[Code of Federal Regulations]
[Title 24, Volume 4]
[Revised as of April 1, 2008]
From the U.S. Government Printing Office via GPO Access
[CITE: 24CFR990.185]

[Page 713-715]
 
                 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

[[Page 714]]

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 715]]

such as building and unit type and size, temperature zones, age and 
construction of building, and other relevant factors.