How Performance Contracting Works

Learn More About...

• How the GEO Can Help
• Performance Contracting
• Performance Contracting Frequently Asked Questions
• Resources for Program Participants

If you own or manage a building, energy performance contracting is an affordable way to make investments in new energy-efficiency equipment. You can make the upgrades you need now, with no up-front capital, and pay for them later through the energy savings that result. You benefit immediately, getting new equipment, expertise from energy service professionals, ongoing maintenance services, and the ability to accomplish many projects all at once. Best of all, these savings can be guaranteed.

The Governor’s Energy Office (GEO) Performance Contracting Program recommends you take the following steps to ensure a successful experience:

1. Identify if a performance contract is a good solution for you.

   Consider how a performance contract would work for you.

   While every project is different, here are some typical factors that make for a good project:

   • Facilities totaling over 40,000 sf
   • Facilities with over a $40,000 annual energy bill
   • Limited capital budget
   • Older lighting
   • Need for updated controls
   • Systems not tuned up to optimal conditions
   • Aging heating systems
   • Aging cooling systems
   • Reoccurring comfort or maintenance problems
   • Desire for comprehensive solutions, rather than piecemeal approach
   • Motivation to improve energy efficiency

   The GEO offers assistance to Colorado state, county and city agencies, and education facilities including higher education, public K-12, and special districts. Other types of organizations are encouraged to use the resources on this website, but at this time, additional services cannot be provided by the GEO.

   If you qualify for the GEO’s assistance, please fill out and submit the Facility Information Request Form found in the Resources Section. It will guide you through the process of gathering information the GEO will need to assist you: a list of buildings, your annual energy bill and information about planned and recent efficiency upgrades. If you decide to move ahead, the GEO will ask you to sign a Facility Owner's Memorandum of Understanding to become a partner in the GEO Performance Contracting Program and qualify for free assistance every step of the way.

2. Select an energy service company (ESCO).

   An ESCO will identify and evaluate your energy-saving opportunities and then recommend and install a package of improvements to be paid for through the savings. The ESCO will guarantee that savings meet or exceed annual payments to cover all project costs, usually over a contract term of 10 to 15 years. If savings don’t materialize, the ESCO pays the difference, not you.

   Your ESCO will be your partner for a long time, so it is important to select one that shares your vision and is able to meet your needs. The GEO has made this process easy by providing you a list of pre-approved ESCOs.

   If you are receiving assistance from the GEO, we can assist you by determining which type of solicitation process is best for you, and by working with you through the entire ESCO selection process to ensure that the ESCO you select will meet the needs of your project. Of course, you will need to follow your organization’s procurement policies to select an ESCO (for example, state agencies must solicit at least three proposals).

3. Contract with your ESCO to identify energy-savings opportunities.

   The Technical Energy Audit Contract (TEA) is the first of two contracts that you will sign with your ESCO. Use the GEO’s template contract to streamline the process and ensure a high level of quality. Once you have signed a TEA your ESCO will perform an audit that that identifies energy-saving and capital improvement opportunities in your facilities. The TEA provides you with critical information for the development of your performance contract. If you are receiving assistance from the GEO, we will review the TEA, and make sure all of your questions are answered before it is finalized. The ESCO will then prepare a draft project proposal contract, which includes the package of facility improvement measures to be implemented in the performance contract.

4. Develop a long-term performance contract with your ESCO.

   Your performance contract will be a road map for implementing and tracking the project over the term of the agreement. It should clearly define roles and responsibilities and explicitly state how savings are determined and how the savings performance guarantee will function. The GEO provides an Energy Performance Contract template. If you are receiving assistance from the GEO, we will work with you to negotiate a worry free contract that meets your energy needs while providing the highest possible level of security and dependability.

5. Verify savings and enjoy benefits.

   Follow-up monitoring helps you ensure you are getting full value from your performance contract. The success of the monitoring effort depends on the level of detail provided in the energy performance contract. In addition to the Measurement and Verification Guidelines for Energy Saving Performance Contracts, the GEO provides its partners with reviews of energy savings reports to ensure that your project is achieving the highest level of performance possible.