BOMA Updates Energy Performance Contracting Model | Practical Law

BOMA Updates Energy Performance Contracting Model | Practical Law

Recently, the Building Owners and Managers Association International (BOMA) updated its Energy Performance Contracting Model toolkit, which helps commercial real estate owners negotiate the performance of energy efficient retrofits at their properties. The toolkit provides an advanced starting point for retrofit negotiations that includes cost and savings guaranties, flexibility in measurement and valuation standards and customizable templates with model language.

BOMA Updates Energy Performance Contracting Model

Practical Law Legal Update w-000-6444 (Approx. 5 pages)

BOMA Updates Energy Performance Contracting Model

by Practical Law Real Estate
Published on 13 Oct 2015 • USA (National/Federal)
Recently, the Building Owners and Managers Association International (BOMA) updated its Energy Performance Contracting Model toolkit, which helps commercial real estate owners negotiate the performance of energy efficient retrofits at their properties. The toolkit provides an advanced starting point for retrofit negotiations that includes cost and savings guaranties, flexibility in measurement and valuation standards and customizable templates with model language.
In July, the Building Owners and Managers Association Internaitional (BOMA) released an update to the BOMA Energy Performance Contracting Model (BEPC) toolkit. The BEPC toolkit assists owners of commercial real estate in developing, negotiating and executing energy efficient retrofits.
The BEPC toolkit was first created in 2008 in collaboration with environmental groups and energy service companies, but commercial owners were hesitant to invest in green initiatives at the time because of the economic climate.
With renewed demand from high quality commercial tenants, an improved commercial real estate market and competition from other building owners, commercial real estate owners are increasingly interested in energy efficient retrofits.
The BEPC toolkit helps commercial real estate owners interested in energy efficient retrofits by:
  • Providing information on new and emerging best practices.
  • Shortening the time needed to negotiate contracts with energy service companies by providing an advanced starting point for negotiations.
  • Allowing energy service contracts to be easily transferable to potential purchasers.
  • Providing that contractors and service providers may guarantee the energy savings or take out an insurance policy to compensate for shortfalls. However, contractors are not strictly required to provide performance guarantees.
  • Offering a high level of flexibility for financing. Measurement and verification efforts may be cancelled after one year to reduce costs and ensure compatibility with funding sources like Property Assessed Clean Energy (PACE), Efficiency Service Agreements (ESAs) and Power Purchase Agreements (PPAs).
  • Ensuring transparency in pricing.
  • Providing model language that can be easily integrated into the owner's or contractor's own contract.
In the past, owners of commercial real estate were hesistant to invest in energy efficient systems for many reasons, including:
  • Energy service contracts were not easily transferable. This provided owners little incentive to invest in energy efficient systems because of the possibilty of complicating a future sale.
  • Ongoing monitoring and verification of performance increased costs and dilluted savings generated by the retrofit.
  • Under most commercial leases, tenants are responsible for utility costs. Owners are not directly affected by rising energy costs and do not benefit from energy cost savings. Commercial tenants have no incentive to invest in long term energy efficient systems in buildings they do not own.
  • Energy efficiency has a low priority when compared with more visible improvements, such as common area refurbishments. When owners do invest in green energy systems, it usually takes the form of easily executed measures with quick repayment periods, such as replacing standard bulbs throughout the building with LED bulbs.
The benefits of energy efficient retrofits include:
  • Improved operating efficiency and ability to better manage operating costs.
  • Enhanced tenant comfort from increased control of temperature and indoor air quality.
  • Improved ability to attract and retain quality tenants because of lower costs of occupancy.
  • Increased likelihood of obtaining ENERGY STAR, LEED, Green Globes, BREAM, Green Star and other energy sustainability certifications.
  • Increased value of the commercial real estate asset.
  • Reduced risk of disruption to tenants' businesses from equipment failure and decreased risk of high cost emergency repairs.