[Code of Federal Regulations]

[Title 24, Volume 4]

[Revised as of April 1, 2006]

From the U.S. Government Printing Office via GPO Access

[CITE: 24CFR990.185]



[Page 715-717]

 

                 TITLE 24--HOUSING AND URBAN DEVELOPMENT

 

CHAPTER IX--OFFICE OF ASSISTANT SECRETARY FOR PUBLIC AND INDIAN HOUSING, 

               DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

 

PART 990_THE PUBLIC HOUSING OPERATING FUND PROGRAM--Table of Contents

 

                 Subpart C_Calculating Formula Expenses

 

Sec.  990.185  Utilities expense level: Incentives for energy 

conservation/rate reduction.



    (a) General/consumption reduction. If a PHA undertakes energy 

conservation measures that are financed by an entity other than HUD, the 

PHA may qualify for the incentives available under this section. For a 

PHA to qualify for these incentives, the PHA must obtain HUD approval. 

Approval shall be based on a determination that payments under the 

contract can be funded from the reasonably anticipated energy cost 

savings. The contract period shall not exceed 12 years. The energy 

conservation measures may include, but are not limited to: Physical 

improvements financed by a loan from a bank, utility, or governmental 

entity; management of costs under a performance contract; or a shared 

savings agreement with a private energy service company.

    (1) Frozen rolling base. (i) If a PHA undertakes energy conservation 

measures that are approved by HUD, the RBCL for the project and the 

utilities involved may be frozen during the contract period. Before the 

RBCL is frozen, it must be adjusted to reflect any energy savings 

resulting from the use of any HUD funding. The RBCL also may be adjusted 

to reflect systems repaired to meet applicable building and safety codes 

as well as to reflect adjustments for occupancy rates increased by 

rehabilitation. The RBCL shall be frozen at the level calculated for the 

year during which the conservation measures initially shall be 

implemented.

    (ii) The PHA operating subsidy eligibility shall reflect the 

retention of 100 percent of the savings from decreased consumption until 

the term of the financing agreement is complete. The PHA must use at 

least 75 percent of the cost savings to pay off the debt, e.g., pay off 

the contractor or bank loan. If less than 75 percent of the cost savings 

is used for debt payment, however, HUD shall retain the difference 

between the actual percentage of cost savings used to pay off the debt 

and 75 percent of the cost savings. If at least 75 percent of the cost 

savings is paid to the contractor or bank, the PHA may use the full 

amount of the remaining cost savings for any eligible operating expense.

    (iii) The annual three-year rolling base procedures for computing 

the RBCL shall be reactivated after the PHA satisfies the conditions of 

the contract. The three years of consumption data to be used in 

calculating the RBCL after the end of the contract period shall be the 

yearly consumption levels for the final three years of the contract.

    (2) PHAs undertaking energy conservation measures that are financed 

by an entity other than HUD may include resident-paid utilities under 

the



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consumption reduction incentive, using the following methodology:

    (i) The PHA reviews and updates all utility allowances to ascertain 

that residents are receiving the proper allowances before energy savings 

measures are begun;

    (ii) The PHA makes future calculations of rental income for purposes 

of the calculation of operating subsidy eligibility based on these 

baseline allowances. In effect, HUD will freeze the baseline allowances 

for the duration of the contract;

    (iii) After implementation of the energy conservation measures, the 

PHA updates the utility allowances in accordance with provisions in 24 

CFR part 965, subpart E. The new allowance should be lower than baseline 

allowances;

    (iv) The PHA uses at least 75 percent of the savings for paying the 

cost of the improvement (the PHA will be permitted to retain 100 percent 

of the difference between the baseline allowances and revised 

allowances);

    (v) After the completion of the contract period, the PHA begins 

using the revised allowances in calculating its operating subsidy 

eligibility; and

    (vi) The PHA may exclude from its calculation of rental income the 

increased rental income due to the difference between the baseline 

allowances and the revised allowances of the projects involved, for the 

duration of the contract period.

    (3) Subsidy add-on. (i) If a PHA qualifies for this incentive (i.e., 

the subsidy add-on, in accordance with the provisions of paragraph (a) 

of this section), then the PHA is eligible for additional operating 

subsidy each year of the contract to amortize the cost of the loan for 

the energy conservation measures and other direct costs related to the 

energy project under the contract during the term of the contract 

subject to the provisions of this paragraph (a)(3) of this section. The 

PHA's operating subsidy for the current funding year will continue to be 

calculated in accordance with paragraphs (a), (b), and (c) of Sec.  

990.170 (i.e., the rolling base is not frozen). The PHA will be able to 

retain part of the cost savings in accordance with Sec.  990.170(c).

    (ii) The actual cost of energy (of the type affected by the energy 

conservation measure) after implementation of the energy conservation 

measure will be subtracted from the expected energy cost, to produce the 

energy cost savings for the year.

    (iii) If the cost savings for any year during the contract period 

are less than the amount of operating subsidy to be made available under 

this paragraph to pay for the energy conservation measure in that year, 

the deficiency will be offset against the PHA's operating subsidy 

eligibility for the PHA's next fiscal year.

    (iv) If energy cost savings are less than the amount necessary to 

meet amortization payments specified in a contract, the contract term 

may be extended (up to the 12-year limit) if HUD determines that the 

shortfall is the result of changed circumstances rather than a 

miscalculation or misrepresentation of projected energy savings by the 

contractor or PHA. The contract term may be extended only to accommodate 

payment to the contractor and associated direct costs.

    (b) Rate reduction. If a PHA takes action beyond normal public 

participation in rate-making proceedings, such as well-head purchase of 

natural gas, administrative appeals, or legal action to reduce the rate 

it pays for utilities, then the PHA will be permitted to retain one-half 

the annual savings realized from these actions.

    (c) Utility benchmarking. HUD will pursue benchmarking utility 

consumption at the project level as part of the transition to asset 

management. HUD intends to establish benchmarks by collecting utility 

consumption and cost information on a project-by-project basis. In 2009, 

after conducting a feasibility study, HUD will convene a meeting with 

representation of appropriate stakeholders to review utility 

benchmarking options so that HUD may determine whether or how to 

implement utility benchmarking to be effective in FY 2011. The meeting 

shall be convened in accordance with the Federal Advisory Committee Act 

(5 U.S.C. Appendix) (FACA). The HUD study shall take into account 

typical levels of utilities consumption at public housing developments 

based upon factors



[[Page 717]]



such as building and unit type and size, temperature zones, age and 

construction of building, and other relevant factors.