E-Mail Forum
City of Richmond Energy Committee To Meet To Review ESCOS
June 30, 2001

The Energy Committee of the Richmond City Council will meet in the City Council Chambers on Monday, July 9, at 2:00 PM to review proposals from several Energy Saving Companies (ESCOs). Like all City Council meetings, this will be a public meeting, and public comment will be heard. Councilmembers Bates, Butt, Griffin and Bell constitute the Energy Committee.

I continue to be puzzled how we have gotten to the doorstep of contracting with an ESCO before reaching the decision that we want to even use an ESCO to further our energy conservation objectives. While ESCOs have a role in the energy demand side industry, I continue to have reservations about the City of Richmond using one. An ESCO is a private company that plans, designs and implements energy saving measures, deriving its profits from sharing in the long term monetary savings from the energy conservation measures implemented. Since ESCOs typically obtain financing for the retrofit work, a big sales pitch is that the work can be done at “no cost” to the customer. What an ESCO would bring to the City is:

1.   financing.

2.   engineering.

3.   guaranteed or shared savings.

4.   project management.

5.   one stop shopping.

This sounds great, but the price you pay is a 30-50% markup on the actual cost of energy conservation projects for that convenience. Ultimately, cities can get financing cheaper than ESCOs from sources such as bonds. Even worse, there is an inherent conflict of interest. Is the ESCO going to do what’s best for the City or what’s best for the ESCO? The last ESCO the City almost contracted with was Honeywell back in 1997. Fortunately, the City bailed at the last minute. Since then, there have been many horror stories involving Honeywell performance contracts with various cities and counties. 

One of the particularly sticky problems with an ESCO contract is facility use stability. Since ESCOs derive their profits from measured energy savings, a change in use patterns of a facility can make such computation meaningless. For example, if there are fewer night events in a community center the year after a base line energy budget has been established, this may look like energy savings and accrue to the profit of the ESCO, when, in reality, it was simply fewer people turning on the lights. With the City preparing to vacate City Hall and move to Marina Bay for several years to facilitate the seismic retrofit project, the energy use pattern of Civic Center facilities will be in chaos for years. Not only will it be impossible to track energy usage meaningfully, the incipient Civic Center master plan study may result in a facility much different than the one that exists today.

A case can be made that the City can get a much better product, at a lower cost, by NOT using an ESCO. A better alternative is to take advantage of all the FREE Federal and State services and hire an engineering firm to do the project management. An engineering firm working directly for the City would not have the same built-in conflict of interest as an ESCO. Some free services available:

·         The California Energy Commission offers 3% loans for demand side projects. 

·         The California Energy Commission offers technical assistance for FREE 

·         The California Conservation Corps does lighting retrofits at $15/hour  -- 1/3 the rate of a prevailing wage contractor.

After steering the City away from contracting with the Honeywell ESCO in 1997, I worked with Building Services Superintendent Willie Haywood to develop an internal energy conservation effort where the City could do the work itself and reap all the rewards of both energy saving and retrofit cost savings.  I also hooked up Mr. Haywood with rebate and technical assistance programs offered by the U.S. Department of Energy (“Rebuild America”), the California Energy Commission and PG&E. The effort focused on changing to energy efficient fluorescent lamps and ballasts and to LED lamps in traffic signals. Although 1,660 T8 ballasts and 4,080 T8 lamps have been installed since 1997, there are hundreds more to go. The LED traffic signal project is not so far along, with over 2,000 individual lights remaining to be retrofitted. The in-house effort has proceeded in fits and starts since 1997. An additional electrician staff position authorized in 1998 was implemented only this month.

The City o Richmond needs to find the best route to energy conservation, but I’m not sure it goes through an ESCO.