Making It Easier for State, Local Governments to Save Energy

Tom Johnson | June 29, 2012 | Energy & Environment
Streamlining energy savings projects could mean a shorter route to taxpayer savings

Hoping to save taxpayer money by reducing energy use by state and local governments, the Senate yesterday gave final approval to a bill to overhaul a program aimed at spurring energy savings projects.

With no debate, lawmakers passed the bill (A-2313) by a 33-0 vote. Gov. Chris Christie is expected to sign the bill.

Passed with great expectations in 2009, the law has failed to live up to its promise because of procurement-related issues, as well as a lack of clarity in its procedures, according to its sponsors.

The original law was designed to allow government entities to enter into performance-based contracts with energy service companies, enabling them to cut energy use without any capital expenditures. The agencies pay off the projects over a 15-to-20-year period through the energy savings they capture, which can run as much as 25 percent.

Few argue that the program offers huge opportunities to significantly reduce energy costs without laying any capital, but neither state nor local governments are taking advantage of the program, according to an advisory group that helped draft the state’s new Energy Master Plan.

As a result, local school boards and governments are missing the opportunity to reduce energy bills, curb greenhouse gas emissions, and create new, well-paying jobs, proponents say.

By putting off making expenditures to invest in new and more efficient heating, ventilation and air conditioning equipment, the towns rely on aging, obsolete equipment, which only increases their energy costs.

Among other things, the bill would eliminate a requirement that state contracts be awarded to the lowest bidder. Instead, it would allow contracts to be awarded on a basis of best value, a standard that would permit New Jersey to award deals based on which bids provide the greatest energy savings.

Energy savings companies were unwilling to respond to bids based on the low bid standard, said Steve Goldenberg, an energy lawyer who has been pushing for changes in the law, known as the Energy Savings Improvement Program (ESIP).

“This is expected to loosen up literally hundreds of millions of dollars for projects,” Goldenberg said. “It’s a major job play. It’s a major economic development tool — most importantly, at no cost to taxpayers.”

Asssemblyman Upendra Chivukula (D-Somerset), a sponsor of the bill, agreed. “Energy Savings Improvement Programs can be a valuable asset, and with these improvements to the program we’ll be taking a large stride toward realizing taxpayer savings,” he said.

The bill also includes a provision allowing energy service companies to choose among a list of prequalified vendors to perform the work on energy savings projects.

Without giving these companies more flexibility in deciding who actually performs the energy efficiency work, they will never invest in long-term contracts that guarantee energy savings, according to some who have followed the bill through the Legislature.