King County Housing Authority achieves significant savings through Energy Performance Contract
The King County Housing Authority (KCHA) provides rental housing and rental assistance to more than 18,000 low- and moderate-income individuals and families throughout the county. KCHA transforms distressed communities through well-designed, higher density, mixed-income housing that uses energy and water saving technologies to maximize building performance. KCHA initiated an Energy Performance Contract (EPC) to fund the installation of energy-efficient lighting, heating, and ventilation, as well as water efficiency improvements. Through this EPC, KCHA was able to successfully provide upgrades for 38 subsidized housing communities in 14 cities.
In 2016 KHCA entered into an EPC, a financing technique that uses future utility cost savings from the installation of energy and water conservation improvements to repay the cost of the installation. Through the EPC, the U.S. Department of Housing and Urban Development (HUD) provides financial incentives for housing authorities to implement conservation measures and to reduce operating costs. Housing authorities typically partner with an energy service company (ESCO) to design and implement the project, given the complexity of the analysis and the regulations involved.
The incentives are provided through utility subsidies for each public housing unit. One of the most commonly used HUD EPC incentives allows housing authorities to lock-in or “freeze" the utility subsidy at the pre-EPC or baseline rate, so that as usage declines from the newly-installed conservation equipment, HUD continues to pay the utility subsidy at the higher frozen amount, rather than at the actual lower utility cost. This additional subsidy can be used to pay for the debt incurred to acquire and install the conservation equipment; up to 25% of the subsidy can be used for operations and maintenance.
The main goal of KCHA’s EPC was to realize financial savings due to a reduction of energy costs in line with KCHA’s 2017 – 2021 Environmental Sustainability Plan efforts. The EPC provides ancillary benefits, such as resource conservation, improved resident comfort, upgraded fixtures, reduced maintenance, and increased standardization. KCHA also developed a tenant communications program to explain these benefits to residents and keep them up-to-date on the construction process.
HUD approval process:
Public housing authorities looking to implement an EPC must first complete several steps including approval from HUD in several stages. Navigating this process may seem complex on the onset, but HUD provides resources and guidance to help PHAs move forward with successful EPC agreements.
The Energy Performance Contracting page on the HUD website overviews the EPC process and provides supporting resources for PHAs. The outline below describes the broad phases for developing an EPC using an ESCO, visualized in this roadmap graphic. All resources mentioned below can be found on HUD’s EPC page.
- RFP Phase: PHAs must submit a request for proposal (RFP) to HUD for approval before soliciting bids for the project. HUD provides downloadable RFP checklists and templates for PHAs to use during RFP development. If desired, PHAs may hire third-party consultants to support with RFP development (and full process support if desired).
- Energy Audit Phase: Once an RFP is submitted, HUD will review and approve. PHAs can then move forward with ESCO selection and contract negotiation. When an initial contract is in place, the ESCO will proceed with performing an energy audit to measure baseline performance and map out cash flows. PHAs will work with the ESCO during this period to confirm data and project plans before finalizing the energy audit.
- Contract Development Phase: The ESCO will prepare the EPC contract package for PHA review/approval. HUD provides checklists and guidance documents (e.g. M&V guidance, completeness review checklist, etc.) to assist the PHA in its review.
- HUD Approval: The PHA will submit the package for HUD review through the process explained in this graphic. During this period HUD may need additional information or adjustments to the contract package before approval.
- Contract Award: Once HUD approves the EPC contract, the PHA is eligible to execute the scope of work with the chosen ESCO. If the PHA plans to finance all or a portion of the upfront project costs, it can solicit financing quotes from project financiers during this period.
The outline above represents a typical EPC approval process. However, KCHA’s engagement with HUD for this EPC was slightly different due to existing agreements and previous approval for an older EPC.
KCHA identified 38 properties for upgrades and entered into an EPC with Johnson Controls (JCI) to improve their energy and water efficiency. During the assessment phase, JCI conducted two Investment Grade Audits (IGAs): a large IGA in 2016 followed by a smaller one in 2017 to add additional properties into the project scope. JCI designed and installed the energy conservation measures across the majority of KCHA’s public housing portfolio under the EPC. KCHA supervised JCI’s work through a program manager, contract manager and 2 site supervisors. The Washington State Department of Enterprise Services supported procurement and provided additional invoice oversight to the project.
Before launching into energy upgrades across all 38 properties identified in the EPC, KCHA piloted energy upgrades at four properties with JCI to get experience with product installation and to solicit tenant input. The lessons learned from the energy upgrades at Shelcor, Cascade Apartments, Eastside Terrace, and Briarwood informed KCHA’s approach to the upgrades with JCI across the remaining EPC properties.
After completing the pilot projects, KCHA coordinated with JCI to implement the following measures at the identified properties using a phased approach:
- Upgrades to LED lighting (bulbs and fixtures) but done at each EPC property; $2,554,695.
- Installed 645 ductless heat pumps: $3,645,000.
- Installed 1,256 exhaust fans installed: $839,246.
- Installed 1,086 energy recovery ventilators (ERVs); $2,508,738.
- Upgraded water measures installed (includes both toilets to WaterSense 0.8 gallon/flush and low-flow showerheads and aerators); $1,239,101.
(Note: not all properties received every upgrade listed above).
KCHA also replaced 16 elevators in 14 buildings as a final ‘self-performed’ portion of the EPC, after JCI had fulfilled their contract: $7,268,876.
Before beginning upgrades at a property, KCHA engaged with residents and staff to inform them of the improvement plans. Site maintenance staff provided feedback on specific materials and products to use with the EPC. This feedback was important to engage the site staff and to encourage buy-in by making their opinions heard. Sample lighting and toilets were demonstrated at a handful of properties to garner resident input on preferred lighting levels and a new type of toilet. Project timeline boards were posted in each building and residents were given the opportunity to share feedback on the equipment with KCHA staff at community meetings.
KCHA project management staff coordinated with JCI to manage vendors, verify installations, and to oversee products and warranties. KCHA property management staff continued to engage with residents throughout the renovations to ensure that all upgrades were completed on schedule and to report any issues with newly installed products.
Tools & Resources
King County Housing Authority utilized the following tools to apply and implement its EPC:
The EPC allowed KCHA to install energy upgrades in 38 buildings across its portfolio. To understand the effect on the building’s performance as well as their utility savings, KCHA reviews weather normalized energy data, automatically shared in ENERGY STAR Portfolio Manager, as well as their own electricity billing data for common spaces. KCHA continues to track savings from these energy efficiency improvements with monthly energy and water billing data through ENERGY STAR Portfolio Manager.
KCHA shares its successes on energy use intensity (EUI) and cumulative savings at its EPC properties with senior staff on a monthly basis. Energy and water savings measures are detailed in its annual report to the board.
The EPC allowed KCHA to install $20 million dollars in energy and water conservation measures at 38 properties (2,087 units of public housing) from 2016 to 2018, generating an estimated $50.4 million in HUD utility subsidy incentives over 20 years. KCHA extended and expanded their original 2005 EPC to include additional public housing sites and to add new measures to scope, such as ductless heat pumps (DHPs).
KCHA is beginning to realize real water and energy savings from these upgrades. Energy-use intensity (kBTU/ft2/Year) and water-use intensity (gallons/person/day) was benchmarked for the three years immediately preceding the energy-upgrades. The charts below demonstrate a nearly 10% energy-use intensity (EUI) savings from the 2014 – 2016 average to the 2017 – 2019 average and an over 20% water-use intensity savings from the 2015 – 2016 average to the 2017 – 2019 average.
The energy performance contracting method provided the necessary financing for KCHA to move forward with needed efficiency upgrades to its portfolio. These energy and water efficiency measures have helped KCHA make progress toward achieving its Better Buildings Challenge goal.
King County Housing Authority entered into an Energy Performance Contract to install energy and water conservation measures throughout its portfolio in 2016, generating an estimated $50 million in HUD utility subsidy incentives over 20 years.
Public Housing Authority
To reduce utility consumption, realize financial savings, and improve air quality and building performance.
HUD’s utility subsidies for public housing properties are tied to actual consumption. As consumption decreases due to energy efficiency improvements, so does the subsidy, which minimizes the incentive for housing authorities to invest in reducing utility costs through efficiency measures.
King County Housing Authority applied to HUD to enter into an Energy Performance Contract to implement energy and water efficiency improvements and services.
King County Housing Authority installed $20 million dollars in energy and water conservation measures at 38 properties from 2016 to 2018, generating an estimated $50 million in HUD utility subsidy incentives over 20 years.