The ESCO will monitor the energy savings, deliver an annual report, and repair or reimburse you for any shortfalls in the guaranteed energy savings.
Following the successful installation of the agreed-upon improvements, the ESCO will perform ongoing project monitoring for the period specified by your state/city/county rules or in the ESPC contract. You should also check your state/city/county's requirements for M&V.
During the initial period, it is required that the ESCO comply in full with all requirements of the ESPC as originally negotiated. These requirements should include (but are not necessarily limited to):
- Measurement and verification reporting and services
- Guarantee of performance and cost savings
- Maintenance and/or repair of equipment
- Training for facility personnel on maintenance and systems operations
- Training for occupants
Check your state rules or ESPC program office for details of M&V reporting requirements.
M&V needs to follow the guidelines established in the International Performance Measurement and Verification Protocol (IPMVP). The ESCO determines the units of energy and water saved by the cost-saving measures as well as any O&M cost savings due to the organization. The utility savings are then multiplied by the baseline unit costs and any escalation rates included in the ESPC, regardless of whether or not the escalation rates are guaranteed. The cost savings are then compared to the guaranteed cost savings to determine whether or not the savings guarantee has been met.
For each year of the guarantee period, the ESCO will submit an annual M&V report. You should review and provide comments to the ESCO. The ESCO addresses the comments, finalizes the report, and re-sends a copy.
If the guaranteed savings are not met during any year of the guarantee period, the ESCO will pay your organization the difference between the actual (measured) savings and the guaranteed savings. Check with your state or local ESPC program office for procdures when the guarantee is not met.
Similarly, if the actual (measured) savings exceed the guaranteed savings in any year of the guarantee period, also check for procedures in the case of excess savings, including where the money flows.
Modifications to the M&V process during the guarantee period are limited to those mutually agreed to by you and the ESCO. In the event of a shortfall, you and the ESCO may negotiate the terms of M&V and the shortfall payment for the remainder of the ESPC finance term.
You will need to inform the ESCO of any significant changes in operation that could affect the savings calculations. The ESPC contract should include a section that describes how potential changes will be handled during the guarantee period. Changes that may affect the savings calculations include:
- Operating hours
- Facility use
- Equipment (new or additional)
- Building addition
For more information reference the U.S. Department of Energy's M&V Guidelines on the M&V process and requirements.