This page highlights the State of North Carolina's implementation model, which was developed with funding from the State Energy Program’s Competitive Financial Assistance program. Download the Enhancing Performance Contracting for K-12 Schools, Community College, and Local Governments.
North Carolina passed legislation in 1993 authorizing the state to use ESPCs to design, implement, and fund energy efficiency projects for public buildings. Since then, executive and legislative actions have been adopted to enhance the state’s ability to implement ESPCs, as shown in the table below.
While North Carolina’s USI program successfully helped large state facilities implement ESPC projects, working with smaller local governments was not a priority. The SEP Competitive Award provided USI the resources it needed to prioritize local governmental units’ use of ESPCs.
After the workshops, the project team contacted and visited workshop participants who were interested in pursuing ESPCs. USI used a survey to collect feedback from participants. Participant feedback revealed that the existing ESPC process in North Carolina, while successful for larger facilities with staff and capital resources, had proved more cumbersome for smaller governmental units. Therefore, the project team worked with North Carolina lawmakers to make five changes to ESPC legislation to facilitate local adoption of ESPCs:
- Investment Grade Audit (IGA) Timing: IGAs are conducted to analyze all cost-effective energy efficiency building upgrades and are needed for ESPC planning, but they can often take 18 months or longer at considerable expense. North Carolina statute required that IGAs be conducted in the bidding process, which was often cost-prohibitive or could significantly delay the selection of an energy service company (ESCO). The project team used feedback received at the workshops to make a change to the ESPC process so that the IGA would be required only after an ESCO was selected by the governmental entity, saving time in securing an ESPC.
- Single-Bidder Approval: North Carolina requires local governments to use Requests for Proposals (RFPs) to solicit and select contractors. Prior to this project, if a local government received only one response to its RFP, it would be required by state statute to rebid the project, hindering ESPC adoption. The USI project team worked with the state legislature and ESCO community to eliminate the statutory requirement that a local government reissue an RFP if “at least” one ESCO submitted an acceptable response. This legislative change reduced the risk to ESCOs responding to local governments’ RFPs and also reduced the burden on local governments, which did not have the capacity to issue multiple RFPs.
- Defining "Qualified Providers" and "Qualified Reviewers" and Identifying Prequalified ESCOs: Industry stakeholder feedback from the workshops alerted USI’s team to inconsistent terminology in state ESPC informational resources. USI worked with the state legislature to define a “qualified provider” in North Carolina law as an ESCO that can provide ESPC services to governmental units. The USI project team then issued an RFP to develop a list of prequalified ESCOs and associated services to ensure consistency in ESPCs. The identification of prequalified ESCOs has relieved individual public entities of the tasks of issuing a solicitation, reviewing bids, and selecting an ESCO each time they seek to execute an ESPC—a prequalified ESCO can now be selected directly from the list. Likewise, a “qualified reviewer” is now defined by North Carolina statute as either a licensed professional engineer or architect. By statute, a governmental unit must have a qualified reviewer review RFP responses for an ESPC. These changes helped local officials identify and hire qualified ESCOs and personnel capable of reviewing RFP responses, which can include dozens, if not hundreds of pages of technical documentation.
- Redefining the "Total Cost" of a Project: Prior to this project, the total cost of an ESPC as defined by legislature included neither utility incentives nor state or federal grants to be applied to the project. These offsets, when available, reduce the amount of financing needed, making more projects cash flow positive and more viable.1 The USI team worked with the North Carolina Legislature to facilitate a legislative change that redefined the total cost of an ESPC to include these offsets to reduce the burden on local governments.
- Measurement and Verification (M&V) Guidance: Finally, the USI team worked with the North Carolina Legislature to adopt formal M&V rules for ESPC projects. M&V is the process of quantifying actual energy and cost savings. North Carolina legislation now requires the use of specific American Society of Heating, Refrigerating and Air-Conditioning Engineers, Federal Energy Management Program, and International Performance Measurement and Verification M&V guidance and is the single most important item in a performance guarantee. This change ensures verification of project outcomes, and it helps local governments compare benefits of different projects and legitimize their performance guarantees.
1 Session Law 2014-115 - Allows the “application of the utility company, State, or federal incentives, grants, or rebates” to reduce the total cost of the project. This is especially useful for small contracts.
In 2017, recognizing the success of the program and the overall ESPC efforts in North Carolina, ESC presented North Carolina with an Energy Stewardship Champion award due to its outstanding accomplishments in using ESPCs to achieve energy savings, infrastructure modernization, environmental stewardship, and economic development.
Without the USI program and the technical assistance USI offers, North Carolina would not be able to achieve the goals laid out by Executive Order 80. The cumulative energy cost savings made possible by USI’s efforts are expected to more than double current levels, reaching an estimated $3 billion by 2025.
Tools & Resources
- § 143-64.17F. State agencies to use contracts when feasible; rules; recommendations. State governmental units shall evaluate the use of guaranteed energy savings contracts in reducing energy costs and may use those contracts when feasible and practical.
- About the USI. The Utility Savings Initiative (USI) is North Carolina’s lead-by-example program supporting energy efficiency in public buildings. The program was created to assist North Carolina governmental units in managing the use and cost of energy, water, and other utilities in their facilities.
- North Carolina’s ESPC templates are published and available for use by all governmental units on the state website.