SUBCHAPTER 41C - ENERGY IMPROVEMENT LOAN PROGRAM

 

SECTION .0100 - GENERAL PROVISIONS

 

01 NCAC 41C .0101 DEFINITIONS

For the purposes of this Chapter, the following definitions apply:

(1) "Allowable Costs," origination cost, up front cost, letter of credit fee (first year), engineering design fee, and implementation of eligible energy conservation measure. All allowable costs to be included in the loan must be incurred after the execution date of the Letter of Intent;

(2) "Applicant," any commercial or industrial business applying for a loan under the Program;

(3) "Btu," British thermal unit; the amount of heat required to raise the temperature of one pound of water one degree Fahrenheit at or near 39.2 degrees F;

(4) "Btu/sq. ft/yr.," Btu per square foot per year; an index of building energy use, calculated by dividing the total annual energy use of a building by its square foot area;

(5) "Commercial or industrial business," a commercial or industrial concern which provides goods or services for profit from a location in North Carolina;

(6) "Credit worthiness", ability of applicant to meet lending institution's standard lending criteria;

(7) "DOA Fiscal Department," the Fiscal Management Department, N. C. Department of Administration;

(8) "Energy conservation measure," a commercially available energy efficient device, technique or technology, designed to reduce energy consumption, peak demand, or as utility costs at an existing or proposed commercial or industrial business;

(9) "Letter of Intent," written notification of the intent of the Department to originate the Loan, subject to the conditions and limitations of the Program;

(10) "Payback," the total energy conservation measure costs (including installation, equipment and engineering design) divided by the annual estimated utility cost savings;

(11) "Program," the Energy Improvement Loan Program;

(12) "Recycling Projects," projects which extract and reprocess energy, water and materials for reuse in buildings, transportation systems, environmental management, consumer products and/or outreach;

(13) "Renewables," solar, wind, biomass or hydropower resources;

(14) "Repayment Schedule," a schedule of periodic payments based upon simple payback as projected in the Technical Analysis rounded to the next quarter. Prepayments shall reduce the term of the loan with periodic payments remaining unchanged;

(15) "State Energy Office," the State Energy Office, N. C. Department of Administration;

(16) "Technical Analysis ("TA")", a report that identifies and analyzes cost‑effective capital energy conservation improvements that the applicant wishes to implement. The Technical Analysis need address only the specific energy conservation measures for which the loan is being requested. Each energy conservation measure analyzed shall be the subject of a single recommendation incorporating technical and economic analyses of the measure, considering building, process and equipment characteristics and energy use patterns pertinent to the improvement. The Technical Analysis must include the estimated cost of the implementation, a construction schedule, and expected energy savings;

(17) "Technical analyst," a person with experience in energy conservation to conduct technical analysis for the purposes of this article;

(18) "Third Party Technical Analyst", a technical analysis performed by an agency or someone who has neither financial interest in the commercial business, non-profit institution, local government institution, or industrial business nor in the sale and installation of any proposed energy conservation measure; however, the Technical Analyst is permitted to provide construction management services to an approved applicant;

(19) "Unallowable costs," costs associated with Technical Analysis preparation, costs associated with pre‑application conference, costs incurred prior to execution date of Letter of Intent, costs associated with loan application (i.e., consultation fees, Technical Analysis modifications); and

(20) "Up front cost," the prepaid charge, if any, at a rate to be determined by the DOA Fiscal Department sufficient to cover the costs of administering and servicing the program.

 

History Note: Authority G.S. 143-345.18(b)(2a); 143-345.18(b)(3);

Eff. September 1, 2004.

SECTION .0200 LOANS

 

01 NCAC 41C .0201 ELIGIBILITY

The following classes of applicants are eligible to apply for loans:

(1) A local government organization, nonprofit organization, commercial or industrial business located in North Carolina that owns the existing building or site of planned construction where the energy conservation measures will be made, or which has a lease or management agreement for such proposed building site or building extending beyond the term of the loan; provided, however, that where the owner of the building authorizes the approved energy conservation measures, the lease or management agreement need not extend beyond the term of the loan.

(2) A Nonprofit organization, commercial or industrial business relocating to North Carolina that owns the site of planned construction where the energy conservation measures will be made, or which has a lease or management agreement for such proposed building or building site extending beyond the term of the loan; provided, however, that where the owner of the building or building site authorizes the approved energy conservation measures, the lease or management agreement need not extend beyond the term of the loan.

 

History Note: Authority G.S. 143-345.18(b)(2a); 143-345.18(b)(3);

Eff. September 1, 2004.

 

01 NCAC 41C .0202 CRITERIA FOR ENERGY CONSERVATION LOANS

Energy conservation projects for which the loans are desired must meet the following criteria:

(1) The building site where the measures are to be installed must be in North Carolina;

(2) The project must demonstrate the ability to conserve energy through efficient energy use or the utilization of renewable energy resources which results in energy savings based upon a net reduction in the use of nonrenewable resources;

(3) A maximum total loan indebtedness of five hundred thousand dollars ($500,000) for a single local government organization, nonprofit organizations, commercial business or industrial business at any given time;

(4) The project must utilize commercially available technologies.

(5) Experimental or research‑related technologies are not eligible for funding;

(6) Each energy conservation measure shall address energy efficiency;

(7) The installation of the energy conservation measure may, at the discretion of the applicant, commence after DOA Fiscal Office issues the Letter of Intent; however, the applicant places itself at risk and is reminded that origination of the Loan is subject to the conditions and limitations of the Program;

(8) The energy conservation measure must demonstrate a simple payback period of 10 years or less;

(9) Each energy conservation measure must have a useful life at least equal to its estimated simple payback;

(10) Eligible energy conservation measures shall fall under one of the following categories:

(a) lighting systems;

(b) heating, ventilation, and air conditioning systems;

(c) electrical distribution systems (motors, variable speed drives, fans, etc.);

(d) energy management systems;

(e) boiler efficiency systems;

(f) energy recovery systems, including on‑site generation of electricity;

(g) alternate/renewable energy systems;

(h) building envelope (doors, windows, roofs, etc.);

(i) industrial process or fabrication systems;

(j) load management systems;

(k) fuel conversion projects provided that the simple payback calculations shall be based on the cost of the current fuel;

(l) other cost‑effective demand or rate‑based improvements; and

(m) recycling projects;

(11) The energy conservation measure shall meet applicable state air and water quality standards; and

(12) The energy conservation measure shall be based on a current Technical Analysis report as defined in Rule .0101 of this Subchapter.

 

History Note: Authority G.S. 143-345.18(b)(2a); 143-345.18(b)(3);

Eff. September 1, 2004.

 

01 NCAC 41C .0203 CONDITIONS AND LIMITATIONS

Loans are made subject to the following conditions and limitations:

(1) Interest shall be charged at the rate of three percent per annum and one percent for renewable and recycling projects;

(2) The amount of the loan shall not exceed allowable costs;

(3) The repayment schedule shall be based on the estimated payback as shown in the Technical Analysis report;

(4) Payments shall be made at a frequency of not less than once per month;

(5) The total amount of the loan, or any portion thereof may be repaid at any time without penalty;

(6) Rebates received through other program offerings of the State Energy Office for projects undertaken from loan proceeds shall be used to reduce the amount of principal;

(7) The borrower shall warrant that all work or construction done with the proceeds of a loan under this program shall comply with all building codes and standards;

(8) Project implementation shall begin within 90 days after approval of the application. If delays are encountered following loan closing, any arbitrage profits will be repaid to the revolving fund;

(9) Loans shall not be used to replace an existing loan;

(10) Loan payments or drafts shall be sent or delivered to the DOA Fiscal Department at its current address as stated in the loan agreement;

(11) A letter of credit from a bank approved to do business in North Carolina shall secure the loan against non‑payment and also serve as a quarterly drafting mechanism for loan repayment from the bank; and

(12) No loans shall be forgiven.

 

History Note: Authority G.S. 143-345.18(b)(2a); 143-345.18(b)(3);

Eff. August 1, 2004.

 

01 NCAC 41C .0204 PRE-APPLICATION CONFERENCE

(a) At least one week prior to submission of a project application the State Energy Office shall convene a pre‑application conference by email, telephone or office visit.

(b) Parties present at the pre‑application conference shall include representatives from the DOA Fiscal Division, the State Energy Office, the applicant or the applicant's engineer.

(c) The purpose of the conference is to help ensure the application procedures are understood and that the application and technical analysis, when accepted, shall be complete.

(d) The applicant shall offer verbal, and if available, written project descriptions.

(e) The applicant shall address environmental impact of the project.

(f) When final, copies of water and air permits shall be provided by the applicant in addition to the technical analysis.

(g) Another purpose of this conference shall be to reach an understanding among all parties that the project is of the type that may be considered for approval.

 

History Note: Authority G.S. 143-345.18(b)(2a); 143-345.18(b)(3);

Eff. August 1, 2004.

 

01 NCAC 41C .0205 APPLICATION PROCEDURES

The applicant shall complete an application on a form provided by the DOA Fiscal Department. The application shall contain the following information:

(1) The name and complete mailing address, including the county, of the applicant;

(2) The address, building name (where applicable) or site description including photographs to locate where the energy conservation measure(s) will be installed;

(3) The name of a contact person, including title and telephone number;

(4) The amount of the loan requested;

(5) The estimated dates of start and completion of the project;

(6) A copy of the Technical Analysis approved by the State Energy Office as fulfilling the energy aspects of the proposed energy conservation measures;

(7) Identification of the commercial lending institution that is providing letter of credit, depository and repayment services;

(8) All applicants shall provide financial data on which to base a determination of the applicant's creditworthiness. Documentation shall include the following:

(a) Financial statements from the last five years; and

(b) Profit and loss statements.

 

History Note: Authority G.S. 143-345.18(b)(2a); 143-345.18(b)(3);

Eff. August 1, 2004.

 

01 NCAC 41C .0206 APPLICATION REVIEW

Application review shall consist of the following phases:

(1) The administrative review shall be conducted by the DOA Fiscal Department and may include any data or information needed to complete that review.

(2) The technical review shall be conducted of the Technical Analysis by the State Energy Office.

(3) The technical review may occur concurrently with application submittal to the DOA Fiscal Department.

(4) The technical review shall consider each energy conservation measure for which funding is requested and shall include the accuracy and sufficiency of calculations, engineering principles considered, and labor and material costs relative to the current local market.

(5) Following acceptance, the State Energy Office will approve those Energy Conservation Measures that were found to meet the energy aspects of the Program.

(6) No application shall be accepted for consideration by the DOA Fiscal Department without the acceptance of the Technical Analysis by the State Energy Office.

 

History Note: Authority G.S. 143-345.18(b)(2a); 143-345.18(b)(3);

Eff. August 1, 2004.

 

01 NCAC 41C .0207 LOAN APPROVAL

Applications shall be considered for loan approval upon completion of the administrative and technical review. Approval shall be based upon the following:

(1) Results of the administrative and technical review documenting energy efficiency; and

(2) Creditworthiness of the applicant.

 

History Note: Authority G.S. 143-345.18(b)(2a); 143-345.18(b)(3);

Eff. August 1, 2004.

 

01 NCAC 41C .0208 LOAN AGREEMENT AND PROMISSORY NOTE

After an application for a loan is approved, a loan agreement shall be executed between the DOA Fiscal Department and the borrower. The loan agreement shall include a promissory note and other necessary documents including, but not limited to, security agreements, mortgages, recordings; and shall contain the covenants and representations as to the borrower's qualification to borrow for the loan, intended use of the loan proceeds, conditions under which the loan will be repaid and events requiring the acceleration, rights and responsibilities of the parties and the terms and conditions of the loan. The requirements to secure the loan shall be included in the loan agreement. Loans shall be secured through bank Letter of Credit.

 

History Note: Authority G.S. 143-345.18(b)(2a); 143-345.18(b)(3);

Eff. August 1, 2004.

 

01 NCAC 41C .0209 REPORTS

Reports must be submitted as follows:

(1) Progress reports must be submitted quarterly to the State Energy Office during the period implementation or construction is in progress and must include a description of the current status, any problems, and forecast of expectations or deviations from the planned schedule; and

(2) A final report certified by the technical analyst must be submitted to the State Energy Office upon completion of the project. The report must include a description of the measures implemented; the actual cost of each measure, and the adjusted estimated payback, based on the actual cost.

 

History Note: Authority G.S. 143-345.18(b)(2a); 143-345.18(b)(3);

Eff. September 1, 2004.

 

01 NCAC 41C .0210 MONITORING

The DOA Fiscal Department shall monitor the use of the funds under this program through continuous review of reports. The State Energy Office shall monitor those buildings/projects where the energy conservation projects are in progress to verify the installation of the energy conservation measures conforms to the original Technical Analysis. At least one visit shall be made to the site of each energy conservation project during the life of the loan.

 

History Note: Authority G.S. 143-345.18(b)(2a); 143-345.18(b)(3);

Eff. August 1, 2004.

 

01 NCAC 41C .0211 DEFAULT

If the borrower violates any of the terms of the loan agreement, the DOA Fiscal Department may place the borrower in default. Borrowers determined to be in default shall be notified by certified mail and the letter of credit provided as security shall be used to protect the interest of the State of North Carolina.

 

History Note: Authority G.S. 143-345.18(b)(2a); 143-345.18(b)(3);

Eff. August 1, 2004.

 

SECTION .0300 - TECHNICAL ANALYSIS

 

01 NCAC 41C .0301 TECHNICAL ANALYSIS REQUIRED

An application for an energy conservation loan must be accompanied by a Technical Analysis that has been conducted by a third party technical analyst and certified by the State Energy Office as fulfilling the energy aspects of the Program.

 

History Note: Authority G.S. 143-345.18(b)(2a); 143-345.18(b)(3);

Eff. September 1, 2004.

 

01 NCAC 41C .0302 TECHNICAL ANAYLYST QUALIFICATIONS

To be qualified to conduct the Technical Analysis required by this article, a technical analyst must meet the following requirements:

(1) Have experience in energy conservation in building construction, mechanical systems or manufacturing processes;

(2) Have neither financial interest in the commercial business, non-profit institution, local government institution, or industrial business nor in the sale and installation of any proposed energy conservation measure; however, the Technical Analyst is permitted to provide construction management services to an approved applicant.

 

History Note: Authority G.S. 143-345.18(b)(2a); 143-345.18(b)(3);

Eff. September 1, 2004.

 

01 NCAC 41C .0303 REPORT REQUIRED

A qualified third party technical analyst shall submit three copies of the results of a Technical Analysis in writing on a form provided by the State Energy Office. The report must include the following:

(1) A description of facility characteristics and energy data, including the operational characteristics of the energy‑using systems;

(2) A description and engineering analysis of each identified energy conservation measure, including the following:

(a) An estimate of the cost of design, acquisition, and installation, including monitoring equipment to assess the performance of the measure discussing assumptions as necessary;

(b) An estimate of the annual energy and energy cost savings by fuel type using generally accepted engineering standards and practices, including all formulae, data and assumptions clearly presented in arriving at the estimate;

(c) The results of a combustion efficiency test, if furnace or boiler modifications or replacements are being implemented;

(d) The simple payback period of each energy conservation measure, calculated by dividing the estimated total cost of the measure by the estimated annual energy cost saving;

(e) A proposed construction schedule for each energy conservation measure; and

(f) The payback period of each energy conservation measure;

(3) The energy use and cost data for each fuel type used for the prior 12‑month period, by month or in accordance with the usual billing cycle;

(4) An outline of qualifications of the analyst documenting previous experience in energy conservation in building construction, mechanical systems, and/or manufacturing processes.

 

History Note: Authority G.S. 143-345.18(b)(2a); 143-345.18(b)(3);

Eff. September 1, 2004.