Audit of the Department of Transportation’s Energy Performance Contracts

Improved oversight of DOT’s energy performance contract needed to ensure promised savings

Airports Division’s “20-year” energy contract is flawed, but still protects the State’s interests

Hawaii State Auditor, Report No. 15-18, December 2015

The Department of Transportation-Airports Division’s energy contract, executed in December 2013 with Johnson Controls, Inc., promises to address a host of current and future energy needs, and could serve as a model for other agencies to follow. However, we found flaws in the design and implementation of the project. Contrary to State Procurement Office guidance, the contract allows for automatic acceptance of the annual savings report, which is a key document for ensuring savings match guaranteed levels. This provision weakens the division’s ability to challenge or dispute any savings issues discovered after the 90-day review period expires.

We also found flaws that could undermine the energy contract’s $518 million savings guarantee. The department thought the energy contract covered a 20-year term, but the contract actually expires after 19 years. Consequently, $60 million in savings are scheduled to occur after the contract expires. This error occurred even though the division said it had “ample” time to review the contract, which was reviewed by multiple internal and outside parties. The division was unaware of this flaw until we brought it to their attention.

Lax administration of energy contract undermines accountability for savings guarantee

Johnson Controls’ annual savings report is the division’s foundation for assessing whether the project has achieved the savings that were guaranteed. Thus, it is imperative the division be able to thoroughly review the report in a timely fashion. We found the division lacks the procedures and expertise needed to evaluate these annual savings reports. The division’s incomplete review of the first savings report left it unaware of significant reporting problems that undermine Johnson Controls’ accountability for ensuring savings exceed costs, as required by law. The division was therefore unable to verify whether $13.7 million in guaranteed savings for the project’s first two years was achieved, undermining the public’s confidence in the department’s ability to ensure the energy contract delivers promised benefits.

Agency response

The Department of Transportation generally agreed with our findings and recommendations, and reported that it has begun implementing all our recommendations. Among other things, the department said it has amended the energy contract to correct flaws we identified.

Read … Full Report

  *   *   *   *   *

Hawaii airports energy upgrade project to save $500M over 20 years

PBN Nov 12, 2015: The state Department of Transportation’s Airport Energy Savings Program is expected to result in nearly $500 million in energy cost savings during a 20-year period, the state’s Energy Office said this week.

In 2013, the DOT entered into an energy savings contract with Johnson Controls Inc., which guaranteed reduction of energy use by nearly 50 percent….

The project started construction in Jan. 2014 and is expected to be completed with the installation of efficiency improvements in Dec. 2016.

Besides the $496.2 million in guaranteed savings in energy costs over a 20-year period, the project is expected to save $20.2 million in tax revenues, $148.5 million in income to households and generate 867 jobs each year for the first two years of construction/installation.

It also will use $4.3 million in energy efficiency rebates from Hawaii Energy, 74,500 light fixtures and 372 transformer replacements, as well as 8,748 solar photovoltaic panels for a total of 5.2-megawatts installed.

Additionally, there will be upgrades and the replacement of chilled water and air conditioning systems, installation of smart controls to maximize efficiency, indoor air quality and occupant comfort….

PBN: Honolulu Airport modernization project gets boost of confidence and savings from eager investors

read … $500M