A Phoenix Called MPP

An old grant program is back, with new requirements,
new benefits, and new worries.

Sometimes perfection is the enemy of the good. That was the consensus last year, anyway, when the New York State Public Service Commission stopped funding the Multifamily Performance Program (MPP) – implemented by the New York State Energy Research and Development Authority (NYSERDA) in 2006 to increase homeowners’ energy efficiency – and then handed it back this past June, stripped bare.

Sure, there were problems with the original program – it was confusing, there were redundancies and not all the firms anxious for a cut of the NYSERDA cash incentives had the know-how to sift through the weight of requirements for the co-op and condo homeowners with whom they were partnering. But at least that program worked. When the MPP was taken offline in 2009, there were 83 projects statewide that had been submitted to NYSERDA for review. Of that number, about half were located in the five boroughs.

Today, both MPP contractors and NYSERDA employees are still trying to parse through the June 17 order from the New York State Public Service Commission that calls for a retooling of several of the old program’s major components – chief among them, how energy efficiencies are actually calculated. Under the old program, a co-op or condo board could institute an energy audit, draw up a plan to reduce energy output and reasonably expect NYSERDA to cover upwards of 25 percent of all the changes the board was willing to initiate in return for the building reducing its overall energy consumption by 20 percent.

Not any more.

The biggest hurdle now in qualifying for the new MPP is whether the building’s energy audit identifies enough cost-effective measures in the building that would pass the Total Resource Cost (TRC). What that means, in short, is that any plan for reducing energy consumption – such as swapping out a boiler, replacing windows, or switching to more efficient light bulbs – has to factor in not only the cost of parts and labor, engineering fees, consultant costs, and the estimated reduction in the building’s carbon footprint, but also how much the building’s utility supplier itself saves in energy dollars.

And while, under the new MPP, a building’s scope of work has to reduce overall energy consumption by 15 rather than 20 percent to qualify for NYSERDA cash incentives, hitting the 15 percent mark, in fact, may be much harder.

Michael Colgrove, director of NYERDA’s New York City office, admits the agency is leery of the changes imposed by the Public Service Commission. “There are some things that give us pause [about the newly revised program],” says Colgrove. “The funding levels are lower, the TRC test is a big unknown [and] all the measures have to pass a cost-effectiveness test.” NYSERDA was afraid there would be a sharp decline in participation in the newly revised MPP. Would buildings “find a work scope that will allow them to continue with the program?”

Under the old MPP, a building could add any number of projects to its scope of work, as long as the overall energy consumption in the building was reduced by 20 percent. Under the new program, a building is more limited in what incentives it can receive. For example, if a board is looking to update its lighting, insulate its pipes, swap out its boiler, and redo its roof insulation, and it turns out that only the pipe insulation and the roof insulation pass the TRC test, then the building will only receive an incentive to defray the cost of the pipe and the roof insulation. So, if a building is eligible for an incentive of $30,000, but the board can only find $10,000 worth of cost-effective measures to install, then the co-op or condo will only receive the $10,000. In the past, buildings were eligible for an incentive upwards of 25 percent of the total cost of the work, as long as all the work combined reduced the building’s energy consumption by 20 percent.

Adding another layer to the new program’s complexity: co-op and condo boards now have to ensure that the money they get from NYSERDA goes to the appropriate project – for example, only money collected from surcharges on electricity bills can be applied to electricity efficiencies, while only money from surcharges on gas bills can go towards projects that realize gas efficiencies. Ensuring that the two funding streams remain separate may further limit a building’s ability to participate, say observers of the newly retooled MPP.

Rand Engineering & Architecture had 14 co-ops lined up to participate in the MPP last year when “the carpet was pulled out beneath them,” recalls Rand’s business development manager, Jim Marcinek. “We had just started to get clients jumping on board,” and the next thing the cooperatives knew, “they were all put on hold.”

The old program required buildings to go through four levels of incentives – money for the energy audit, money when the project hit the 50 percent mark, money to finish the program, and additional money if they surpassed the 20 percent energy consumption benchmark. Now, buildings will receive a total of about $600 per unit as long as they pass three levels – energy audit, 50 percent completion mark, and then the full completion mark. In total, MPP contractors estimate that the overall funding for the program has been cut by roughly two-thirds, a figure that Colgrove does not dispute.

Tom Sahagian, director of the energy division at Power Concepts, advises boards to do a careful cost-benefit analysis before applying for any incentive programs. “Buildings get so focused on getting the free money that they lose sight of the whole point of the project, and the incentives become the tail that wags the dog. We had a client that when it turned out a particular incentive was no longer available, they just abandoned the entire project.” It made no sense, says Sahagian.

Both NYSERDA and contractors that perform MPP work expect the new regulations to be released in September. Unfortunately, while Colgrove says NYSERDA tried to stay in contact with the buildings with pending contracts, all 83 projects that had been in the pipeline will have to re-apply to the program. “We were really hoping we would be able to bring some of those applications in under the old program,” Colgrove says, but the money had already been spent. Those buildings would be first in line to be reviewed under the new program, he says.

There are some benefits to the revised program, however. There is more money for low and low-to-moderate income buildings, and under the new MPP, firms that want to partner with co-ops and condos to shepherd them through the process are expected to be more closely vetted. According to NYSERDA, the firms are expected to submit applications “demonstrating that they have the knowledge and expertise to do energy efficiency programs in multifamily buildings.” They must provide a minimum level of service, including: overseeing the audit, drafting an energy reduction plan, identifying ways to pay for the work, offering “some level” of oversight and two inspections to make sure the work being installed meets the MPP criteria.

Another plus side to the MPP is that those buildings that participate in the incentive program will also be in compliance with New York City’s “Greener Greater Buildings Plan,” which goes into effect in 2013 and requires that buildings greater than 50,000 square feet do an energy audit every 10 years. “If you do participate in our program, the audit you receive will give you compliance with the city legislation,” says Colgrove.

When the MPP starts again in September, there will be roughly $21 million available – $18 million from the Department of Public Service and another $3 million from the Green Jobs/Green New York state legislation to help homeowners finance their MPP projects.

While much of the most forward-looking ideas in the revised MPP have been dumped, New Yorkers like Richard Heitler refuse to be discouraged. Heitler, board president of the 434-unit Village East co-op on Avenue C, remains doggedly optimistic about the new MPP, even though the co-op had to siphon off an ambitious submetering and cogeneration program from its original application. While the new application is much more modest – window and door replacement, installation of high-efficiency lighting, new controls on a steam heat distribution system – the savings will still be “significant,” says Heitler. How significant? Roughly $400,000 a year after a more than $2 million outlay in cost. And that, as they say, ain’t hay.