Mayor Rahm Emanuel’s infrastructure trust wants to tap into fees customers pay on their electricity bills to help fund energy efficient building projects that the city is trying to bankroll privately.
The proposal, which the city insists will not increase rates, would bolster Emanuel’s efforts to improve city infrastructure without borrowing. It comes as ComEd has struggled to meet state targets for energy savings paid for with those fees.
But the trust’s filing with state regulators is short on specifics; it doesn’t detail which projects it would like to fund or how much money it seeks.
The money would come from ComEd customers who pay, on average, $1.24 a month on their bills for energy efficiency programs. The fund totals almost $160 million annually, money that currently is used for programs such as swapping out light bulbs and providing rebates on appliances.
ComEd said it’s crunching the numbers.
“We’re figuring out the details of what the infrastructure trust is proposing and seeing if we can get more bang for our buck,” said Val Jensen, senior vice president of customer operations at ComEd.
Emanuel created the trust in April 2012 to seek private investment for projects the city otherwise could not afford. But the nonprofit agency has been slow to secure financing for its first initiative — making city and school buildings more energy efficient.
The latest proposal comes as the infrastructure trust is set to approve that first project Tuesday after more than a year.
Stephen Beitler, the trust’s executive director, said the ComEd proposal would not be used to fund the project, which would make 75 city buildings more energy efficient. He and Emanuel spokesman Tom Alexander insisted that the proposal would not increase electricity bills, but only tap into money customers already pay.
“The first project of the trust is moving forward completely independent of ComEd, and the trust has no current plans for the ComEd-related efforts in any way,” said Alexander.
The trust’s pitch to tap into ComEd’s fund coincides with the fact that the utility for the first time this year was unable to meet state targets for energy efficiency under the law.
Funding has remained flat for the programs even as goals have increased. ComEd met just 71 percent of state goals this year and is asking regulators to give it a pass on meeting future goals, saying it is on track to hit just 35 percent of state targets in 2016 with the money available.
Environmental groups have long complained that energy efficiency programs run by ComEd do not go far enough. Larger energy savings are to be had in retrofitting buildings, which account for about 70 percent of energy use.
“There’s a lot of potential for energy efficiency that’s out there,” said Anne McKibbin, policy director at Chicago-based CNT Energy, which has overseen energy efficiency upgrades at 386 city apartment buildings. “It is significantly cheaper than the alternative of buying power, and if there’s some way to help people take advantage of that, to get paid to do efficiency instead of buying power, that would be good for everyone.”
The infrastructure trust has been hampered by delays tied to its first round of projects. City advisers initially predicted the trust’s first financing deal would be completed by summer. Beitler has attributed delays to building a first-of-its-kind organization in the country that is in pursuit of complex investment deals that take time to execute.
Dubbed Retrofit Chicago, the infrastructure trust’s first phase initially sought $37.1 million to improve energy efficiency at police and fire stations, libraries and other city buildings, $64 million to convert a water-pumping station from steam power to electricity and $14 million for lighting improvements in Chicago Public Schools.
The trust has since narrowed the focus of the projects to just the city building improvements, which Beitler said now will cost about $25 million. The original $37 million estimate included 104 buildings. The city conducted energy audits on 112 and settled on 75 that were deemed best to offer up for private investment.
“There’s enough complexity and enough people involved that doing one and getting it done correctly is a significant accomplishment,” Beitler said of excluding the schools and water projects in its first transaction. “We need to pay attention to getting this one done.”
The deal will cover energy improvements at city buildings including 28 libraries, 22 police and fire department facilities and City Hall. Most of the work includes enhanced digital controls, lighting upgrades, heating and cooling improvements and weatherization work.
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The trust’s board is expected to vote on the project at its meeting Tuesday afternoon. If approved, it will be introduced before the City Council on Wednesday, Beitler and Alexander said. The trust’s bylaws require a minimum of a month between when the proposal is introduced and when the council votes on it, Alexander said.
Beitler said the trust likely will approve an agreement with a single financing company to back the projects.
The investor will cover the $25 million cost of construction upfront and will be repaid likely over 20 or 21 years from savings on the city’s utility bills, Beitler said.
The structure of the potential deal, known in finance circles as an energy savings agreement, requires the city to pay the investor if predicted energy savings goals are met. However, if the buildings do not meet the projected cost savings, the contractor selected to complete the retrofitting will be on the hook to pay the investor, Beitler said.
Beitler called the structure the trust settled on a “very excellent methodology” that allows it to fulfill Emanuel’s directive to the organization: Pay for city projects without using city funds.
“This is off-credit, off-balance-sheet, so it preserves city bonding capacity for projects that don’t have a return of investment like this one,” Beitler said.
Emanuel spokesman Alexander lauded the plan for making “critical infrastructure upgrades at no cost or risk to taxpayers, exactly what the trust was designed to do.”
Beitler said the trust has lined up a financing structure for CPS to cover the cost of its lighting improvements independent of the trust. CPS spokeswoman Becky Carroll was unable to provide details Monday on the district’s plan to secure private funding for the lighting projects or confirm whether it was doing so independent of the trust.
The Tribune previously reported that the CPS projects that the trust sought to cover had already been completed, hundreds of thousands of dollars in new lighting upgrades in at least nine schools that Emanuel shut earlier this year.
Beitler said the trust’s attempt to secure funding to convert the city water pumping station had hit snags, because of various liens on the water system from previous borrowing that have made executing that deal “very complex.” He said the trust, however, is still pursuing that project.
One of the areas Beitler identified where money from ComEd would be helpful is upfront work the city must cover before seeking private investment for its projects. For example, he said, in order to package an energy efficiency deal, the city must pay a contractor to conduct energy audits to assess potential savings.
The audits connected to the trust’s first projects will cost the city $575,000, according to figures from the trust.
“I wasn’t anticipating so much that construction would be subsidized, because it is very expensive and that’s why we’re going out to private investors,” Beitler said. “But the investment-grade audits that were done to determine whether these were valid projects … would be an example of an area where subsidy might be appropriate.”
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