PISMO BEACH COUNCIL AGENDA REPORT

PISMO BEACH COUNCIL AGENDA REPORT

Agenda Item #11.B

SUBJECT/TITLE: ENERGY AND WATER EFFICIENCY CAPITAL IMPROVEMENT PROGRAM RECOMMENDATION: Adopt a Resolution authorizing the City Manager to enter into an agreement with OpTerra Energy Services for an energy conservation project assessment. EXECUTIVE SUMMARY: The City of Pismo Beach prides itself in being a leader in responsible operation of its facilities, both fiscally and environmentally. Upgrades to City facilities include converting all 17 City owned cobra-head street lights and the 27 two-head decorative street lights to LEDs, installing variable frequency drive (VFD) motors in both water and wastewater operations, upgrading the City Hall fluorescent lights to T8 bulbs and ballasts, and installing low-flow aerators on all of the water faucets at City Hall, among others. In order to sustain the City's commitment to reducing costs and increasing efficiencies in operations, City staff has been looking at ways to further reduce facility electric expenditures, capture lost water revenues, increase staff efficiency through technology tools, and fund improvements without need of an initial cash investment. In June of 2013, staff began working with Siemens Industry, Inc. (Siemens) on a “self-funding” project that would provide a number of improved efficiencies throughout the City. Portions of this project included remote-read water meters, energy-saving thermostats, updated HVAC (heating and air) units and the aforementioned variable frequency drive (VFD) pumps in the water and wastewater systems. This project would have been financed by Siemens and debt payments would have been made from the cost savings that the project provided. The entire scope of this project was to cost over $4 million. Staff felt that this price was too high and choose to not move forward with this project. In March of 2014, staff began working on a similar project study with Climatec to see if they could provide the same types of efficiencies at a better value to our citizens. Climatec completed a comprehensive Preliminary Assessment Report of the City’s facilities and identified a project similar to the Siemens project at a total anticipated cost of $2.8 Million. In December of 2014, the City Council authorized staff to move forward with a detailed project analysis with Climatec. There was no fee for the detailed analysis if the City moved forward with a project. Climatec identified a project, however the scope of the project was too large and staff proposed a smaller project to move forward with Climatec. Climatec chose not to move forward with the City due to Climatec's preference of a larger more profitable project. Because the City was willing to move forward with a project and it was Climatec who did not, there was no charge to the City for the detailed project analysis.

11.B-1Council Agenda 5-2-2017

In August of 2016 staff began working with OpTerra Energy Solutions1 to see if viable project could be identified that fit the City’s needs and budget. The OpTerra team identified a project that included the following improvements at various city facilities:

• Interior and exterior lighting upgrades • Install more efficient HVAC units • Install VFDs at lift stations and wastewater treatment plant • Install solar panels • Install an energy storage system at the wastewater treatment plant • Replace all water meters with new remote read meters (optional)

OpTerra is confident that a viable project can be done within the City’s budget. Additionally, OpTerra believes that a project without a water meter replacement component can be viable. The next step is to perform a detailed project analysis to ensure that cost savings can be achieved. This project, if approved, is anticipated to move into the construction phase prior to the end of the year, after the detailed project analysis is completed. Staff has checked OpTerra’s references, including the Lucia Mar School District and the cities of Brea, Palm Springs, San Jose, and Garden Grove. All of the references indicated that their energy efficiency projects performed by OpTerra has exceeded their expectations and the cost savings have exceeded the projected cost savings. Background In 2006, the State passed Assembly Bill (AB) 32, the “Global Warming Solutions Act,” which set the 2020 greenhouse gas emissions reduction goal into law. This law requires that that the greenhouse gas emissions in 2020 are no more than the emissions released in 1990. Then in 2008, the State of California passed Senate Bill (SB) 375, "Sustainable Communities Strategy," which builds on AB 32 and requires regions with high levels of air pollution to develop a "Sustainable Communities Strategy" in order to reduce greenhouse gas emissions from motor vehicles. In 2009, the City Council adopted a resolution authorizing the City staff to participate in the San Luis Obispo County Energy Watch Program. Although Pismo Beach is not considered a region with high levels of air pollution, the City prides itself on being a leader in reducing energy consumption and increasing efficiencies throughout its organization. Then in 2010, continuing to show its commitment to energy efficiency, the City implemented energy savings measures including new high-efficiency light fixtures at City Hall, Pismo Beach Veterans' Hall, Fire Department #64 and Shell Beach Veterans' Hall/Library. Other retrofits included replacing booster station pump motors and replacing 71 HPS Street Lights fixtures with LEDs. In 2013, a Climate Action Plan (CAP), including an updated Greenhouse Gas Emissions Inventory, was prepared for the City by Rincon Consultants in conjunction with the Pismo

1 For more information about the company, visit http://opterraenergy.com/


http://opterraenergy.com/

Beach Planning Division and the San Luis Obispo County Air Pollution Control District. A Climate Action Plan is considered a necessary tool in reducing the City’s greenhouse gas emissions, as mandated by California State Assembly Bill 32. Project Benefits Moving forward with the Climatec project would not only provide operational and energy efficiencies, but would also provide a funding mechanism for capital improvements, all while freeing up City funds that are currently being used in a less efficient manner. These benefits include:

• Making significant strides in the City’s Climate Action Plan • Remedying previously unfunded utility infrastructure needs • Saving utility costs (electric, gas and water) • Capturing lost water revenues • Upgrading existing systems:

o Automated water meter reading and advanced metering infrastructure (AMR/AMI)

o Interior & exterior facility lighting o Heating and air and building automation system (BAS) controls

• Decreasing operational costs • Generating ongoing savings • Addressing unfunded needs • Providing self-fund improvements • Guaranteeing financial results

Program Process The City has designed this procurement process to adhere to the intent and processes of Public Resource Code 25008 and California Government Code 4217.The next step is to authorize OpTerra to initiate a Detailed Audit (DA) that will include the engineering resources necessary to confirm the preliminary scope of work and finalize the project economics of the recommended measures. If OpTerra’s DA report can demonstrate that their recommended improvement measures are viable and the financial benefits that can be derived from implementation can be guaranteed in an amount sufficient to cover all costs associated with the project, it is staff’s recommendation to negotiate a Guaranteed Performance Contracting Agreement with OpTerra. Under that Agreement, OpTerra shall design, procure, implement, and provide training and monitoring of the recommended measures. Competitive bids would be solicited for the improvement projects, and City staff would have the final say in what products are installed as part of this project. The cost associated with moving forward with this detailed project analysis is $29,853. This amount would compensate OpTerra’s direct engineering costs associated with the development of the DA report. Should the DA report meet the above requirements and should the City elect to move forward with OpTerra’s recommended measures, this cost would be incorporated into the total contract amount payable under the Energy Services Contract agreement between the City and OpTerra. If OpTerra determines that the projected savings from implementation of the energy savings projects identified in the DA cannot result in a paid-from-savings project which complies with California


Government Code, then the agreement would be terminated by OpTerra and the City would not have to pay this fee. Staff recommends that in the event this $29,853 should be paid to OpTerra as a result of not moving forward with a project, these funds should come from the General Fund contingency budget account. A Resolution authorizing staff to proceed with a program development agreement (Attachment 1.A) for the development of a Detailed Audit is provided as Attachment 1. A Preliminary Assessment Report has been completed by OpTerra and presented to staff. If Council directs staff to proceed with its recommendation, within the next three months, OpTerra will complete the comprehensive Detailed Audit, and if the audit demonstrates a viable project, the staff intends to negotiate with OpTerra a Guaranteed Performance Contract. Other Options There are other options to implementing an energy efficiency project. These include a staff-led project and an “energy consultant”-led project. With the current workload, staff does not have the resources available to lead an energy efficiency project at this time. Staff reached out to a local energy consultant to inquire about an energy efficiency project and to understand the value of this approach. An energy consultant would help to identify a project and then help staff to prepare an RFP for a design/build project. The consultant would not guarantee cost savings of the proposed project, however cost savings could be a requirement of the RFP. Through talking with a local consultant, past projects have shown that including costs savings as a requirement of the RFP results in higher fees from the design/build team. Once the RFP is issued the consultant would assist staff in selecting a qualified design/build firm and help to review the project submittals. Fees for this type of consultant depend on the size of the project but typically range from 1% - 2.5% of the project cost. This does not include construction management of the project or financing of the project which would add additional costs. FISCAL IMPACT: The cost associated with moving forward with this detailed project analysis is $29,853. This amount would compensate OpTerra’s direct engineering costs associated with the development of the DA report. Should the DA report meet the above requirements and the City elects to move forward with OpTerra’s recommended measures, this cost would be incorporated into the total contract amount payable under the Energy Services Contract agreement between the City and OpTerra. If OpTerra determines that the projected savings from implementation of the energy savings projects identified in the DA cannot result in a paid-from-savings project which complies with California Government Code, then the agreement would be terminated by OpTerra and the City would not have to pay this fee. Staff recommends that in the event this $29,853 should be paid to OpTerra, these funds should come from the General Fund contingency budget account. If the DA does identify a viable project, the City would need to either pay for the project with cash and/or seek financing for the total or partial amount of the project. The City could seek Clean Renewable Energy Bonds (CREBs), which is a federal low-interest-rate


loan program, for the solar portion of the project. OpTerra has estimated the various costs that would be borne by the City, but would be covered in the overall project. OpTerra estimates that the energy cost savings would cover the full amount of these costs.

Various Project Component Costs Detailed Project Analysis – could be included in project cost $29,853

Financing costs associated with seeking low interest Clean Renewable Energy Bonds (CREBs) for the solar portion of the project. These are not OpTerra costs. These are costs for a municipal advisor, attorney fees, consultants, etc. associated with obtaining the CREBs

$81,591

Construction Period Financing – one year of estimated interest on remaining funds borrowed during the first year while no savings are generated. Low-end of range is a project without new water meters. High-end of range includes new water meters.

$74,697- $162,767

OpTerra 95% guarantee of savings – approximately $20,000/year for the first five years; remaining 14 years are estimated

($100,000)

OpTerra’s compensation for project management, construction management, overhead, and profit margin

15% of overall project

ALTERNATIVES: 1. Do not approve staff's recommendation; provide alternative direction to staff.

ATTACHMENTS: 1. Resolution

1.A. Exhibit A to Resolution: Program Development Agreement

Prepared by: Meeting Date: May 2, 2017 Benjamin A. Fine, P.E., Director of Public Works/City Engineer

City Manager Approval:


RESOLUTION NO. R-2017-XXX

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PISMO BEACH AUTHORIZING THE CITY MANAGER TO ENTER INTO AN AGREEMENT WITH OPTERRA ENERGY SERVICES FOR AN ENERGY CONSERVATION PROJECT

ASSESSMENT WHEREAS, the City of Pismo Beach prides itself in being a leader in responsible operation of our facilities, both fiscally and environmentally; and WHEREAS, in order to sustain its commitment to reducing costs and increasing efficiencies in our operations, City staff has been looking at ways to further reduce facility electricity expenditures, capture lost water revenues, increase staff efficiency through technology tools, and fund improvements without need of capital; and WHEREAS, in August of 2016 staff began working with OpTerra to see if viable energy conservation project could be identified that fit the City’s needs and budget. The OpTerra team identified a project that included the following improvements at various city facilities:

• Interior and exterior lighting upgrades • Install more efficient HVAC units • Install VFDs at lift stations and wastewater treatment plant • Install solar panels • Install an energy storage system at the wastewater treatment plant • Replace all water meters with new remote read meters (optional); and

WHEREAS, OpTerra is confident that a viable project can be done that is within the City’s budget, and the next step of the project is to perform a detailed project analysis (DA) to ensure the cost savings; and WHEREAS, the cost associated with moving forward with this detailed project analysis is $29,853, which would compensate OpTerra’s direct engineering costs associated with the development of the DA report, and should the DA report meet the above requirements and should the City elect to move forward with OpTerra’s recommended measures, this cost would be incorporated into the total contract amount payable under the Energy Services Contract agreement between the City and OpTerra; and WHEREAS, if OpTerra determines that the projected savings from implementation of the energy savings projects identified in the DA cannot result in a paid-from-savings project which complies with California Government Code, the agreement would be terminated by OpTerra and the City would not have to pay this fee; in the event this $29,853 should be paid to OpTerra, staff recommends that these funds come from the General Fund contingency budget account. NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Pismo Beach, in consideration of the above recitals, hereby authorizes the City Manager to enter into a


Attachment 1

program development agreement with OpTerra (Exhibit A) for an energy conservation project assessment.

UPON MOTION OF Council Member , seconded by Council Member , the foregoing resolution was adopted by the City Council of the City of Pismo Beach this 2nd day of May 2017, by the following vote:

AYES: NOES: ABSENT: ABSTAIN: RECUSED:

Approved: Attest:

________________________ ________________________ Ed Waage, Mayor Erica Inderlied, City Clerk


Attachment 1

OpTerra ES Project #: - _ _ _ _ _OpTerra ES Contract # R 3187

PROGRAM DEVELOPMENT AGREEMENT

This PROGRAM DEVELOPMENT AGREEMENT (this “Agreement”) is made and entered into as of this ____day of February 2017 between OpTerra Energy Services, Inc. (“OpTerra Energy Services”), having its principal offices at 500 12th Street, Suite 300, Oakland, CA 94607, and the City of Pismo Beach, located at 760 Mattie Road,Pismo Beach, CA 93449 (“Pismo Beach” and together with OpTerra Energy Services the “Parties” and each of PismoBeach and OpTerra Energy Services a “Party”.)

WHEREAS, OpTerra Energy Services is an energy services and solutions company with the technical andmanagement capabilities and experience to perform an integrated energy assessment (an “Assessment”) and toidentify supply-side and/or demand-side energy conservation measures (“ECMs”);

WHEREAS, Pismo Beach desires to enter into an agreement to have OpTerra Energy Services perform anAssessment in accordance with the scope of work set forth in Attachment A (the “Scope of Work”) for the sites listedon Part I of Attachment B (the “Sites”), and to identify energy improvements and operational changes which arerecommended to be installed or implemented at the Sites; and

WHEREAS, the primary purpose of the Assessment is to provide an engineering and economic basis for theimplementation of the recommended ECMs, in furtherance of which the Parties intend to negotiate and execute acontract providing for, among other things, engineering, procurement, installation, construction and training services(an “Energy Services Contract”);

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is herebyacknowledged, the Parties agree as follows:

1. ASSESSMENT

OpTerra Energy Services agrees to complete the Assessment within one hundred twenty (120) calendar daysafter the date on which OpTerra Energy Services receives the information listed in Part I of Attachment A (the“Required Information”). Pismo Beach agrees to deliver the Required Information to OpTerra Energy Services nolater than thirty (30) calendar days after the date hereof.

Pismo Beach agrees to assist OpTerra Energy Services in performing the Assessment by (i) providing OpTerraEnergy Services with access to key decision makers and stakeholders of the City of Pismo Beach, (ii) providingOpTerra Energy Services, its employees and agents, such access to the Sites and other relevant facilities of PismoBeach as OpTerra Energy Services deems necessary and (iii) providing, or causing Pismo Beach’s energy suppliersto provide, complete and accurate data concerning energy usage and costs related to the Sites and other relevantfacilities. OpTerra Energy Services will be entitled to rely upon the accuracy and completeness of all informationprovided to OpTerra Energy Services by Pismo Beach and Pismo Beach’s energy suppliers. OpTerra EnergyServices will promptly provide written notice to Pismo Beach if OpTerra Energy Services determines there is anyincorrect data included in the information provided by Pismo Beach or Pismo Beach’s energy suppliers, but OpTerraEnergy Services will have no obligation to correct or confirm any such information unless otherwise specified in theScope of Work. Any change(s) in the Scope of Work will be set forth in a writing executed by the Parties.

2. COMPENSATION TO OPTERRA ENERGY SERVICES

Pismo Beach will compensate OpTerra Energy Services for its performance of the Assessments by payment toOpTerra Energy Services of a fee (the “Assessment Fee”) in the amount of Twenty-Nine Thousand Eight HundredFifty-Three Dollars ($29,853).

The Assessment Fee will be due and payable thirty (30) calendar days after completion of the Assessment;provided that if on such thirtieth (30th) calendar day OpTerra Energy Services and Pismo Beach are negotiating anEnergy Services Contract in good faith, the Assessment Fee will be due ninety (90) calendar days after completion ofthe Assessment; provided further, that if OpTerra Energy Services and Pismo Beach execute an Energy ServicesContract within ninety (90) calendar days after completion of the Assessment, the Assessment Fee shall beincorporated into the total contract amount payable under such Energy Services Contract.


Attachment 1.A

Each of Pismo Beach and OpTerra Energy Services reserves the right to terminate this Agreement at any timeduring the course of the Assessment, by delivery of written notice to the other. If this Agreement is terminated byPismo Beach, a fee will be payable by Pismo Beach to OpTerra Energy Services within thirty (30) calendar days oftermination, in an amount equal to the greater of (i) OpTerra Energy Services’ estimate of its fees, costs, expenses, disbursements and overhead incurred through the date of termination and (ii) a pro-rated fee based on OpTerraEnergy Services’ estimate of the percentage of completion of the Assessment. If this Agreement is terminated byOpTerra Energy Services, Pismo Beach shall have no obligation to pay any portion of the Assessment Fee toOpTerra Energy Services. If OpTerra Energy Services determines that the projected savings from implementation ofthe ECMs identified during the Assessment cannot result in a paid-from-savings project which complies withCalifornia Government Code Sections 4217.10 through 4217.18, the Assessment and this Agreement will beterminated by OpTerra Energy Services.

Any amount not paid when due shall, from and after the due date, bear interest at the rate specified in CaliforniaCode of Civil Procedure §685.010. Accrued and unpaid interest on past due amounts (including interest on past dueinterest) shall be due and payable upon demand.

3. INSURANCE

OpTerra Energy Services will maintain, or cause to be maintained, for the duration of this Agreement, theinsurance coverage outlined in (A) through (F) below, and all such other insurance as required by applicable law.Evidence of coverage will be provided to Pismo Beach via a certificate of insurance, and if requested by PismoBeach, through provision of the insurance polic(ies) and applicable endorsements.

A. Workers' Compensation/Employers Liability for states in which OpTerra Energy Services is not a qualifiedself-insured. Limits as follows:* Workers' Compensation: Statutory* Employers Liability: Bodily Injury by accident $1,000,000 each accident

Bodily Injury by disease $1,000,000 each employeeBodily Injury by disease $1,000,000 policy limit

B. Commercial General Liability insurance with limits of:* $1,000,000 each occurrence for Bodily Injury and Property Damage* $1,000,000 General Aggregate - other than Products/Completed Operations* $1,000,000 Products/Completed Operations Aggregate* $1,000,000 Personal & Advertising Injury* $ 100,000 Damage to premises rented to OpTerra Energy Services

Coverage to be written on an occurrence form. Coverage to be at least as broad as ISO form CG 0001(04/13) or its equivalent forms, without endorsements that limit the policy terms with respect to:(1) provisions for severability of interest or (2) explosion, collapse, underground hazard.

C. Auto Liability insurance for owned, hired and non-owned vehicles with limits of $1,000,000 per accident.Coverage to be written on an occurrence form.

D. Professional Liability insurance with limits of:* $1,000,000 per occurrence* $1,000,000 aggregate

Coverage to be written on a claims-made form. OpTerra Energy Services agrees to maintain such insurancein effect for at least three (3) years following termination of the Agreement.

E. Umbrella / Excess Liability insurance. Limits as follows:* $1,000,000 each occurrence* $1,000,000 aggregate

Coverage terms and limits to apply excess of the per occurrence and/or aggregate limits provided forCommercial General Liability and Professional Liability written on a claims made form. Coverage terms andlimits also to apply in excess of those required for Employers Liability and Auto Liability written on anoccurrence form.


Attachment 1.A

F. Policy Endorsements.* The insurance provided for Workers Compensation and Employers Liability above will contain

waivers of subrogation rights against Pismo Beach, but only to the extent of the indemnityobligations contained in this Agreement.

* The insurance provided for Commercial General Liability and Auto Liability above will:(1) include Pismo Beach as an additional insured with respect to Work performed under this

Agreement, but only to the extent of the indemnity obligations contained in thisAgreement, and

(2) provide that the insurance is primary coverage with respect to all insureds, but only to theextent of the indemnity obligations contained in this Agreement.

4. INDEPENDENT CONTRACTOR

OpTerra Energy Services, and the agents and employees of OpTerra Energy Services, its subcontractors and/orconsultants, are acting in an independent capacity in the performance of this Agreement, and not as public officials,officers, employees, consultants, or agents of the City of Pismo Beach, for purposes of conflict of interest laws or anyother applicable law. This Agreement may not be construed to represent the creation of an employer/employee orprincipal/agent relationship. OpTerra Energy Services will act in an independent capacity and retain sole discretion inthe manner and means of carrying out its activities under this Agreement. OpTerra Energy Services is free to workfor other entities while under contract with Pismo Beach.

5. CREDIT

Pismo Beach will periodically provide to OpTerra Energy Services that financial information or security deemednecessary by OpTerra Energy Services to support any credit extension. If during the life of this Agreement, thefinancial capacity of Pismo Beach becomes impaired or unsatisfactory to OpTerra Energy Services in the solejudgment of OpTerra Energy Services, advance cash payment or security satisfactory to OpTerra Energy Serviceswill be given by Pismo Beach on demand by OpTerra Energy Services and the Work Product (as defined below) maybe withheld until such payment or security is received.

6. ENERGY SERVICES CONTRACT

As it is the intent of Pismo Beach and OpTerra Energy Services to pursue cost effective energy retrofits andECMs at the Sites pursuant to an Energy Services Contract, both Parties agree to enter into good faith negotiationsof an Energy Services Contract immediately following completion of the Assessment.

7. WORK PRODUCT

Pismo Beach will not, by virtue of this Agreement, acquire any interest in any formulas, patterns, devices, secretinventions or processes, copyrights, patents, other intellectual or proprietary rights, or similar items of property whichare or may be used in connection with the Assessment. All data, proposals, plans, specifications, flow sheets,drawings, and other work product prepared or produced by OpTerra Energy Services hereunder (“Work Product”) and furnished directly or indirectly, in writing or otherwise, to Pismo Beach under this Agreement will remain OpTerraEnergy Services’ property and will be used only in connection with work performed by OpTerra Energy Services.OpTerra Energy Services will be deemed the author and owner of such Work Product and will retain all common law,statutory and other reserved rights, including copyrights. The Work Product may not be used by Pismo Beach as abasis for facility construction or implementation of ECMs developed herein by any entity other than OpTerra EnergyServices, without the prior written agreement of OpTerra Energy Services. Any unauthorized use of the Work Productwill be at Pismo Beach’s sole risk and without liability to OpTerra Energy Services, and Pismo Beach agrees to waiveand release, and indemnify and hold harmless, OpTerra Energy Services, its subcontractors, and their directors,employees, subcontractors, and agents from any and all actions, claims, demands, damages, disabilities, fines,penalties, losses, costs, expenses (including consultants’ and attorneys’ fees and other defense expenses) and liabilities of any nature (collectively, “Losses”) associated with or resulting from such use.

8. LIMITATION OF LIABILITY

The liability of a defaulting Party, in connection with this Agreement or any analysis, report, or other deliverablesprovided hereunder, will be limited to direct, actual damages. Neither Party shall be liable to the other Party for anyspecial, indirect, incidental or consequential damages whatsoever, whether in contract, tort (including negligence) orstrict liability, including, but not limited to, operational losses in the performance of business such as lost profits orrevenues or any increase in operating expense. Additionally, each Party waives any claims for negligence againstthe other Party to the greatest extent permitted by law. In no event will OpTerra Energy Services be liable to Pismo


Attachment 1.A

Beach for any Losses which collectively exceed the amount of the Assessment Fee, regardless of whether suchamounts arise out of breach of contract, guarantee or warranty, tort, product liability, contribution, strict liability or anyother legal theory.

9. NONDISCRIMINATION; COMPLIANCE WITH LAWS

OpTerra Energy Services will comply with all applicable laws, rules, regulations and policies, including, but notlimited to, those relating to nondiscrimination, accessibility and civil rights.

The Parties acknowledge and agree that OpTerra Energy Services is not a municipal advisor and cannot giveadvice to Pismo Beach with respect to municipal securities or municipal financial products absent Pismo Beach beingrepresented by, and relying upon the advice of, an independent registered municipal advisor. OpTerra EnergyServices is not subject to a fiduciary duty with regard to Pismo Beach or the provision of information to Pismo Beach.Pismo Beach will consult with an independent registered municipal advisor about the financing option(s) appropriatefor Pismo Beach’s situation.

OpTerra Energy Services cannot guarantee that Pismo Beach will receive funding from any energy efficiencyrebate, incentive, and/or loan program(s) (collectively, “Incentive Funds”); OpTerra Energy Services expresslydisclaims any liability for Pismo Beach’s failure to receive any portion of the Incentive Funds, and Pismo Beachacknowledges and agrees that OpTerra Energy Services will have no liability for any failure to receive all or anyportion of the Incentive Funds.

10. FORCE MAJEURE

Neither Party will be considered to be in default in the performance of any material obligation under thisAgreement (other than the obligation to make payments) when a failure of performance will be due to an event ofForce Majeure. The term “Force Majeure” will mean any cause beyond the control of the affected Party and which bythe exercise of due diligence such Party could not reasonably have been expected to avoid and which, despite usingcommercially reasonable efforts, it has been unable to overcome. Neither Party will be relieved of its obligation toperform if such failure is due to causes arising out of its own negligence or due to removable or remediable causeswhich it fails to remove or remedy within a reasonable time period. Either Party rendered unable to fulfill any of itsobligations under this Agreement by reason of an event of Force Majeure will give prompt written notice of such factto the other Party.

11. INTEGRATION; AMENDMENT; COUNTERPARTS

This Agreement constitutes the entire contract among the Parties relating to the subject matter hereof andsupersedes any and all previous agreements and understandings, oral or written, relating to the subject matterhereof. This Agreement may not be amended except by a writing executed by both Parties. No oral amendmentshall be enforceable, even if supported by new consideration.

This Agreement may be executed in counterparts (and by different parties hereto in different counterparts), eachof which shall constitute an original, but all of which when taken together shall constitute a single contract. Delivery ofan executed counterpart of a signature page of this Agreement by email or fax shall be effective as delivery of amanually executed counterpart of this Agreement.

12. DISPUTE RESOLUTION; APPLICABLE LAW; VENUE; SEVERABILITY

If a dispute arises out of or relates to this Agreement, or the transaction contemplated by this Agreement (a“Dispute”), either Party may initiate the dispute resolution process set forth in this Section 12 by giving notice to theother Party. Senior executives for the Parties will meet, within thirty (30) calendar days after notice of the Dispute, inan attempt to resolve the Dispute and any other identified disputes or any unresolved issues that may lead to adispute. If the senior executives are unable to resolve a Dispute or if a senior management conference is not heldwithin the time provided herein, either Party may submit the Dispute to mediation.

If the Dispute is not settled by senior management conference, the Parties will endeavor to settle the Dispute bymediation under the Commercial Mediation Procedures of the American Arbitration Association (“AAA”). Mediation isa condition precedent to arbitration or the institution of legal or equitable proceedings by either Party. Once one Partyfiles a request for mediation with the other Party and with the American Arbitration Association, the Parties agree toconclude the mediation within sixty (60) calendar days after filing the request. Either Party may terminate themediation at any time after the first session, but the decision to terminate must be delivered in person by the Party’s representative to the other Party’s representative and the mediator.


Attachment 1.A

If the Dispute is not resolved by mediation within sixty (60) calendar days after the date of filing of the request formediation, then the exclusive means to resolve the Dispute is final and binding arbitration. Either Party may initiatearbitration proceedings by notice to the other Party and the American Arbitration Association. The following provisionsapply to all arbitration proceedings pursuant to this Article: (i) The place of arbitration will be San Francisco,California; (ii) one arbitrator will conduct the arbitral proceedings in accordance with the Commercial Arbitration Rulesand Mediation Procedures (Excluding the Procedures for Large, Complex Commercial Disputes) of the AmericanArbitration Association currently in effect (“Arbitration Rules”) (to the extent of any conflicts between the Arbitration Rules and the provisions of this Agreement, the provisions of this Agreement prevail); (iii) the Parties will submit truecopies of all documents considered relevant with their respective statement of claim or defense, and anycounterclaim or reply (in the discretion of the arbitrator, the production of additional documents that are relevant andmaterial to the determination of the Dispute may be required); (iv) the arbitrator does not have the power to award,and may not award, any punitive, indirect or consequential damages (however denominated); all arbitration fees andcosts are to be shared equally by the parties, regardless of which Party prevails, and each Party will pay its own costsof legal representation and witness expenses; (v) the award must be in the form of a reasoned award; (vi) the Disputewill be resolved as quickly as possible, and the arbitrator will endeavor to issue the arbitration award within six (6)months after the date on which the arbitration proceedings were commenced; and (vii) the award will be final andbinding and subject to confirmation and enforcement proceedings in any court of competent jurisdiction.

If any term of this Agreement is declared by a court to be illegal, invalid or unenforceable, the legality, validityand enforceability of the other terms of this Agreement will not be affected or impaired thereby, and the rights andobligations of the Parties will be enforced as if the illegal, invalid or unenforceable term were revised to the minimumextent necessary to make such term legal, valid and enforceable.

[the Parties’ signatures appear on the following page]


Attachment 1.A

IN WITNESS WHEREOF, and intending to be legally bound, the Parties hereto subscribe their names to thisAgreement.

OPTERRA ENERGY SERVICES: PISMO BEACH:

OpTerra Energy Services, Inc. City of Pismo Beach

By: By:

Print Name: Print Name:

Title:_________________________________________ Title: ______________________________________


Attachment 1.A

ATTACHMENT A

SCOPE OF WORK

I. Required Documents (Needed to Proceed).

A. Pismo Beach will provide the following detailed documentation:

1. Most recent three (3) years of audited financial statements.

2. Actual utility company invoices for all utilities serving the Sites, for a minimum of two (2) years, andpreferably three (3) years, immediately prior to the date hereof, with, beginning with the most recentlycompleted month.

3. Utility company demand interval recordings of 15/30 minute electrical demand for one year, where available.

4. Record drawings (AutoCAD or hard copy) for the Sites:a. electricalb. structuralc. architecturald. modifications and remodelse. site landscaping

5. AutoCAD or hard copy of 8 ½” x 11” or 11” x 17” floor and roof plans of all Sites, as well as information onthe age, type and condition of buildings and roofs.

6. A list of key contacts at each site, including Pismo Beach personnel knowledgeable of the electrical, HVAC,lighting and controls systems.

II. Scope of Work.

The Assessment will be performed as described below:

A. Perform detailed review of documents delivered above.

B. Perform an inspection survey to:

1. Identify potential ECMs.

2. Identify the potential locations and type of application for solar PV and other ECM installations.

3. Interview the facility manager, chief engineer, or others as needed.

4. Identify comfort or system-function problems which may impact the performance of the recommendedmeasures.

5. Obtain the hours of operation for building systems and equipment, and expected occupancy and use.

6. Survey major energy using equipment, and evaluate for performance improvement or replacement.

C. To the extent deemed necessary by OpTerra Energy Services, prepare preliminary engineering for ECMs atSites, to include:

1. A written description including:a. the existing conditionsb. the changes to be made

2. A general scope of the construction work required for installation of work.

3. Preliminary selection of major equipment.


Attachment 1.A

D. Calculate energy use and cost for viable ECMs:

1. For each ECM, calculate annual energy savings.2. Calculation methodology will be determined by OpTerra Energy Services, and may include spreadsheet

analysis or other accepted, standard engineering procedures.3. Operational and maintenance savings, if any, will be identified as a separate line item.

E. Prepare a proposed “Project Cost” and a list of “Services to Be Provided,” in anticipation of OpTerra Energy Services and Pismo Beach entering into an Energy Services Contract to design, construct, install, and monitorthe proposed ECMs. The proposed Project Cost is conditioned on prompt execution of the Energy ServicesContract and the condition that hazardous substance or abnormal subsurface/soil condition issues are notpresent.

F. Provide to Pismo Beach the financial analysis for each ECM and the Energy Services Contract.

III. Technologies to be Considered:

A. The technologies listed below will be considered during the performance of assessments:

1. Solar PV

2. HVAC upgrades/replacements

3. Lighting retrofits

4. Pump upgrades

5. Water meter replacement (if energy savings can be demonstrated and if the overall project energy savingsare sufficient to pay for overall project costs)

6. Energy storage


Attachment 1.A

ATTACHMENT B

PISMO BEACH SITE INVENTORY

PART I: SITES INCLUDED IN ASSESSMENT

Site Name

Site Name Address

Wastewater Treatment Plant 570 Frady Lane

City Hall 760 Mattie Road

Shell Beach Veteran's Hall 230 Leeward Avenue

Pismo Beach Veteran's Hall 780 Bello Street

Pismo Beach Police Department 1000 Bello Street

Fire Station No. 64 990 Bello Street

Spyglass Lift Station

Sunset Palisades Lift Station

Vista del Mar Lift Station

Pismo Oaks Lift Station

PART II: SITES NOT INCLUDED IN ASSESSMENT

Any Sites not included above


Attachment 1.A

PISMO BEACH COUNCIL AGENDA REPORT

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