Andy on Sandy: V-Zone Voodoo

If you are a coastal resident, you likely have heard that FEMA revised their flood mapping on an “advisory” basis last week. The mapping changes are wholesale in nature, and include increases in predicted flood elevations and the number of properties subject to flooding. The implications of these changes affect flood insurance and the development potential of land. As an example, I’m working on a site on the Raritan Bay where the flood elevation increased by 9 feet! As you can imagine, that puts a big kink in the Owner’s plans to redevelop the site.

A-Zone Flooding

Among the many changes, the proliferation of V-Zones is one of the most dramatic. To understand what a V-Zone is, consider the following photos. The flooding that you see at right is an A-Zone flood. It is flooding that is generally devoid of waves and currents. In contrast, a V-Zone is an area where waves exist, and are expected to cause substantial damage to structures (see image below).  The substantial damage expectation causes development in V-Zones to be highly regulated.

V-Zone Flooding

Prior to the recent FEMA mapping release, the only V-Zones in New Jersey were along the Atlantic coastline and in very large bays (Raritan and Delaware). The new mapping changes everything. Now the entire shorelines of New York Harbor, Barnegat Bay, Manahawkin Bay, etc. are mapped as V-Zones.

To the single family homeowner, this change means that reconstruction requires conformance with V-Zone construction standards. If you’ve ever been to the outer banks of North Carolina, you’ve seen what this construction standard looks like. For residential/commercial developers, the implications are more substantial. For instance, in New Jersey, residential development is outright prohibited in a V-Zone. Likewise, commercial development is discouraged.

Rest assured, there are opportunities to mitigate the V-Zone designation if you are the owner of a piece of land that is substantially affected. FEMA has an established a protocol for challenging or modifying their flood designations. The least costly alternative (but least likely to succeed) is to challenge FEMA’s science. The “granularity” of FEMA’s analysis doesn’t consider individual properties. Therefore, there may be something unique about your particular property (i.e. the presence of a seawall, etc.) that would cause it to be unaffected by waves.

 In the absence of scientific justification, the only way to remove your property from the V-Zone is to make a physical improvement such as a seawall, revetment, or other coastal structure. Faced with the NJ ban on residential development in V-zones, BSG has undertaken V-Zone modification applications for properties in Perth Amboy, Atlantic City, South Amboy, and Highlands. To our knowledge, we are the only consultant to successfully remove a V-Zone designation in New Jersey within the last decade.

As always, I’m here to assist. If you have a question or need some advice, drop me a line at araichle@birdsall.com. Thanks.

- Andy

Andy Raichle, PE, serves as Senior Vice President within the Land & Marine Engineering Division and is a civil and marine engineer with nationwide experience in a broad range of waterfront development and maritime projects. His project experience includes planning and design of coastal and port structures, sub-aqueous utility construction, navigational dredging, contaminated sediment remediation, and shore protection projects. He is well versed in the technical, political, and regulatory specialties that are unique to the process of waterfront development and remediation, and has applied these skills throughout the U.S. and the Caribbean.

Are Communities at Risk for Losing the FEMA Funding they Deserve?

The nature of a natural disaster requires communities to act first and think second — but often times this results in the inability to receive reimbursement just when it's needed the most.  The process of recovery can take months, even years, and the lives and livelihoods of the entire area will be affected. With so much at stake, it's vital to have an adovocate that not only assists with debris management and operations, but also in the process of quickly securing the Public Assistance and FEMA funds to pay for it.
  

Birdsall Services Group, Inc. (BSG) and The Louis Berger Group, Inc. (LBG) are teaming up in the wake of Hurricane Sandy to combine their expertise and experience in major disaster recovery to come to the aid of the battered Jersey Shore. The combination of LBG’s rapid response emergency management team and FEMA expertise, and BSG’s large public client base and intimate knowledge of the infrastructure, facilities, and operations of the Jersey Shore, makes the BSG-LBG team the perfect advocate to help clients streamline their disaster recovery programs and receive the maximum reimbursement possible from Public Assistance.

Click Here to Learn About our Full Suite of Disaster Recovery Services

BIRDSALL SERVICES GROUP CANCELS ANNUAL LEAGUE PARTY AND DONATES PARTY COSTS TO HURRICANE SANDY RELIEF

(Eatontown, NJ) – Birdsall Service Group today announced that it would be cancelling its annual hospitality party at the Revel Resort in Atlantic City during the upcoming League of Municipalities Convention and donating the $35,000 event costs to the American Red Cross Hurricane Relief efforts in the area.

“To stand in the shadow of devastation and celebrate hardly seems appropriate,” said Scott MacFadden, Chief Administrative Officer of Birdsall Services Group.  “Our company extends our deepest sympathy to those affected by Hurricane Sandy and we hope that our actions will be followed by others planning events during the convention. These funds are better spent helping the community rather than entertaining.”

MacFadden added that the company will maintain a reduced presence at the League of Municipalities conference while key employees work throughout the region on emergency assessment projects.

NJ Environmental Infrastructure Trust Drinking Water State Revolving Fund

Municipalities, counties, sewer, utility or improvement authorities or local government units in charge of constructing or improving related water management facilities may be eligible! 

 

The EIT works to provide and administer low interest rate loans to New Jersey's municipalities, counties, and regional authorities for water quality infrastructure projects that improve the State's natural resources and protect the public health.

Letters of Intent and Environmental Planning Documents must be submitted by Monday, October 1, 2012 for SFY2014. The project application along with Construction design documents must be submitted by March 4, 2014.

Learn More about this program Here

 

Purchasing Energy for Municipal Accounts

"How do I make a comparison to all my alternatives?"

By
Fred Fastiggi, CEM
Senior Vice President – Energy
Birdsall Services Group

As an energy consultant with a substantial portion of our practice involved in Energy Procurement Advisory Services, we are often asked by our clients “how does the price you secured for me, compare to this alternative I just heard about?” 

We are constantly getting these inquiries, and the most difficult thing is trying to answer them with facts so that our clients can make a true “apples to apples” comparison.  While we always have the facts from our end (they come right off the supplier’s contract), inquiries spurred by competitor pitches usually contain no detail other than a claim that “we can save you more money”.   

Perhaps they can, but in order to answer the question, we need to delve a little deeper into what, when and why a user is buying energy from a non-utility supplier.  We also need to understand exactly what the buying alternative being promoted actually represents. 

One Client’s Question - We recently had a client tell us that they could get a rate of $0.0784 per KWH from a competitor, while we were under contract at $0.085 per KWH.  Naturally they were curious as to why the contract we procured for them was so much higher than the competitor’s offer.  We too were curious, but to answer that question we needed to understand a few more things:    

What tariff are we talking about when you quote the $0.0784 rate? - We were buying electricity for this client for two very distinct types of accounts.    The first is for what are called “fixed price accounts,” and these are the accounts typically found at town hall, the police station, the fire house, the library and other buildings where the town pays the electric bill.  Usually for these types of buildings and accounts, in PSE&G’s territory, a town is on either a GLP or LPL-S tariff.  The smaller accounts are on GLP, the larger ones, who have a demand of at least 150KW in any month during the year, go to LPL-S (Large Power and Light-Secondary Service).  LPL-S service is generally going to be less costly than GLP whether you take it from PSE&G as your default supplier, or from a Third Party Supplier because LPL-S accounts usually have higher volume and less volatility in usage patterns.  Both characteristics are very desirable for a supplier due to economies of scale and because the risk of buying too much, or too little to service the accounts, is greatly reduced for a supplier. 

The town in question has 18 separate “fixed price” accounts, all on PSE&G’s GLP tariff.  Collectively they consume 509,564 KWH per year.  Our contract rate for these accounts is $0.085 per KWH and is a flat rate for the entire 12 months of the contract running from June 1, 2012 to May 31, 2013.  Our price will not change from month to month over the term of the contract, as many competitive offers do. 

What is included in the quoted price? – Our price is totally comparable to PSE&G’s price-to-compare (also known as Basic Generation Service or BGS) and includes NJ Sales and Use Tax, as well as charges for generation and transmission capacity , line losses, PJM ancillary service charges and all of the items in PSE&G’s BGS component of their default tariff.    

It is very important when evaluating competitive offers to understand not only what tariffs the quote is applicable to, but also to understand what is included in the price being quoted.   Many times vendors do not include Sales and Use tax in their quotes. 

There may also be other charges in the price which you may, or may not, want to pay for.  For example, our price also includes a small fraction of a cent, to pay for the operating costs, legal fees, audit fees, automated auction fee and our firm’s fee as the energy consultant for the buying group that this town is a member of.   A buyer needs to decide if these are services they want to pay for in their electric cost.

The members of our buying group get many benefits, including:

·         The administrative expertise of an Executive Director who manages the buying group, schedules and runs meetings, promotes new membership, and makes sure the group adheres to public contract law;

·         An attorney who provides legal services in the drafting of contracts that are favorable to the membership; 

·         An Energy Consultant who provides advice on contract structure, reviews supplier qualifications, writes the RFP, answers member questions, analyzes and monitors energy markets, forecasts a guaranteed target pricing level for the members prior to asking them to commit to a contract, and conducts either a traditional paper bid or automated auction for suppliers to bid, and;

·         Board Members who make decisions on behalf of the buying group, who themselves are Municipal Business Administrators making decisions, sharing their efforts with their fellow Business Administrators.         

It gets more complicated - This particular client also has their Street Lighting accounts in our program.  These accounts use approximately 302,800 KWH per year, and our rate for them is much lower, at $0.04632 per KWH.  Again, this rate is fixed for the 12 month contract period and includes Sales and Use Tax and all components of PSE&G’s BGS for their street lighting tariff.

What was in the competitive offer?  - Upon further questioning, we found that the competitive price being quoted to our client was not a “firm” commitment and was only supposed to be “representative” of what they could secure.   The competitive offer was based on a neighboring town with a contract already in place, that on the surface appeared to be a town with very similar energy needs to our client.  In reality, the competitor’s price was a bundled price for all accounts in the neighboring town (fixed price accounts, street light accounts and even accounts having to do with their water treatment plant (which was a regional plant serving five towns!) Their rate was not comparable to our rate.  Accounts serving a water treatment plant in PSE&G’s territory are usually on yet another tariff.  In this case, the plant was on LPL-P (Large Power and Light – Primary Service).  This type of tariff is referred to as Commercial and Industrial Pricing (or CIEP) and is characterized by high volumes, higher voltages and usually still steadier usage.  Predictability of load is very important to a supplier bidding into a supply contract and, as you can imagine, a water treatment plant has a high volume and relatively steady demand for electricity.  Because of this, most of these plants are on CIEP tariffs like LPL-P.  CIEP loads are very attractive when compared to Fixed Price loads and, as such, they get much lower pricing.  

The real cost of each alternative - When calculating the weighted average (weighted by usage between our fixed price and street light accounts) for our client, our weighted average rate was $0.07058 which is less than the competitors quoted rate of $0.0784 per KWH (and their rate was a blended rate that included fixed price accounts, street lights and even a water treatment plant that served five towns).   

Timing?  - Timing also has a lot to do with electric pricing.  Competitive pricing differs significantly when you go out to bid at different times of the year, and the term of the contract can also affect pricing.  Sometimes a longer contract term is cheaper than a 12 month period and other times it is not. 

The month In which you secure your supply can also affect pricing.  The price of gas generally drives the price of electricity because most electric pricing is based on natural gas as a fuel for generation.   If we purchased a 12 month contract volume in March, for a term beginning on June 1^st, and the market for natural gas has since been in a decline, a contract put on at a later date, should have a lower price for electricity than one put on when the natural gas fuel price for electric generators was higher.

Additionally, electric prices are usually higher in a peak period, so if one contract has a term that includes many peak periods (e.g. summer months) in it, and another does not, you would expect the contract with more non-peak usage in it to be cheaper.  That is usually true but if the tariff you are buying against has a large portion of fixed cost components in it  (e.g. capacity charges), the opposite can be true because you are spreading that fixed cost over more KWH’s if you have a lot of peak usage.  Each situation needs to be analyzed individually to see what effect the seasonality, periodicity or hour-to-hour variation in usage does to the price of a particular account (or accounts) and given that, what price for electricity you can realize in the marketplace at that point in time.     

Terms  and Conditions? - Finally, the contract we have with our supplier is what is called a “full requirements” contract, which means the suppliers have to supply whatever the municipality needs at the agreed upon pricing.  If the municipality takes less than originally specified in the bid document, the supplier still needs to supply that deficiency at the contract price.  Same if the municipality takes more, the excess is priced at the contract price.  Many competitors who claim to offer lower pricing are not offering full requirements contracts and if usage should vary, you may find you are paying a different price of the variation from your originally anticipated volume.   

So, Let’s circle back - These are a few things you should initially ask a broker, consultant, supplier or aggregator when they approach you about buying energy:

·         What tariff(s) does the quoted rate cover?

·         What are the volumes included in that price?

·         Is the price flat for a specific period, or does it vary?

·         If it varies, what event or condition triggers a change in the price you quoted?

·         What period is covered? When does it start and stop?

·         What happens if my consumption patterns change during the term of your supply contract?

·         When did you go out for pricing?  What was the price of gas at that time and how does it compare to today’s price for gas?

·         Does the price include sales tax, and is the price fully comparable to the “Price to Compare” or the Basic Generation Service charge (they are one in the same) on my electric bill?

·         Who do I go to with questions on billing?

·         Can I see the contract under which you are buying this electric service?

·         Are you complying with Public Contract Laws?

·         Are you and your suppliers and subcontractors licensed and approved by the NJ Board of Public Utilities?    

Some of the intangibles you may want to ask about are:

·         How are the decisions made to enter into a competitive supply contract on my behalf? 

Our buying group has a team of Municipal Administrators, Lawyers, Energy Consultants and an Executive Director that plan for, and administer, the Electric and Gas cooperative purchasing programs for its members.   The buying group ultimately takes its direction on the timing, and contract length from its Board, which is made up exclusively of Municipal Administrators who deal with the same issues other   Municipal Administrators deal with on a day in and day out basis.  Getting competitive pricing is important to them, as is budgetary certainty.   For the case cited above, the Board’s direction was to secure an appropriately aggregated supply (with specific bid packages for similar groups of accounts that will allow for the optimization of their usage) with a competitive price, as well as a flat rate for budgetary certainty, over the twelve month contract period.    In other instances they may direct their professionals to secure a floating price, or a “block and index” price where part of the requirement is at a fixed price and another part floats.  For natural gas they may direct their professional to lock only the “basis” (a/k/a) the transmission costs from the gulf to the local utility’s City Gate, and to let the commodity portion float.  There are an almost infinite number of contract structure possibilities, but what should be specified to the bidders is what satisfies the pricing and functional needs of the users given their risk appetite.

One of our buying groups tells all their members ahead of time, and in writing, that the Board will not authorize a final supply contract unless the chosen bid is at, or below a targeted price which reflects the host utilities lowest, forecasted BGS electric price during the course of the contract term.  If members don’t like the price, they can opt out of the auction.  This is a unique feature of this program as are the features of having Municipal Administrators making decisions for their fellow Municipal Administrators, and having legal, energy and administrative professionals retained as part of the buying process.  All of these features bring more value to the procurement process than just supplying competitive, low-priced electricity (which, obviously, is also a needed objective of the buying group).

A few more questions still:  Who is your Consultant/Broker/Aggregator, and what is their role in the Electric Procurement process? - The state of New Jersey has very specific guidelines, requirements and safety measures in place which govern the purchase of energy by government entities.  These guidelines and directives should be listed on your supplier’s website or in their promotional material.  The suppliers of electricity need to be licensed and approved by the NJ BPU.  That is also true for aggregators or consultants serving this market.  Make sure that your consultant or broker has been screened to meet the licensing requirements of the state.  Those requirements are there to protect you.  

Regulations also require that public entities understand and adhere to Public Contracts Laws.   Non-utility energy supply must be procured under public bid, satisfying all the requirements of applicable law. 

You should ask any potential supplier what their specific role is in the acquisition of competitive supply.  Are they a supplier, broker, aggregator, consultant, etc., and how are they paid?  What specifically do they do to facilitate the supply transaction?  Do they work alone?  Do they work with a law firm to make sure the town’s interests are protected?   Are they splitting his fee with other parties, and if so, what do they do?  Also, are they, and any of the parties they work with, licensed by the NJ BPU?

Any energy supplier, broker, consultant or aggregator should also be willing to show you the contract they will be securing their quoted price under.   Having that contract helps immeasurably in understanding if you are comparing apples to apples and in the public sector, that contract is public information so they should have no reluctance to sharing it with you. 

If a supplier, broker, consultant or aggregator can’t produce a contract, that would suggest that they might just be fishing for a quick transaction and may not have your strategic interests at heart.  There have been a lot of efforts by network marketers to build their energy sales force in a similar manner to the way Amway developed a network marketing organization to sell soap and personal products.  They recruit hundreds of people as sub-distributors, provide minimal training, and turn them loose to chase customers.    You have to decide if this type of procurement effort is all you need, or if you are looking for a more organized and professional approach.

There are many alternatives and options for buying electricity and gas competitively in the state of New Jersey, however if you hope to make a realistic comparison to your current situation, there are many questions you and your associates should  wade through before jumping to conclusions about which price is better or worse than what you have now. 

 
About the Author -  Fred Fastiggi is Senior Vice President of Energy Services for the Birdsall Services Group.  He has worked in the energy industry for over twenty-five years both for regulated utilities and as a consultant to commercial, industrial and public clients.  Fred’s firm is currently the Energy Consultant to the New Jersey Sustainable Energy Joint Meeting (an organization of over one-hundred and ninety New Jersey municipalities and public authorities), the Mid-County Cooperative Pricing System (six NJ counties who have banded together to do cooperative energy purchasing)   and numerous individual counties, school districts, colleges, hospitals and other commercial or industrial entities.   He holds the designation of Certified Energy Manager and Distributed Generation Certified Professional from the Association of Energy Engineers.    

 

Cooper Cancer Institute in Camden Fitted for its Final Steel Beam

On September 12, the Cooper Cancer Institute in Camden was fitted for its final steel beam during the topping-off ceremony. The beam, which was painted in white displayed the words “Building Hope,” and was signed by the construction trades and Cooper's cancer team, symbolizing the sentiment behind the new cancer center to open in the fall of 2013. 

The $100 Million, four-story, 103,050 square foot building will provide a full range of specialists and cancer care services with the benefit of patients having all their medical needs in one place, including: radiology and radiation oncology, hematology/medical oncology, surgical oncology, urology and gynecologic oncology; chemotherapy infusion and laboratory space; and chemotherapy pharmacy. Abundant examination, treatment and procedure space throughout the new building will improve patient flow and access; and conference room and academic spaces will foster the team-approach to cancer treatment for which Cooper Cancer Institute is already well-known.

Birdsall Services Group (BSG) is providing a full range of engineering and consulting services on this project and was on site for the ceremony.  In conjunction with Francis Cauffman Architects, BSG provided the MEP and IT design and utilized Building Information Modeling (BIM).  Additionally, the building is under review for LEED status.




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Engineering Firm Opens New Location in Manhattan

 

Birdsall Services Group (BSG) to Take a Bite of the Big Apple with New Location in Manhattan

Press Release - August 28, 2012

 

Birdsall Services Group (BSG), a professional services firm and recognized leader in engineering and consulting services, announces the opening of their new location in New York City at One Penn Plaza in the Borough of Manhattan.

Heralded as another milestone in the strategic growth plan of the firm, BSG’s presence in Manhattan will further stimulate and drive business development operations focused in the New York City market.  BSG’s Manhattan office will provide all of the firm’s disciplines, creating the opportunity to expand BSG’s broad range of services to its existing clients in the City, as well as facilitate opportunities with new clients.  The new Manhattan office,   along with the firm’s existing New York offices located in White Plains, and Patchogue, Long Island, puts the firm in an advantageous position to serve the six major Counties of Westchester, Suffolk, Nassau, Rockland, Dutchess and Orange, in addition to the five boroughs of New York City.   BSG’s Vice President of Business Development, Kenneth Sisk, P.E., will be the Principal in Charge of this office, with support from our existing staffing in the White Plains and Patchogue offices.  

 

Drawing on over twenty-five years of experience, Mr. Sisk will be responsible for all phases of marketing, business development and project management for BSG’s New York City operations, driving the continued expansion into the City.  Having spent a number of years working in New York City and the State of New York, Mr. Sisk is exceptionally qualified with a unique knowledge of the marketplace.  “Our firm has already established a valuable clientele in the City from a number of projects in both the public and private sectors,” states Mr. Sisk, “however, having a presence in the City will help us better capture the wealth of opportunities for our unique brand of services  that exist in the New York City market.” 

 

“This is a very exciting time for BSG.  The decision to open an office in Manhattan is not only consistent with our strategic growth plan from a business development perspective, but it is also in line with our spirit of expansion, which has been a core philosophy throughout our firm’s history,” stated Howard Birdsall, President and CEO of BSG.  “The transition should prove to be a natural one, as BSG is a carefully planned combination of firms that have a documented history of over twenty-five years of experience in this market.  Under the leadership of Ken Sisk, and driven by our talented staff, we are confident this new office will help cultivate new business opportunities in this extremely fertile and important marketplace.”

 

The address to BSG’s Manhattan office is One Penn Plaza, 36^th floor, New York, NY 10119.  For more information, please call Ken Sisk at 212-786-7369.  

Birdsall Services Group (BSG) is a professional service firm and a recognized leader in engineering and consulting services.  The strengths of our licensed and certified professionals enable us to serve a wide variety of clients throughout New Jersey, New York, Connecticut, and Pennsylvania in the private sector as well as all levels of government, public authorities, and non-profit organizations.   Founded 1919, BSG has nine offices located throughout New York and New Jersey.  BSG has continually been ranked by McGraw Hill Companies, Inc., Engineering News Record, and other construction publications as one of the region's leading engineering and consulting firms.

Visit our Site to Learn More

BSG Ranked in ENR's Top 200 Environmental Firms

The list is out: ENR's Top 200 Environmental Firms of 2012...and Birdsall Services Group ranks in at the 189th spot! 

Our firm is proud to have made this year's list, which includes firms from all over the United States, Canada and the U.K.  Furthermore, ENR reports that this year's list is extra-amazing because these firms managed to grow revenue in 2011 despite a challenging economy and budget restraints in the public sector.  Kudos!     

Our Environmental and Geotechnical professionals will enjoy this achievement as they continue to provide a full scope of services that include preliminary site feasibility and selection studies, development of detailed site preparation and foundation design criteria, and inspection of construction activities.
















View the entire ENR list here!

and

Read the Analysis and ENR.com Here

Ground Broken to Transform Dormant Newark Brownfield Site

BSG’s Senior Vice President of Land and Marine Engineering, Andy Raichle, P.E., was on site for a groundbreaking July 31st on a $50 million 350,000-square-foot warehouse in the Ironbound section of Newark. Morris Companies, a Rutherford, N.J.-based developer, is building on the dormant brownfield site, the home of a former Sherwin Williams Co. paint facility at 60 Lister Avenue. BSG is providing a full range of consulting and engineering services for this project, including civil, marine, environmental, survey, construction administration, and grants and funding. The site will also qualify for the state of New Jersey’s Urban Transit Hub Tax Credit program, which offers incentives to companies to develop near major transportation centers. Vital to the economic health of existing cities and suburban centers, Newark has actively been transforming and redeveloping brownfield sites, such as this one. 

 

More BSG News Here!

BSG VP of Water Resources Helps to Foster Relationship Between Two Local Charities

Dave Applegate, BSG's Vice President of Water Resources, was recently recognized by Northern Ocean Habitat for Humanity (NOHFH), a local branch of the national nonprofit housing organization that he is actively involved with and that BSG frequently supports. NOHFH formally thanked Dave for all of his efforts with their organization, most recently for serving as NOHFH Construction Committee Chairman, and for organizing volunteers from the Toms River Kiwanis Daybreak, an organization that sponsors and participates in many projects to support children and the local community. Dave has been an active member of the Toms River Kiwanis Daybreak since 2010, and involved on the NOHFH Construction Committee for 2 years. His passion for both local charities is evident in his unwavering commitment and hard work. Great work, Dave!

To learn more about either organization, visit nohfh.com or tomsriverkiwanis.org.

A Word on Energy Audits

By Fred Fastiggi, CEM
Senior Vice President - Energy Services
Birdsall Services Group

Energy Audits are becoming more commonplace as the price and volatility of the various forms of energy (fuels and electricity) used in a building continue to rise. This upward trend, coupled with the proliferation of programs, grants and incentives offered by various governmental agencies or other sources, have greatly increased both the need for energy audit services and the number and types of consulting and audit firms chasing this work. If you ask one hundred people for the definition of an energy audit, you will get one hundred answers. The American Society of Heating, Refrigeration and Air-Conditioning Engineers (ASHRAE) has been at the forefront of providing a baseline and standard for defining energy audits. The energy user who seeks the efficient supply, demand and conversion of energy should understand the various types of energy audits and should know how to look for the differences in work scope and pricing that can make the difference between a successful and unsuccessful energy audit.

ENERGY AUDIT TYPES

A Level I audit is also known as a “one-day” or “walk-through” audit and involves an analysis of energy bills and a brief survey of buildings to produce a rough estimate of how efficiently energy is used in the building. This level of effort will detect some “low hanging fruit” and may suggest other options worthy of more study, but should not be viewed as comprehensive. They are merely geared toward pointing you in the right direction.

A Level II audit invests more effort in the building survey and energy analysis and often includes some level of performance testing or benchmarking versus similar buildings. This level audit provides a breakdown of how energy is used in the building as well as a broader range of savings options, including simple capital budgeting analysis with payback calculations. It may address the “people factor” and its’ effect on the uncertainty of savings. It may explore maintenance procedures and assesses any impacts energy conservation measures may have on savings. The current New Jersey Board of Public Utilities Local Government Energy Audit program is largely based on a Level II audit specification.

A Level III audit, also known as an “Investment Grade Audit,” digs into the details on large capital projects that may have been discovered as part of a Level I or Level II audit, or are the result of a specifically commissioned Level III audit. More detail is gathered from field equipment inventories, extensive test measurements and interviews with operating and maintenance personnel. Sometimes utility data is logged over a period of time. Always, a sophisticated energy model is developed based on the physical audit of the building. Once this model is developed, the projected energy use and demand is compared to actual bills, and if there is a significant difference (>10%) the model is “calibrated” or adjusted until it produces energy projections which are within some elected level of accuracy (often 5-10% of the actual building usage). At times the client may want an even greater level of accuracy in the model, and in these instances, the recurring “calibration” effort can be costly and time consuming. Once an acceptable level of accuracy in the model is achieved, possible reasons for variation are highlighted, the capital requirements of proposed energy conservation measures are estimated (with a higher level of confidence), and the investment decision can be made with a significantly reduced amount of risk.

MARKET FOR AUDIT SERVICES

Needless to say, a client contemplating ESCO financing or any of the Performance based Incentive Programs like the NJ BPU’s Pay for Performance Program, should be sure to hire someone to perform its’ appropriate level of energy audit who understands the audit process. While the definition of the various levels of audit seem relatively straight forward, every company has a different idea of what an energy audit is, and the client would be well advised to make a clear distinction between what is being offered by the various vendors or consultants.

With the slowdown in the national and regional economies, companies who are slow in their core businesses are looking for ways to make money and are increasing turning to the energy auditing business. Energy consulting/auditing companies are doing well today despite the economy. This is the result of several factors: 1) With the focus on cost cutting, companies or government entities are realizing that energy costs don’t have to be a fixed cost but are actually a cost that can be reduced by 10-30% or more with a little analysis and planning, and; 2) With the availability of ARRA funds and/or state or utility funded programs, companies who are not in the energy consulting business see a prime target area for keeping staffs busy by energy auditing.

It is often we see architects, real estate management companies, real estate brokers, electrical and mechanical contractors and equipment vendors all trying to sell and perform energy audits. Giant engineering companies have also entered the market to offset the slowdown in their primary markets.

For potential buyers of audit services, there is a good and bad news from this rush into the market by new potential suppliers. With more competition, prices go down, but with decreased costs, the quality of work being done by unqualified suppliers can go down as well. Companies that are new to auditing often don’t have experienced auditors and produce poor quality audits. Often, contractors, real estate companies and giant engineering firms don’t even do the audit themselves, but contract the vast majority, or all of their work, out to others. They just take a cut off the top.

Sometimes equipment vendors or contractors offer audits at a deep discount, or even for free. They do this because their primary objective is to sell equipment and installation services and the audit serves as a loss leader to secure the more lucrative equipment sale or installation contract. Invariably these audits lack the depth of analysis and completeness to get the best solutions for the customer. The recommendations from these audits end up being the equipment (controls, automation, software, chillers, etc.), installation services, or projects requiring detailed engineering services, that the provider of the audit wants to sell.

The level of variation, and occasion for conflicts of interest, is even greater for a Level III audit because there are so many more elements of the job that need to be addressed (with varying levels of diligence and expertise). As a rule of thumb, experienced field auditor should be billed out at a rate of at least $100 per hour with specialists in various technical areas, project management or upper management at rates much higher than that. For a rough comparison on effort, if you take the price of labor the audit firm is giving you, and divide by $100, you will have a rough idea of how many hours are being spent on your audit job.

Want to learn more about energy audits? Feel free to contact Fred at 732-751-9592, ext. 6503, or email him at ffastiggi@birdsall.com.

Financing School Energy Infrastructure Improvements with the Energy Savings Improvement Program (ESIP)

With rising energy costs straining limited educational resources, a number of New Jersey school districts are implementing energy efficiency measures to stretch their tax dollars. These districts are, and will become, models for the many other districts throughout the state, placing pressure on school board administrators to follow suit and make energy infrastructure improvements with an ultimate goal of saving money. Finding the funds among escalating operating expenses and tight budget caps has become a significant challenge. Funding is often unavailable to front the capital costs of improvement projects, and in these tough economic times, bond referendums may be unattractive. In 2009 the state legislature introduced a new solution to this old problem with the Energy Savings Improvement Program (ESIP). The ESIP law provides districts and other government agencies in New Jersey with a flexible tool to improve and reduce energy usage with minimal expenditure of new financial resources.

The ESIP solution

Fifteen years in the making, the Energy Savings Improvement Program is based on similar programs in other states and allows government entities to contract with Energy Services Companies (ESCOs) in lease-purchase agreements for energy infrastructure improvement projects. Before passage of the ESIP legislation, government agencies were prohibited from making contractual arrangements for energy projects if the contract had a term of longer than five years. Since many of the energy projects under consideration required more than five years to recover their investment, traditional ESCO financing offered for years by reputable companies like Honeywell, Johnson Controls, Siemens, Noresco, Ameresco, Constellation and others, was generally unavailable to them. Compounding this problem for school districts was the significant failure rate of bond referendums. These hurdles prevented many districts from moving forward on projects resulting in continued use of old infrastructure, excessive maintenance requirements and high energy costs.

The ESIP provides a clearer, more defined process to finance these projects. Now, through an ESIP, initial project funding comes from the energy companies using Energy Savings Obligations (ESOs), and the debt is repaid through the savings from the reduced energy operations over a period of time. Replacing the rigid contractual time limits of the previous ESCO financing program, the ESIP payback period now allows fifteen years on most improvements, and twenty on those for combined heat and power. And with no need for a bond referendum specific to improvements under this program, districts now have a much more viable way to finally address the energy needs of their schools.

Another benefit of the ESIP legislation is the safeguards, which were written into it to protect the government entities making the improvements. The Department of Community Affairs governs the utilization of an ESIP using Board of Public Utilities guidelines. Additionally, the entire ESIP process can be streamlined with the various elements of design, installation, finance, and maintenance combined into a comprehensive agreement with the ESCO. However, the use of third-party consultants for different components of the process provides a system of checks and balances that protects the interests of the district.



Frankford Township School District implemented ESIP 



To cite an example, in 2010 the Frankford Township School District hired Honeywell to develop an Energy Savings Plan. The necessary, first step audit, was performed by Steven Winter Associates, Inc., and another firm, Birdsall Services Group, performed the Third Party Verification of the energy savings calculations as indicated by both Honeywell’s Energy Savings Plan and the original Steven Winters energy audit. Birdsall’s verification was performed subject to specific New Jersey Board of Public Utility protocols.

Developing and Implementing an ESIP

There are three options to developing and implementing an ESIP: the Traditional Model, the Do-it-Yourself Model, and the Hybrid Model. The Traditional Model uses an ESCO to manage the various functions that make up an ESIP, while the Do-it-Yourself Model is usually utilized when a school district already has the funds to finance the improvements either from their own capital budgets, an Improvement Authority or some other source. In the Do-it-Yourself model, many of the responsibilities an ESCO would normally perform are given to the school district’s own staff, an engineer, or other specialist. As the name suggests, the Hybrid Model can be a combination of the two, an ESCO being hired for some purposes, while other components may be left to the discretion of the district on how to manage them.

The Energy Audit ― The ESIP process begins with an Energy Audit, which can be conducted through the BPU's Local Energy Audit Program (which is 100% reimbursed by the Office of Clean Energy) or by a contracted firm qualified to perform the audit. The use of an independent third party to conduct the audit is essential in order to provide the district with an unbiased assessment of the range of potential Energy Conservation Measures. This also ensures that vendors, who will be subsequently competing to develop the Energy Savings Plan, have an independent document on which to base their proposals. When completed, the Energy Audit will provide the district with a comprehensive analysis of current energy usage of the facilities in their current state and will identify the possible energy improvements that can be implemented to

produce energy savings and maximize energy efficiencies.

The Energy Savings Plan ― Once the audit is completed, an Energy Savings Plan (ESP) is developed. The ESP is a critical document in the ESIP process as it describes in detail the Energy Conservation Measures that will be implemented and the cost calculations that support how the plan will pay for itself through the energy cost savings. The ESP must contain a number of elements, including the results of the Energy Audit, a description of the Energy Conservation Measures that will comprise the program, an estimate of Green House Gas emission reductions resulting from the energy savings, identification of all design and compliance issues, an assessment of risks involved in the successful implementation of the plan, schedules showing calculation of all costs of implementing the proposed measures, and the projected energy savings. The ESP will also indicate maintenance requirements for the measures that must be taken which are necessary to ensure continued energy savings. Moreover, if the ESP is developed by an ESCO, they must provide an option for an Energy Savings Guarantee, with the cost, or premium, for this guarantee.

Implementing the ESIP ― After third party verification of the ESP, financing is secured in order to implement the plan and begin improvements. Many energy infrastructure improvements are eligible under the ESIP, such as boiler and chiller improvements and retrofits, Building Automation Systems (BAS) upgrades and installations, HVAC improvements, lighting improvements, renewable energy systems, energy related process improvements, recycling programs, and any number of other improvements that provide energy cost reduction and conservation. Finally, post-installation Measurement and Verification (M&V) of the improvements must be conducted by a firm independent of the one that prepared the ESP.

As a financing mechanism for energy improvement projects, the Energy Savings Improvement Program is beneficial to school districts that want to reduce the size of a public referendum for overall school improvements, and cannot otherwise afford to begin making energy infrastructure improvements. Since its implementation, the Energy Savings Improvement Program has encouraged many districts to begin moving forward with the measures that can make their schools more efficient, as defined in audits already performed through the BPU’s Local Government Energy Audit Program.

ESIP legislation undoubtedly benefits the school district in terms of energy conservation and economical investment in improving the performance of its buildings. Even after meeting the debt service on the financing, there are net savings to the district which can be turned into additional resources for student education or taxpayer savings.

By Fred Fastiggi
Senior Vice President - Energy Services
Fred has over two decades of experience integrating the specialized and interdependent areas of auditing energy usage, quantifying project economics, design and engineering of energy solutions, project development, securing project finance, construction management and maintenance of energy infrastructure.  Fred has extensive experience in the development of Combined Heat and Power and District Energy projects, and his consulting experience inlcudes extensive work for both Fortune 100 industrials and several public utilities.