Exhibit D to Subpart C of Part 1930 - Energy Audit

IObjective: It is the objective of the Farmers Home Administration (FmHA) or its successor agency under Public Law 103-354 that Multiple Family Housing (MFH) financed by the Agency incorporates energy conservation measures and operating practices in keeping with the National Energy Strategy for a more efficient, less vulnerable, and environmentally sustainable energy future. Monitoring of this objective will be accomplished by energy audit.

IIPurpose and Intended Outcome:

AThe purpose of this exhibit is to define the FmHA or its successor agency under Public Law 103-354 requirements for energy audits. While energy audits will review the functioning of energy conservation measures initially incorporated in the housing, or previously retrofitted, and identify need for any further measures, the main thrust of energy audits will be to evaluate and/or recommend operating practices used in individual dwelling units and the common areas of a project.

BThe intended outcome is to reduce tenant or member utility expenses; reduce project operating and maintenance expense; reduce usage of subsidy; improve the marketability of units and value of the property; conserve national energy resources within cost effectiveness; and increase the comfort and enjoyment level of tenants or members.

IIIBorrower Responsibility:

AInitial audit. An initial energy audit is required for each project during the third year of operation following completion of construction for “early” detection and correction of any deficiencies in energy conservation measures and/or operating practices.

BSubsequent audit. A subsequent energy audit is required at least within 5 years of the initial audit and at 5-year intervals thereafter, to identify if energy conservation improvements are needed.

CSubmission of audit. The borrower shall submit a copy of the initial or subsequent energy audit along with the next submission of Form FmHA or its successor agency under Public Law 103-354 1930-7, “Multiple Family Housing Project Budget.” The borrower's plan for implementing the recommended improvements shall be included in the project budget. The submitted copy of the energy audit will be retained in the file by the Servicing Office for review during subsequent annual reviews. If any of the improvements are deferred due to cost ineffectiveness, the borrower shall, each year thereafter, include with the annual project budget, an updated cost feasibility analysis of the deferred improvements, along with the borrower's recommendation for implementing the improvements.

DCost of audit. An energy audit is beneficial to the operation of an MFH project. The cost of the audit is an operational expense. The cost should be consistent with the size of the project and comparable to the cost of other audits in the area. The cost may be paid from annual revenue or from the reserve account depending on the amount.

IVPerformance of Energy Audit:

AAn energy audit shall be an in-depth, on-site inspection of the building shell and of the space heating, space cooling, ventilation, and water heating equipment for the building. It shall be conducted by a qualified energy auditor.

BPersons shall be considered qualified to perform an energy audit if they:

1Are authorized under a State Plan approved by the Department of Energy (DOE) in accordance with the requirements in 10 CFR part 456,

2Are authorized under a Federal Standby Plan promulgated by DOE in accordance with the requirements in 10 CFR part 456, or,

3Can otherwise demonstrate that they possess the technical skills and knowledge necessary to perform energy audits.

CWhen persons meeting the qualifications in paragraph IV B of this exhibit are not available, the FmHA or its successor agency under Public Law 103-354 State Director, with prior National Office approval, may institute a plan and method to accomplish the requirements of this exhibit using Agency staff and resources, provided it is cost and time effective to perform such task.

DThe energy auditor shall inspect the building to determine which energy saving measures and operating practices should be improved. The energy auditor is expected to summarize the results of this inspection and projected cost savings in priority order and include them in a written report.

1The report shall address the condition or application of the following energy saving measures:

aCaulking and weatherstripping;

bCentral high efficiency air conditioners;

cCeiling, wall, and floor insulation;

dCrawlspace or foundation wall insulation;

eDuct or pipe insulation;

fWater heater insulation;

gStorm or thermal windows and doors;

hHeat-reflective window and door material;

iCrawlspace and/or attic ventilation;

jEnergy management devices;

kClock thermostats;

lFurnace efficiency modifications; and

mVent dampers for water heaters, furnaces, and boilers.

2The report may address the following energy saving measures if significant benefits can be shown in the opinion of the energy auditor:

aSolar domestic hot water systems;

bActive solar space heating system;

cCombined active solar space heater and solar domestic hot water systems; and

dPassive solar space heating and cooling systems.

3The auditor shall inspect the building and report any improvement of energy conserving operating practices that can lead to immediate energy savings. These practices include, but are not limited to, the following:

aFurnace efficiency maintenance and adjustments (air filters should be changed frequently);

bWater flow reduction on showers and faucets;

cSealing leaks and check insulation of pipes and ducts;

dRaising thermostat settings in summer and lowering them in winter;

eCleaning baseboard convectors and refrigerator coils;

fNightime temperature setback;

gReducing energy use when apartment is unoccupied;

hPlugging leaks in attics, basements, and fireplaces;

iEfficient use of shading; and

jReduce water heater temperature setting (should not exceed 120 degrees Fahrenheit).

4The report shall include a list of any recommended energy saving measures and/or operating practices. The following information shall be provided as applicable:

aDescription;

bEstimated useful life;

cEstimated annual energy cost savings in the first year;

dCost; and

eEstimate of any incremental annual operation and maintenance costs.

5The report shall include a summary of the energy auditor's qualifications.

VFunding: Improvements may be funded from annual project income, project reserve, a subsequent loan, borrower's funds, or any other FmHA or its successor agency under Public Law 103-354 authorized funding which will keep the improvement cost effective. Plans for funding the improvements should be included in the borrower's recommendation for implementation.

VIServicing Official Responsibility:

AThe Servicing Official shall determine the cost effectiveness and financial impact of the proposed improvements from information contained in the energy audit.

1Cost effectiveness. Cost effectiveness shall be determined by comparing the value-in-use of the facility with and without the proposed energy saving improvement. Exhibit D of FmHA or its successor agency under Public Law 103-354 Instruction 1922-B, (available in any FmHA or its successor agency under Public Law 103-354 office), describes the “value-in-use” approach that may be used to appraise cost effectiveness.

2Financial impact. Financial impact shall be determined by comparing the estimated net energy and operation and maintenance costs savings in the first year to the annual cost of amortizing a loan to install the proposed energy saving improvement. A positive financial impact occurs when the first year annual savings equals or exceeds the annual cost of amortizing any loan(s) for the proposed energy savings improvement. Exhibit D-1 of this subpart may be used to organize the calculation of the financial impact.

3When the identified and/or deferred improvements determined by an energy audit obtained within the immediate past 5-year period are found to be cost effective and have a positive financial impact, the Servicing Official shall recommend or require that any rent or occupancy charge increase approval requested by the borrower be conditioned upon installation of such energy saving improvement(s).

4The Servicing Official may recommend a rent or occupancy charge increase for energy saving improvements which are not “cost effective” whenever the borrower contributes sufficient funds to reduce the cost of the improvement so that, on the basis of the FmHA or its successor agency under Public Law 103-354 investment only, the improvement is cost effective. A positive first year financial impact is not required. Any contribution made by the borrower to reduce the cost of the improvement to the cost effective limits will not be an eligible contribution for computing return on investments. The project reserve may not be utilized for such contribution.

BWhen the improvements are not cost effective or do not have a positive financial impact, and the borrower does not elect to reduce the cost of the energy saving measures as described in paragraph VI A 4 of this exhibit, the Servicing Official shall recommend deferral of implementation of the improvements. Any deferred improvements must be analyzed during each subsequent year's annual analysis.

CA copy of the decision regarding the energy audit will be included in the annual reports forwarded to the State Director.

VIIState Director Responsibility: The State Director shall review the Servicing Official's recommendations and the decision regarding implementation of the proposed improvements and/or practices as a part of the annual report review.

VIIIDevelopment: All development will be performed in accordance with the requirements of subpart E of part 1944 of this chapter and subpart A of part 1924 of this chapter, except that § 1924.6 (b)(3)(i) of subpart A of part 1924 of this chapter will not apply to improvements made by the owner-builder method.

IXRent or Occupancy Charge Change: Any rental or occupancy charge change necessitated by the improvements must be processed as set forth in exhibit C of this subpart.