency projects? How do we prioritize the energy projects? Low hanging fruit? What if there was a way to fund energy related projects AND major capital improvement projects?

When will there be funding allotted for energy efficiency projects?

11 Scenario 1: Business as Usual 100% 95% 90% 85% 80% 75% 70% 65% 60% Utility bill expense

12 Scenario 1: Business as Usual 100% 95% 90% 85% 80% 75% 70% 65% 60% Utility bill expense Sunk cost to Utility Provider

13 Scenario 2: Budget then Implement 100% 95% 90% 85% 80% 75% 70% 65% 60% Utility bill expense Savings but used capital outlay funding to achieve results

11 12 13 14 15 Utility bill expense Savings

14 Maximizing Savings Efficient devices and installation (saves 10 to 15%) Optimized usage via automation (save 5 to 15%) Without regulation and control systems (up to 12 % lost) Without Monitoring and Maintenance (2 to 8% lost) 100% 70% Energy Consumption Efficient devices and installation Optimized usage via automation Monitoring & Maintenance Lack of monitoring, maintenance programs, regulation and control systems Time

Maintenance (2 to 8% lost) 100% 70% Energy Consumption Efficient devices and installation Optimized usage

15 Scenario 2: Budget then Implement 100% 95% 90% 85% 80% 75% 70% 65% 60% Utility bill expense Sunk cost to Utility Provider Savings

5 6 7 8 9 10 11 12 13 14 15 Utility bill

16 Scenario 3: Financed Comprehensive Energy Project 100% 95% 90% 85% 80% NO capital outlay or budgeted dollars used, frees up those funds for other needed projects EVERY tax dollar being used to help the county, NO sunk costs 75% 70% 65% 60% Utility bill expense Reallocated utility expense to cover the financing Savings

being used to help the county, NO sunk costs 75% 70% 65% 60% 0 1 2 3 4 5 6 7 8 9 10 11 12

17 Funding Infrastructure Improvements in THIS Economy A Financed Performance-Based Energy Project: Reallocates money being spent on utilities to fund improvements Maximizes energy savings NOW to avoid sunk tax dollars to utility company Guaranteed performance and ROI Frees up funds for other government needs Energy Costs Savings $45 Utility Costs ($1,000s) $40 $35 $30 $25 $20 $15 $10 $5 $0 J F M A M J J A S O N D Electric Fuel Savings

to utility company Guaranteed performance and ROI Frees up funds for other government needs Energy Costs

18 The Financing Component Municipal Lease is the Preference Tax-exempt lease financing is perfectly suited for transactions between $500,000 and $50million Versus a bond, the tax-exempt lease hits the operating side of the budget without impacting the capital budget side Unlike bonds - lease agreements do not require a referendum allowing municipalities to finance various essential projects in a timely manner. Lower transaction costs Typically the interest rate associated with a tax-exempt lease includes all fees bond fees include both the cost of the interest rate and cost of issuance. More flexibility in term & payment structure Fewer documents Less complicated for the municipality Unlike bonds, there is no public voter approval required for taxexempt leases, which allows for more timely financing. Typically, lease agreements can be completed in 30 to 60 days - providing the opportunity for: Does not encumber any other lessee s tax revenues There is non-appropriation with taxexempt leasing

timely manner. Lower transaction costs Typically the interest rate associated with a tax-exempt lease includes all fees bond fees include both the cost of the interest rate and cost of issuance.

19 What if we have already done a lot for energy efficiency and have produced our own savings? Will those savings sustain over years? What happens if your energy employee leaves in a few years? What happens if the focus isn t on energy savings anymore? What happens if those savings flourish after a few years? Is it in the government s best interest to make sure savings aren t being left on the table?

What happens if your energy employee leaves in a few years?

20 What do we save if the guaranteed savings pay for the turnkey project?

21 What can be included? Quick Payback Long Payback Lighting Building Automation Systems Major HVAC Roof Upgrades Water Conservation Water and Waste Water Plant Upgrades Cost Savings Cost Savings

22 Efficiency VS Conservation Efficiency replacing a piece of equipment with a higher efficiency model Design around optimizing systems as one Conservation Reducing system runtimes Reducing load on systems Performance Based model = marrying the two and sustaining the savings

23 Summary Local governments in a tough financial position Every tax dollar counts There are creative and proven funding mechanisms available to address: Facility capital improvement projects Deferred maintenance projects Water/Waste Water Plant upgrades Irrigation systems Lighting systems (traffic, street, parking, indoor, etc) Schneider Electric Energy Solutions 23

24 Questions & Comments Contact Info: Michelle Simon Gregg Baty Schneider Electric Energy Solutions 24

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