HomeMy WebLinkAboutA001 - Council Action Form dated November 12, 2024ITEM #:9
DATE:11-12-24
DEPT:ELEC
SUBJECT:LETTER OF INTENT TO APPLY TO RURAL ENERGY
SAVINGS PROGRAM LOAN
COUNCIL ACTION FORM
BACKGROUND:
The Rural Energy Savings Program (RESP) is administered through the US Department of Agriculture's
(USDA) Rural Development Office. The program provides loans to rural utilities and other eligible
applicants to provide energy efficiency loans to their customers to implement durable cost-effective
energy efficiency measures. Loans through RESP are offered a 0% interest rate, for terms of up to 20
years. Funds from RESP may be used for the purpose of implementing energy efficiency measures to
decrease energy use or costs for rural families and small business. This program could be a source of
funding for a home retrofit program, one key action step of the Climate Action Plan.
Staff recommends submitting a letter of intent to apply for a RESP loan. Submitting a letter of intent
does not guarantee funding for the City. The letter of intent will be evaluated by Rural Development
staff. Rural Development, if it deems Ames as an eligible applicant, may then invite Ames to submit a
complete loan application. The letter of intent does not bind Ames to completing a full application
for a RESP loan if invited.
Being designated as an “Rural Utility Service eligible borrower” could also allow Ames Electric to
apply for other grants and low-cost loans for a variety of projects through USDA’s Rural Development
office.
ALTERNATIVES:
1. Authorize staff to submit a letter of intent to apply for a Rural Energy Savings Program Loan
2. Do not authorize staff to submit a letter of intent to the Rural Energy Savings Program
CITY MANAGER'S RECOMMENDED ACTION:
The Rural Energy Saving Program could provide funding to operate a home retrofit program.
Further, a successful application would deem the City as an eligible Rural Utility Service
borrower, opening further grant and loan opportunities with USDA’s Rural Development office.
Therefore, it is the recommendation of the City Manager that the City Council adopt Alternative No. 1,
as noted above.
ATTACHMENT(S):
RESP letter of intent - AMES.pdf
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Submit Letter of Intent VIA Email to: RESP@USDA.GOV
[Date]
Mr. Christopher A. McLean
Assistant Administrator, Electric
Program Rural Utilities Service
1400 Independence Avenue,
SW Stop 1560
Washington, DC 20250-1560
RE: Intent to Apply for a Rural Energy Savings Program Loan
This letter confirms that the City of Ames Municipal Electric Services (AMES) intends to seek
a Rural Energy Savings Program loan from the Rural Utilities Service pursuant to the Notice of
Solicitation of Applications (NOSA) for Fiscal Year 2021 (FY2021) published in the Federal
Register 85 FR 81178 on December 15, 2020. AMES hereby represents that it meets all the
requirements as specified in the NO SA and herewith submits the mandatory information
required to comply with the first step of the loan application process.
AMES intends to submit a complete application on or before the due date specified in the
Invitation to Proceed for step-2 of the process and commits to diligently collaborate with
the RUS General Field Representative to complete the application in a timely manner.
AMES acknowledges that RUS may not consider our loan application complete (Step -2) if
we fail to provide the information requested by RUS in its screening process (Step-1).
Applicant’s Profile and Point of Contact
AMES is a municipal electric utility organized in 1896 with its principal place of business
located at 502 Carroll Ave, Ames, IA 50010. The SAM Managed Identifier (SAMMI) or
DUN and Bradstreet (D&B) DUNS number for AMES is 061320917, our Unique Entity
Identifier (UEI) is GK9YL53MJ459, and our tax identification number is 42-6004218.
AMES will be a new RUS borrower.
AMES serves customers in and around the City of Ames, IA. Ames, IA has a population of
36,822 when excluding full-time students at Iowa State University. AMES has net assets in the
amount of $154,601,617. It is hereby affirmed that AMES has never been in receivership or
bankruptcy or is under a workout agreement over the last 10 years. AMES holds operating
reserves in the amount of $48,732,232. A copy of AMES balance sheet for the last 3 years is
submitted with this letter of intent. AMES intends to be the legal borrower .
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The point of contact during the application process will be Joel Zook, Energy Services
Coordinator , who has been duly authorized to carry out the necessary actions to
complete the RESP loan application. Joel Zook can be contacted at 502 Carroll Ave, Ames,
IA 50010, 515-239-5177, joel.zook@cityofames.org . Additional information about AMES
is available at https://www.cityofames.org/government/departments -divisions-a-
h/electric.
Project Description
AMES requests a RESP loan of $15 million. The RESP loan will be used to implement a
Pay As You Save® (PAYS®) tariffed on-bill (TOB) investment program rather than a loan
program to our customers (See Addendum for AMES RESP NOSA Requirements Waiver
Request). The program will follow the design and implementation strategy used in the
PAYS programs of three other RUS RESP Loan Recipients —Appalachian Electric
Cooperative, Ouachita Electric Cooperative, and Roanoke Electric C ooperative.
These three RUS funded PAYS programs pioneered by rural electric cooperatives in
three states have been a tremendous success. These programs have reported zero
charge-offs to date using the PAYS system.
The energy saved through PAYS programs provides value to the utility and the
economic benefits for customers. Ouachita Electric and Roanoke Electric , whose PAYS
program have been in operation for three years have reported an average of 1.5 to 2.0
kW reduction in peak demand generating over $200 savings to the utility per year per
participant. In addition to creating value for the municipality PAYS programs also
increase energy affordability, improve home health and comfort, and support local
economic develo pment by hiring local contractors who hire and purchase materials and
equipment locally.
A Description of the Service to be Provided
AMES will use the capital to implement a tariff on -bill program adhering to the Pay As
You Save® (PAYS) system, an inclusive financing model for which all customers in the
residential and commercial rate classes can be eligible. AMES will use the capital to
invest in cost-effective energy upgrades at no upfront cost to our customers. The utility
will recover its investment and costs through a tariffed charge (fixed charge tied to the
meter until the investment is recovered) on the cus tomer’s monthly bill. The cost-
recovery charge on a customer’s bill is substantially less than the estimated savings
generated by the upgrade, allowing our customers to enjoy immediate a nd sustained
cash flow. This program will be modeled after the successful PAYS programs in three
rural electric cooperatives serving 60,000 meters with a 99.9% recovery rate. Unlike
loan programs, a PAYS program will allow us to deliver a range of energy e fficiency
services to the hard to reach low-income, manufactured housing, multifamily housing,
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and small business populations. Financed energy efficiency upgrades may include
improved structure envelope tightness and insulation, HVAC system upgrades, water
heating upgrades, on-site solar and battery storage, demand response devices, electrical
upgrades where necessary, and other improvements that meet the RESP requirement of
decreasing energy use and cost for rural families and small businesses.
Staff or Contractors that will be Implementing the EE Program and Their
Credentials
The following individuals will provide administrative oversight for the program :
Joel Zook, Energy Services Coordinator
Don Kom, Electric Services Director
Nolan Sagan, Sustainability Coordinator
AMES will contract with a Program Operator to operate the program day -to-day
including providing training, hiring, and ongoing support of local contractors,
determining cost-effective scope of work, presenting upgrade plans and offers to
customers, conducting QA/QC of data entry and work, authorizing contractor payment,
and providing third-party EM&V. AMES will leverage in-house expertise to conduct
program marketing and call center support.
Implementation Plan
Eligible Energy Efficiency Upgrades: Program Operator will focus its efforts first on the
following upgrades: 1) weatherizing, including air sealing, duct sealing, and insulation,
2) improving or replacing inefficient HVAC and domestic water heating systems, 3)
installing demand response devices, 4) other upgrades that meet the RESP requirement
of decreasing energy use and cost for rural families and small businesses, and 5) where
necessary, electrical upgrades to allow the installation of previously listed practices.
The Marketing Strategy: AMES will use data -driven customer prioritization to identify
customers who may benefit from the PAYS program by examining bill usage and energy
intensity per square foot to inform marketing materials and the priority of outreach.
AMES will inform customers of the program through multiple channels that may include
bill inserts, public announcements, direct mail, social media, phone calls, and other
appropriate strategies.
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How the Applicant will Operate the Program: AMES will request up to the allowed
advance four percent funding from RUS for program start -up and initial working capital.
The municipal utility will pledge security for the funds advanced on its share of the
RESP loan. As the municipal utility invests in upg rades for its customers and energy
efficiency improvements are made and validated with post -installation QA/QC then
Program Operator will authorize AMES to pay the contractors who installed the
improvements and file for reimbursement from RUS. The municipal utility will repay its
RESP loan with revenues from the tariffed charge for cost recovery paid by participating
customers.
A Schedule Showing Sources and Uses of Funds to Implement the EE Program: The RUS
loan capital will be used to capitalize energy efficiency improvements over a ten -year
period, revolving the capital for a second investment over the following ten years. This
amount will fund approximately 2,000 upgraded homes which assumes an av erage
project cost of $7,500.
A Brief Description of the Processes, Procedures, and Capabilities to Quantify and Verify
the Reduction In Energy Consumption Or Decrease In The Energy Costs Of Participant
Program Operator’s final contract will require a detailed program plan specifying the
following:
a. Program Management
The program plan will include descriptions of program management procedures, data
processing and security procedures, automated AMI and billing data retrieval, proven
cost-effective energy savings projection methods, contractor training, QCI of assessment
data, Program Operator generated project scopes, remote post -upgrade QA/QC, 45 -day
and 12-month post-upgrade customer satisfaction and experience surveys, third party
home performance certification, and performance -based compensatio n based on
completed assessments and completed upgrades.
b. Customer Prioritization
AMES will prioritize high -use structures based on historical energy usage, energy
intensity per square foot, and other relevant characteristics and will focus program
marketing on the structure’s priority score.
c. Structure Condition and Energy Performance Assessment
Interested customers will receive a site visit by a trained data collection agent. The
agent will assess the overall structure condition, presence of health and safety issues,
and likelihood of continued habitability through the average lifetime of energy
efficiency upgrades. If health and safety or durability issues currently prohibit forward
progress in PAYS program participation then the agent will, with customer consent,
directly install a limited set of quick, inexpensive, and high -value energy efficiency
upgrades, such as LED lighting and low -flow fixtures. If no issues are identified, the
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agent will measure the HVAC system and home envelope performance and collect data
including photographs of home characteristics. Photographs will be dated and time
stamped for validation and all data will be electronically transmitted to the Program
Operator who will use the data to assess the current home performance, run a cost-
effectiveness analysis, and produce the scope of work.
d. Energy Savings Projection
Program Operator will review the submitted data for accuracy and develop a PAYS
compliant cost-effective scope of work based on the structure’s energy savings potential
and upgrade costs, using a field -validated structure energy savings projection model
known for producing accurate savings projections at the level of each individual
structure; deemed-savings projections will not be used.
e. Retrofits
Program Operator will prepare a user -friendly home energy upgrade plan and program
offer, will schedule and conduct a one -on-one review with the customer , and will
authorize contractors to complete the work for customers who accept the offer and
terms and conditions of the tariff agreement. Program Operator will ensure contractors
schedule appointments with the customer and complete the recommended energy
efficiency improvements in a timely fashion.
f. Quality Control and Quality Assurance & Payment
Program operator will use pre- and post-performance measurements and photographic
documentation of structure needs to ensure quality, accountability, and consumer
confidence. After installation, the implementing contractor will electronically submit
time and date-stamped photographs an d performance measurements of the upgraded
HVAC system and envelope with automated output data transmission and capture.
Program operator will review the post-performance data for accuracy. When actual
results exceed performance targets, Program Operator w ill recalculate, update
projected energy savings, and shorten tariffed charge repayment terms. Once Program
Operator deems the project complete, it will electronically transmit a close -out file with
payment authorization and details to AMES. AMES will then issue payments to the
contractors within Net-30 terms.
g. Evaluation, measurement and verification of energy savings
Program Operator will commission a third -party evaluation expert to validate whole
structure energy savings from the complete set of installed energy efficiency upgrades
and to validate peak load reduction. The evaluator will use the methods established by
the Department of Energy’s Uniform Methods Project. These methods can be used to
evaluate whole structure savings as well as peak demand and specific upgrade savings
when the appropriate data are available. For program evaluation, our program will use
advanced meter interval (AMI) energy usage and billing data where possible, and
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traditional monthly usage and billing data where AMI data is not available. In general,
our program will prefer 12 consecutive month pre and 12 consecutive month post
installation data and comparator structures data when needed. Because the weather
fluctuates, the data will be weather normalized to illustrate what the savings would be
for a typical meteorological year (“TMY”).
h. Customer Satisfaction and Experience
Program participants will provide written and signed post -contractor performance
evaluation as part of their project close -out documentation. In addition, Program
Operator will conduct a 45 -day post-installation phone survey to assess continued
customer satisfaction and non -energy benefits such as home health and occupant
comfort.
i. Data Processing and Security
All reports will be scrubbed of all personal identification information to protect the
privacy of customers.
Lastly, AMES commits to immediately notify RUS in writing should we decide to
withdraw from consideration for the RESP loan before submitting the complete
application.
Sincerely,
Don Kom, Electric Services Director
502 Carroll Ave. Ames, IA 50010
Enclosures
• Service Area Map
• Financial Records
• NOSA Requirements Waiver Request
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Service Area Map
AMES does not serve all residents of the City of Ames. As displayed in the above map, Iowa
State University and some adjacent areas to the AMES service area may reside in the City of
Ames but receive electric service from another provider. AMES services 28,000 electricity
meters.
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Financial Records
Insert income statement and 3 years of balance sheets received from finance.
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NOSA Requirements Waiver Request
[DATE]
The City of Ames
515 Clark Ave
Ames, IA, 50010
Mr. Christopher A. McLean
Assistant Administrator, Electric Program Rural Utilities Service
1400 Independence Avenue, SW Stop 1560
Washington, DC 20250-1560
Administrator McLean:
Ames Municipal Electric Services (AMES) is proposing to offer a Pay As You Save® (PAYS®)
tariffed on-bill (TOB) investment program rather than a loan program to our customers. The
program will follow the design and implementation strategy used in the PAYS programs of three
other RUS RESP Loan Recipients—Appalachian Electric Cooperative, Ouachita Electric Cooperative,
and Roanoke Electric Cooperative.
PAYS programs are by definition a TOB investment programs (see:
https://www.eeivt.com/pays -essential-elements-minimum-program-requirements-2/). In a PAYS program,
a utility invests in cost-effective energy upgrades at no upfront cost to the customer. The customer
signs a tariff agreement for a charge on their monthly bill that is substantially less than the
estimated savings generated by the upgrade, creating immediate and sustained customer cash flow.
The Ouachita, Roanoke, and Appalachian Electric Coops’ programs have delivered energy efficiency
services to the hard to reach populations and improv ed energy affordability for disproportionately
burdened households.
From the Notice of Solicitation for Applications (NOSA) printed in the Federal Register on
June 21, 2016, we understand that “the purpose of the [RESP] program is to help rural families and
small businesses achieve cost savings by providing loans to qualified consumers to implement
durable cost-effective energy efficiency measures.”
The goals of our PAYS program are identical to those of the PAYS programs of the three RUS
RESP Loan Recipients and we believe consistent with RUS interests in promoting investment in
energy efficiency . Like the other programs, ours includes the key success factor of switching away
from making loans to customers, in favor of offering to make investments on tariffed terms.
The RESP NOSA sets forth detailed requirements for applicants that our PAYS program
would not appear to meet. Before undertaking the RESP application process, I am seeking written
confirmation that RUS will waive the program requirements listed in the attachment as it did for
other PAYS programs.
Sincerely,
Joel Zook, Energy Services Coordinator
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Requirements set forth in the Notice of Solicitation for Applications (NOSA)
for the Rural Energy Savings Program (RESP) for which AMES’ Pay As You Save® (PAYS®)
tariffed on-bill investment program would need a waiver
AMES seeks a letter from RUS waiving each of the following requirements in the NOSA for RESP for
the purpose of helping rural families and small businesses achieve cost savings by a PAYS program
with investments on tariffed terms to consumers to implement durable cost -effective energy
efficiency measures. Reasons for each waiver are provided below the requirement in italics.
1. Qualified consumer means a consumer served by an Eligible entity that has the ability to repay
a loan made by a RESP borrower under the RESP program, as determined by the Eligible entity.
AMES PAYS program will not offer loans to consumers. AMES will not make any determination
about the ability of a participant in its PAYS program to repay a loan.
2. The implementation plan must address how the Applicant will operate the relending process.
AMES will not operate a relending process through the PAYS program. AMES can describe how it
operates the PAYS tariffed on-bill investment program.
3. The financial forecast and related projections submitted in support of a loan application must
include discussion on how the loan loss reserve will be set up, including a description of the
schedule and the mechanism to fund the loan loss reserve.
AMES PAYS program will not offer loans to consumers, and therefore, there are no loan losses in
the program.
Utilities with a PAYS tariffed on-bill program similar to the AMES PAYS program have reported
zero charge-offs to date. Because the historical level of risk exposure is lower than the prevailing
charge-off rate for our municipal utility, AMES does not expect to establish a loss reserve. AMES
will, as an added measure of fiduciary care, seek access to the North Carolina Sustainable Energy
Associations (NCSEA) Energy Savings Reserve Fund (ESRF) to serve as an excessive charge -off
reserve in the event that future charge -offs exceed the prevailing rate. There is no cost to AMES for
ESRF protection.
4. The Energy Efficiency Program Implementation Work Plan must project the expected amount of
loans made by the RESP Applicant to Qualified consumers over the next 10 years.
The AMES PAYS program will not offer loans to consumers. Instead, we project our expected level
of investment through the PAYS program will deploy $15 million in the next 10 years.
5. The Energy Efficiency Program Implementation Work Plan must explain the marketing and
outreach efforts to be executed in implementing the relending program.
AMES will not operate a relending process through the AMES PAYS program. We can explain our
marketing and outreach efforts for implementing the AMES PAYS program.
6. The Energy Efficiency Program Implementation Work Plan must describe its energy efficiency
program and how it will operate the relending process.
AMES will not operate a relending process through the AMES PAYS program. We can describe the
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AMES PAYS program and how we operate the process of offering tariffed investments.
7. The RESP Applicant must provide an itemized budget for a loan loss reserve, the expected loan
delinquency and default rates.
The AMES PAYS program will not offer loans to consumers, and therefore, there are no loan losses
in the program, and there are no loan delinquencies or loan defaults. Like the electricity services
offered on tariffed terms to our customers, the AMES PAYS program will be able to have accounts
that are in arrears as well as charge -offs for uncollectible accounts receivable.
8. The RESP Applicant must describe the processes and procedures that will be put in place to
avoid a conflict of interest in the implementation of the energy efficiency loan program for
Qualified consumers.
The AMES PAYS program is not an energy efficiency loan program for consumers. AMES will
establish processes and procedures to avoid a conflict of interest for the AMES PAYS program.
9. The RESP borrower must provide to Qualified consumers all RESP loan funds that the RESP
borrower receives within one year of receiving them from RUS. If the RESP borrower does not
re-lend the RESP loan funds within one year, the unused RESP loan funds, and any interest
earned on those RESP loan funds, must be returned to the Federal Government and will be
applied to the RESP borrower’s debt. The RESP borrower will not be eligible to receive
additional RESP loan funds from RUS until providing evidence, satisfactory to RUS, that RESP
loan funds from a previous advance have been fully relent to Qualified consumers or returned
to the Federal Government.
AMES will not operate a relending process through the AMES PAYS program. AMES can deploy all
funds received from RUS within one year through its PAYS program.
10. Each loan made by the RESP borrower to a Qualified consumer may not exceed a term of 10
years.
The AMES PAYS program will not involve making loans to consumers. Energy efficiency upgrades
made through the AMES PAYS program are recovered over a period that will not exceed 80% of
the useful life of the upgrade, with a maximum cost recovery period of 10 years.
11. To evaluate loan feasibility, RUS will consider the projections of the expected amount of loans to
Qualified consumers per year and the average size of those loans per customer class.
The AMES PAYS program will not involve making loans to consumers. For each customer class,
AMES can estimate the number of tariffed on -bill investments that customers will approve each
year as well as the average size of those investments.
12. To evaluate loan feasibility, RUS will consider whether the economics of the RESP Applicant’s
operations and service area are such that Qualified consumers may reasonably be expected to
repay the loans for energy efficiency in such levels so that the RESP borrower may sufficiently
cover all its expenses and meet the debt service coverage ratio set by the Administrator.
The AMES PAYS program will not offer loans to consumers. AMES will not make any determination
about the ability of a participant in the AMES PAYS program to repay a loan.
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13. An Eligible entity must use the proceeds from a RESP loan only to make loans to Qualified
consumers for the purpose of implementing energy efficiency measures.
AMES will not make loans to consumers through the AMES PAYS program. While none of the RESP
loan proceeds will be used to make loans to Qualified consumers, AMES will deploy the RESP loan
proceeds through investments made under the terms of the opt -in tariff for the AMES PAYS
program.
14. Purpose of the loan to the Qualified consumer. Loans made to a Qualified consumer must be to
finance Energy efficiency measures for the purpose of decreasing energy (not just electricity)
usage or costs of the Qualified consumer by an amount that ensures, to the maximum extent
practicable, that a loan term of not more than 10 years will not pose an undue financial burden
on the Qualified consumer as determined by the RESP borrower.
AMES will not make loans to consumers through the AMES PAYS program. AMES will not make
any determination about the ability of a participant in the AMES PAYS program to repay a loan.
Investments in energy efficiency upgrades made through the AMES PAYS program are recovered
over a period that will not exceed 80% of the useful life of the upgrade up to a maximum of 10
years.
15. Loans made by the RESP borrower to Qualified consumers may not exceed 10 years.
AMES will not make loans to consumers through the AMES PAYS program. Investments in energy
efficiency upgrades made through the AMES PAYS program are recovered over a period that will
not exceed 80% of the useful life of the upgrade up to a maximum of 10 years.
16. Qualified consumers must repay their loans to the RESP borrower through charges added by
the RESP borrower to the electric bill for the property for, or at which, the Energy efficiency
measures are or will be implemented.
The AMES PAYS program will not offer loans to consumers. AMES will recover its costs for
investments made through the AMES PAYS program using an on-bill charge.
17. Eligible Activities and Investments: A RESP borrower must make loans to Qualified consumers
for the purpose of decreasing their energy (not just electricity) use or costs.
AMES will not make loans to consumers through the AMES PAYS program. While none of the RESP
loan proceeds would be used to make loans to Qualified consumers, AMES will deploy the RESP
loan proceeds through investments made under the terms of the AMES PAYS program’s opt-in
tariff for the purpose of decreasing the energy use or costs of customers.
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