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Agency cuts energy costs and builds success
Lightening Up

In December 2004, energy experts descended on Kerrville State Hospital, one of 23 mental health and mental retardation schools and hospitals that are part of the Texas Health and Human Services Commission (HHSC). They installed energy-efficient lighting; low-flow faucets; toilets and shower heads; and centralized climate controls that let maintenance workers adjust temperatures at any one of the campus' 21 buildings.

By the end of 2007, 20 other HHSC sites across the state will undergo similar upgrades as part of a $53 million facility improvement project. Using a construction financing tool called Energy Savings Performance Contracting (ESPC), HHSC will implement water- and energy-related improvements using an ESPC contractor, Dallas-based Tour Andover Controls (TAC). Savings from reduced energy and water use will pay for all improvements, and TAC guarantees utility savings of more than $4 million a year for 15 years.

"It is good for the state of Texas, and it's good for us," said Sharon Hunter, director of Facilities Support Services and Oversight for HHSC. "It allows us to be more energy-efficient. We're not asking for funds from the General Revenue Fund to replace equipment that can be replaced through the ESPC program."

HHSC also is meeting a state mandate--the 2001 Texas Legislature passed legislation directing state agencies to implement cost-effective energy- and water-efficiency measures.

HHSC is interested in saving energy and water because it has many older, less energy-efficient buildings across the state, Hunter said. A quarter of its buildings were built before 1951. Austin State Hospital has a building that dates to 1861 and is the third-oldest public building in the state.

Performance contracting
For each contract, a state agency, local government or school works with a private energy service company (ESCO), which identifies areas where the agency can save energy and recommends improvements. The agency pays for the improvements through annual energy savings, according to the nonprofit Energy Services Coalition.

The ESCO guarantees the savings will meet or exceed annual payments to cover project costs, generally over several years. If the anticipated savings don't happen, in many cases the ESCO pays the difference, not the agency. The ESCO manages the project from design to installation and provides ongoing maintenance.

Most ESPCs have saved 12 to 15 percent more than the guarantee, according to SECO.

HHSC will pay for the $53 million project using funds from the Texas Public Finance Authority, which will provide $49.8 million through its Master Lease Purchase Program--a program that finances capital equipment acquisitions by state agencies. The Texas Comptroller's State Energy Conservation Office (SECO) will provide an additional $2.5 million through its LoanSTAR program, a loan fund for public energy-efficiency projects.

Every state agency should consider an ESPC, said Theresa Sifuentes, who handles the ESPC and LoanSTAR programs for SECO.

"We are helping agencies get more value from funds they are already spending, rather than look for infusions of new dollars," she said.

Hammer and saw
HHSC chose TAC as the primary contractor in April 2003, said Tarek Bou-Saada, energy manager for HHSC. TAC representatives visited all 23 sites, collected utility data and estimated the potential energy and water savings. Both parties agreed on a plan, and HHSC split the work into six construction phases, Bou-Saada said.

TAC began the first phase of construction in October 2004, which includes improvements to Austin State Hospital, Austin State School, San Antonio State Hospital, San Antonio State School and Kerrville State Hospital. The work was half-finished by March 2005.

Improvements included installing solar film on windows to keep out heat and upgrades to lighting and water systems. At some sites, workers will replace outdated steam systems with localized water heaters that consume less energy. Workers at Austin State Hospital replaced older toilets that used four to six gallons of water per flush with toilets that use one and a half gallons, said David Rupe, Austin State Hospital's plant maintenance director.

TAC is installing Energy Management Systems that let maintenance workers control heating and air conditioning from a central point, so they don't have to visit individual buildings to adjust thermostats.

"You don't want to know how many times we have to do that," said Rupe. "To be able to sit in one location and look on a computer screen and monitor what's going on and make changes--it's a vast improvement."

Phase one construction costs will account for $13.9 million of the total project. TAC guarantees savings of about $1.3 million a year for 15 years, said Bou-Saada.

Better living
The energy upgrades will improve living and working conditions at HHSC's sites, Hunter said.

"We've already had many compliments from our caregivers, staff and clients," she said.

Kerrville State Hospital staff like the lighting upgrades, said Plant Maintenance Manager Tim Brady.

"I asked the nursing staff and the residents if they had any problems with the lighting retrofit," said Brady. "I got only positive feedback. They felt the lighting was vastly improved and a little crisper."

Workers expanded Kerrville State Hospital's laundry to handle loads from five area state hospitals and schools. They installed a continuous batch washer system, which uses less than one gallon of water per pound of laundry, compared to three and a half gallons of water with the previous machines, said Kevin Vaughn, with government energy solutions for TAC.

In the sixth phase, TAC will install consolidated laundries at Abilene State School, North Texas State Hospital in Wichita Falls, Richmond State School and Mexia State School. The laundry consolidation will cost $5.1 million, but TAC guarantees annual savings of about $480,000 a year for 15 years, Bou-Saada said.

The second phase of construction, expected to begin in 2005, will cover Abilene State School, Big Spring State Hospital, El Paso State Center, Lubbock State School and San Angelo State School. Construction will include lighting and plumbing retrofits, heating and air conditioning work, and energy management systems.

Money where the mouth is
Every 90 days, HHSC and TAC determine the amount that HHSC saved from the energy improvements. At the end of the year, if the work did not achieve the expected savings, TAC will write a check to HHSC to cover the difference, Vaughn said.

Brady said in March that he had already seen utility bills drop substantially at Kerrville State Hospital. To meet legal requirements, a licensed, third-party engineer independently reviews all ESPC projects prior to construction. Dallas-based Kinsman and Associates Inc. will review the first phase work, Bou-Saada said.

"This assures the agency that there's an independent set of eyes--a consulting engineer that says the savings are achievable, measurable and the project's going to work," said Vaughn.

On the bandwagon
State agencies and universities are working with various contractors on other ESPCs around the state. The Texas Department of Transportation completed a $4.4 million project that involved installing 33,000 light-emitting diode lamps in Houston-area traffic signals in 2004, Vaughn said. The Texas Parks and Wildlife Department is finishing a $2.4 million water and energy ESPC for its Austin headquarters, he said.

Lamar University in Beaumont is working on an ESPC project worth $13.7 million that should save $1.5 million a year on utilities, Vaughn said.

"When the institution wants to do this kind of a renovation, they submit an application for our board's consideration, and we approve the project," said Dr. Nancy Ellen Soteriou, assistant director of resource planning for the Texas Higher Education Coordinating Board.

Victor Moore, director of maintenance and construction for HHSC, said his agency's success might convince other agencies to consider ESPCs.

"I think there's a natural reluctance to enter into a new contracting method," Moore said. "It was new to us, too. To handle as large and as varied a project as we have, we're very encouraged. We feel like it's the best thing going for us right now."

Karen Hudgins