New Jersey § 40a:11-4

§ 40a:11-4.

a. (1) A contracting unit, as defined in P.L.1971, c. 198 ( C.40A:11-1 et seq. ), may implement an energy savings improvement program in the manner provided by this

section whenever it determines that the savings generated from reduced energy use

from the program will be sufficient to cover the cost of the program's energy conservation

measures as set forth in an energy savings plan. Under such a program, a contracting unit may enter into an energy savings services

contract with an energy services company to implement the program or the contracting

unit may authorize separate contracts to implement the program. The provisions of P.L.1971, c. 198 ( C.40A:11-1 et seq. ) shall apply to any contracts awarded pursuant to this section to the extent that

the provisions of such law are not inconsistent with any provision of this section. (2) A contracting unit facility alteration required to properly implement other energy

efficiency or energy conservation measures, or both, may be included as part of an

energy savings services contract, in which case, notwithstanding any other provision

of law, rule, regulation, or order to the contrary, the facility alteration may be

undertaken or supervised by the energy services company performing the energy savings

services contract if: (a) the total cost of the improvement does not exceed 15 percent of the total cost

of the work to be performed under the energy savings services contract; and (b)(i) the improvement is necessary to conform to a law, rule, or regulation, or order,

or (ii) an analysis within an approved proposal, or the contracting unit, at the time

of the award of the proposal, demonstrates that there is an economic advantage to

the contracting unit implementing the improvement as part of the energy savings services

contract, and the savings rationale for the improvement is documented and supported

by reasonable justification. b. (1) To be eligible to enter into an energy savings services contract, an energy

services company shall be a commercial entity that is qualified to provide energy

savings services in accordance with the provisions of this section. A contracting unit may determine to enter into an energy savings services contract

either through public advertising for bids and the receipt of bids therefor or through

competitive contracting in lieu of public bidding in the manner provided by sections

1 through 5 of P.L.1999, c. 440 ( C.40A:11-4.1 et seq. ). (2)(a) Public works activities performed under an energy savings improvement program

shall be subject to all requirements regarding public bidding, bid security, performance

guarantees, insurance and other public contracting requirements that are applicable

to public works contracts, to the extent not inconsistent with this section. A general contractor, energy services company serving as general contractor, or

any subcontractor hired for the furnishing of plumbing and gas fitting and all kindred

work, and of steam and hot water heating and ventilating apparatus, steam power plants

and kindred work, and electrical work, structural steel and ornamental iron work,

shall be classified by the Division of Property Management and Construction in the

Department of the Treasury in order to perform public works activities under an energy

savings improvement program. (b) Individuals or organizations performing energy audits, acting as commissioning

agents, or conducting verification of energy savings plans, implementation of energy

conservation measures, or verifying guarantees shall be prequalified by the Division

of Property Management and Construction in the Department of the Treasury to perform

their work under an energy savings improvement program. (3) (a) An energy services company may be designated as the general contractor for improvements

to be made pursuant to an energy savings plan, provided that the hiring of subcontractors

that are required to be classified pursuant to subparagraph (a) of paragraph (2) of

this subsection shall be performed in accordance with the procedures and requirements set forth pursuant to the public bidding requirements of the contracting unit. A contract with an energy savings company shall include, but not be limited to:

preparation of an energy savings plan; the responsibilities of the parties for project

schedules, installations, performance and quality, payment of subcontractors, project

completion, commissioning, savings implementation; a requirement that the savings

to be achieved by energy conservation measures be verified upon commissioning of the

improvements; allocation of State and federal rebates and tax credits; and any other

provisions deemed necessary by the parties. (b) All workers performing public works activities for subcontractors awarded contracts

by an energy services company pursuant to this section shall be paid prevailing wages

in accordance with the “New Jersey Prevailing Wage Act,” P.L.1963, c. 150 ( C.34:11-56.25 et seq. ). All subcontractors shall comply with the provisions of “The Public Works Contractor

Registration Act,” P.L.1999, c. 238 ( C.34:11-56.48 et seq. ). Only firms appropriately classified as contractors by the Division of Property Management

and Construction shall be eligible to be awarded a contract as a subcontractor of

an energy services company under this section for performing public works activities

pursuant to regulations adopted by the Division of Property Management and Construction. (c) In order to expedite communications with an energy services company and facilitate

the implementation of an energy savings improvement program, a contracting unit may

designate or appoint an employee of the contracting unit with decision-making authority

to coordinate with the energy services company and to address issues associated with

the implementation of an energy savings improvement program as they arise, provided

that any decision requiring a change order shall be made only upon the approval of

the contracting unit. (4) Except as provided in paragraph (5) of this subsection, a subsidiary or wholly-owned

or partially-owned affiliate of the energy services company shall not be an eligible

contractor or subcontractor under an energy savings services contract. (5) When the energy services company is the manufacturer of direct digital control

systems and contracts with the contracting unit to provide a guaranteed energy savings

option pursuant to subsection f. of this section, the specification of such direct

digital control systems may be treated as proprietary goods and if so treated, the

bid specification shall set forth an allowance price for its supply by the energy

services company which shall be used by all bidders in the public bidding process. Direct digital controls shall be open protocol format and shall meet the interoperability

guidelines established by the American Society of Heating, Refrigerating and Air-Conditioning

Engineers. Each contract to be entered into pursuant to this section between a contracting unit

and an energy services company that is the manufacturer of direct digital control

systems where such direct digital control systems are treated as proprietary goods

as part of the contract, shall first be reviewed and approved by the Board of Public

Utilities for the purpose of affirming the reasonableness of such allowance price. If the board does not disapprove of the contract within 14 days of receipt thereof,

the contract shall be deemed approved. c. An energy savings improvement program may be financed through a lease-purchase

agreement or through the issuance of energy savings obligations pursuant to this subsection. (1) An energy savings improvement program may be financed through a lease-purchase

agreement between a contracting unit and an energy services company or other public

or private entity. Under a lease-purchase agreement, ownership of the energy savings equipment or improved

facilities shall pass to the contracting unit when all lease payments have been made. Notwithstanding the provisions of any other law to the contrary, the duration of

such a lease-purchase agreement shall not exceed 15 years, except that the duration

of a lease purchase agreement for a combined heat and power or cogeneration project

shall not exceed 20 years. For the purposes of this paragraph, the duration of the repayment term of a lease-purchase

agreement shall commence on the date upon which construction and installation of the

energy savings equipment, “combined heat and power facility” or “cogeneration facility,”

as those terms are defined pursuant to section 3 of P.L.1999, c. 23 ( C.48:3-51 ), or other energy conservation measures undertaken pursuant to the energy savings

plan, have been completed. (2) Any lease-purchase agreement entered into pursuant to this subsection, may contain:

a clause making it subject to the availability and appropriation annually of sufficient

funds as may be required to meet the extended obligation; and a non-substitution

clause maintaining that if the agreement is terminated for non-appropriation, the

contracting unit may not replace the leased equipment or facilities with equipment

or facilities that perform the same or similar functions. (3) A contracting unit may arrange for incurring energy savings obligations to finance

an energy savings improvement program. Energy savings obligations may be funded through appropriations for utility services

in the annual budget of the contracting unit and may be issued as refunding bonds

pursuant to N.J.S.40A:2-52 et seq. , including the issuance of bond anticipation notes as may be necessary, provided

that all such bonds and notes mature within the periods authorized for such energy

savings obligations. Energy savings obligations may be issued either through the contracting unit or

another public agency authorized to undertake financing on behalf of the unit. (4) Lease-purchase agreements and energy savings obligations shall not be used to

finance maintenance, guarantees, or verification of guarantees of energy conservation

measures. Lease-purchase agreements and energy savings obligations may be used to finance

the cost of an energy audit or the cost of verification of energy savings as part

of adopting an energy savings plan. Notwithstanding any law to the contrary, lease-purchase agreements and energy savings

certificates shall not be excepted from any budget or tax levy limitation otherwise

provided by law. Maturity schedules of lease-purchase agreements or energy savings obligations shall not exceed the estimated average useful life of the energy conservation measures. d. (1) The energy audit component of an energy savings improvement program shall be

conducted either by the contracting unit or by a qualified independent third party

retained by the governing body for that purpose. It shall not be conducted by an energy services company subsequently hired to develop

an energy savings improvement program. The energy audit shall identify the current energy use of any or all facilities

and energy conservation measures that can be implemented in which the energy savings

and energy efficiency could be realized and maximized. (2) To implement an energy savings improvement program, a contracting unit shall develop

a plan that consists of one or more energy conservation measures. The plan shall: (a) contain the results of an energy audit; (b) describe the energy conservation measures that will comprise the program; (c) estimate greenhouse gas reductions resulting from those energy savings; (d) identify all design and compliance issues that require the professional services

of an architect or engineer and identify who will provide these services; (e) include an assessment of risks involved in the successful implementation of the

plan; (f) identify the eligibility for, and costs and revenues associated with the PJM Independent

System Operator for demand response and curtailable service activities; (g) include schedules showing calculations of all costs of implementing the proposed

energy conservation measures and the projected energy savings; (h) identify maintenance requirements necessary to ensure continued energy savings,

and describe how they will be fulfilled; and (i) if developed by an energy services company, a description of, and cost estimates

of an energy savings guarantee. All professionals providing engineering services under the plan shall have errors

and omissions insurance. (3) Prior to the adoption of the plan, the contracting unit shall contract with a

qualified third party to verify the projected energy savings to be realized from the

proposed program have been calculated as required by subsection e. of this section. (4) Upon adoption, the plan shall be submitted to the Board of Public Utilities, which

shall post it on the Internet on a public webpage maintained for such purpose. If the contracting unit maintains its own website, it shall also post the plan on

that site. The board may require periodic reporting concerning the implementation of the plan. (5) Verification by a qualified third party shall be required when energy conservation

measures are placed in service or commissioned, to ensure the savings projected in

the energy savings plan shall be achieved. (6) Energy-related capital improvements that do not reduce energy usage may be included

in an energy savings improvement program but the cost of such improvements shall not

be financed as a lease-purchase or through energy savings obligations authorized by

subsection c. of this section. Nothing herein is intended to prevent financing of such capital improvements through

otherwise authorized means. (7) A qualified third party when required by this subsection may include an employee

of the contracting unit who is properly trained and qualified to perform such work. e. (1) (a) The calculation of energy savings for the purposes of determining that the energy

savings resulting from the program will be sufficient to cover the cost of the program's

energy conservation measures, as provided in subsection a. of this section, shall

involve determination of the dollar amount saved through implementation of an energy

savings improvement program using the guidelines of the International Performance

Measurement and Verification Protocol or other protocols approved by the Board of

Public Utilities and standards adopted by the Board of Public Utilities pursuant to

this section. The calculation shall include all applicable State and federal rebates and tax credits,

but shall not include the cost of an energy audit and the cost of verifying energy

savings. The calculation shall state which party has made application for rebates and credits

and how these applications translate into energy savings. (b) During the procurement phase of an energy savings improvement program, an energy

services company's proposal submitted in response to a request for proposal shall

not include a savings calculation that assumes, includes, or references capital cost

avoidance savings, the current or projected value of a “solar renewable energy certificate,”

as defined pursuant to section 3 of P.L.1999, c. 23 ( C.48:3-51 ), or other environmental or similar attributes or benefits of whatever nature that

derive from the generation of renewable energy, and any costs or discounts associated

with maintenance services, an energy savings guarantee, or third party verification

of energy conservation measures and energy savings. The calculation of energy savings shall utilize and specifically reference as a

benchmark the actual demand and energy components of the public utility tariff rate

applicable to the contracting unit then in effect, and not a blended rate that aggregates,

combines, or restates in any manner the distinct demand and energy components of the

public utility tariff rate into a single combined or restated tariff rate. If an energy services company submits a proposal to a contracting unit that does

not calculate projected energy savings in the manner required by this subsection,

such proposal shall be rejected by the contracting unit. (2) For the purposes of this section, the Board of Public Utilities shall adopt standards

and uniform values for interest rates and escalation of labor, electricity, oil, and

gas, as well as standards for presenting these costs in a life cycle and net present

value format, standards for the presentation of obligations for carbon reductions,

and other standards that the board may determine necessary. f. (1) When an energy services company is awarded an energy savings services contract,

it shall offer the contracting unit the option to purchase, for an additional amount,

an energy savings guarantee. The guarantee, if accepted by a separate vote of the governing body of the contracting

unit, shall insure that the energy savings resulting from the energy savings improvement

program, determined periodically over the duration of the guarantee, will be sufficient

to defray all payments required to be made pursuant to the lease-purchase agreement

or energy savings obligation, and if the savings are not sufficient, the energy services

company will reimburse the contracting unit for any additional amounts. Annual costs of a guarantee shall not be financed or included as costs in an energy

savings plan but shall be fully disclosed in an energy savings plan. (2) When a guaranteed energy savings option is purchased, the contract shall require

a qualified third party to verify the energy savings at intervals established by the

parties. (3) When an energy services company is awarded an energy savings services contract

to provide or perform goods or services for the purpose of enabling a contracting

unit to conserve energy through energy efficiency equipment, including a “combined

heat and power facility” as that term is defined pursuant to section 3 of P.L.1999, c. 23 (C48:3-51), on a self-funded basis, such contract shall extend for a term of up to

15 years for energy efficiency projects, and for up to 20 years for a combined heat

and power facility after construction completion. If a contracting unit shall elect to contract with an energy services company for

an energy savings guarantee in connection with a contract awarded pursuant to this

section, such guarantee may extend for a term of up to 15 years for energy efficiency

projects, or up to 20 years for a combined heat and power facility after construction

completion. g. As used in this section: “ direct digital control systems ” means the devices and computerized control equipment that contain software and computer

interfaces that perform the logic that control a building's heating, ventilating,

and air conditioning system. Direct digital controls shall be open protocol format and shall meet the interoperability

guidelines established by the American Society of Heating, Refrigerating and Air-Conditioning

Engineers; “ energy conservation measure ” means an improvement that results in reduced energy use, including, but not limited

to, installation of energy efficient equipment; demand response equipment; combined

heat and power systems; facilities for the production of renewable energy; water

conservation measures, fixtures or facilities; building envelope improvements that

are part of an energy savings improvement program; and related control systems for

each of the foregoing; “ energy related capital improvement ” means a capital improvement that uses energy but does not result in a reduction

of energy use; “ energy saving obligation ” means a bond, note or other agreement evidencing the obligation to repay borrowed

funds incurred in order to finance energy saving improvements; “ energy savings ” means a measured reduction in fuel, energy, operating or maintenance costs resulting

from the implementation of one or more energy conservation measures services when

compared with an established baseline of previous fuel, energy, operating or maintenance

costs, including, but not limited to, future capital replacement expenditures avoided

as a result of equipment installed or services performed as part of an energy savings

plan; “ energy savings improvement program ” means an initiative of a contracting unit to implement energy conservation measures

in existing facilities, provided that the value of the energy savings resulting from

the program will be sufficient to cover the cost of the program's energy conservation

measures; “ energy savings plan ” means the document that describes the actions to be taken to implement the energy

savings improvement program; “ energy savings services contract ” means a contract with an energy savings company to develop an energy savings plan,

prepare bid specifications, manage the performance, provision, construction, and installation

of energy conservation measures by subcontractors, to offer a guarantee of energy

savings derived from the implementation of an energy savings plan, and may include

a provision to manage the bidding process; “ energy services company ” means a commercial entity that is qualified to develop and implement an energy savings

plan in accordance with the provisions of this section; “ public works activities ” means any work subject to the provisions of P.L.1963, c. 150 ( C.34:11-56.25 et seq. ); and “ water conservation measure ” means an alteration to a facility or equipment that reduces water consumption, maximizes

the efficiency of water use, or reduces water loss. h. (1) The Director of the Division of Local Government Services in the Department

of Community Affairs, the State Treasurer, and the Board of Public Utilities may take

such action as is deemed necessary and consistent with the intent of this section

to implement its provisions. (2) The Director of the Division of Local Government Services in the Department of

Community Affairs, the State Treasurer, and the Board of Public Utilities may adopt

implementation guidelines or directives, and adopt such administrative rules, pursuant

to the “Administrative Procedure Act,” P.L.1968, c. 410 ( C.52:14B-1 et seq. ), as are necessary for the implementation of those agencies' respective responsibilities

under this section, except that notwithstanding any provision of P.L.1968, c. 410

( C.52:14B-1 et seq. ) to the contrary, the Director of the Division of Local Government Services in the

Department of Community Affairs, the State Treasurer, and the Board of Public Utilities

may adopt, immediately upon filing with the Office of Administrative Law, such rules

and regulations as deemed necessary to implement the provisions of this act which

shall be effective for a period not to exceed 12 months and shall thereafter be amended,

adopted or re-adopted in accordance with the provisions of P.L.1968, c. 410 ( C.52:14B-1 et seq. ).