[Federal Register Volume 61, Number 41 (Thursday, February 29, 1996)]
[Rules and Regulations]
[Pages 7966-7973]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-4679]
[[Page 7965]]
_______________________________________________________________________
Part IX
Department of Housing and Urban Development
_______________________________________________________________________
Office of the Assistant Secretary for Community Planning and
Development
_______________________________________________________________________
24 CFR Part 965
Streamlining Public Housing Maintenance and Operation Rules; Final Rule
Federal Register / Vol. 61, No. 41 / Thursday, February 29, 1996 /
Rules and Regulations
[[Page 7966]]
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
Office of the Assistant Secretary for Public and Indian Housing
24 CFR Part 965
[Docket No. FR-3928-F-02]
RIN 2577-AB55
Streamlining Public Housing Maintenance and Operation Rules
AGENCY: Office of the Assistant Secretary for Public and Indian
Housing, HUD.
ACTION: Final rule.
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SUMMARY: This final rule amends HUD's regulations in 24 CFR part 965 on
public housing maintenance and operations to streamline and simplify
necessary requirements and to eliminate unnecessary requirements. This
final rule takes into consideration comments received on the September
25, 1995 proposed rule.
EFFECTIVE DATE: April 29, 1996.
FOR FURTHER INFORMATION CONTACT: William C. Thorson, Director,
Administration and Maintenance Division, Office of Public Housing
Management, Room 4214, U.S. Department of Housing and Urban
Development, 451 Seventh Street, SW, Washington, DC 20410. Telephone
(202) 708-4703; Hearing- or speech-impaired persons may use the
Telecommunications Devices for the Deaf (TDD) by contacting the Federal
Information Relay Service on 1-800-877-TDDY (1-800-877-8339) or (202)
708-9300. (Other than the ``800'' TDD number, the telephone numbers are
not toll-free.)
SUPPLEMENTARY INFORMATION:
I. Background
In accordance with President Clinton's regulatory reinvention
efforts and Executive Order 12866 (Regulatory Planning and Review)
issued by President Clinton on September 30, 1993, HUD commenced a
comprehensive review of all of its regulations to determine which
regulations could be eliminated and streamlined. One such review was
with respect to 24 CFR 965, PHA-Owned or Leased Projects-Maintenance
and Operation.
HUD published a proposed rule on September 25, 1995 (60 FR 49480)
announcing its intention to (1) eliminate one subpart F--Modernization
of Oil Fired Heating Plants, (2) simplify and revise subpart C--Energy
Audits and Energy Conservation Measures, subpart D--Individual Metering
of Utilities for Existing PHA-Owned Projects, and subpart E--Tenant
Allowances for Utilities, (3) consolidate two subparts, subpart A--
Preemption of State Prevailing Wage Requirements With Respect to
Maintenance and Operation and subpart H--Lead- Based Paint Poisoning
Prevention, applicable to other housing programs in a new ``general''
part that will be applicable to all programs, (4) revise subpart I--
Fire Safety at a later date to reflect new statutory requirements and
(5) make only a minor technical change to subpart B--Required Insurance
Coverage.
II. Differences Between This Final Rule and September 25, 1995 Proposed
Rule
Intervening events have changed the need for some of these changes.
Subpart F was removed by another rulemaking that eliminated obsolete
provisions, 61 FR 47263. Subpart A is being amended by a pending
rulemaking that focuses primarily on streamlining public and Indian
housing modernization regulations. Therefore, this final rule focuses
on making the changes to simplify subparts C, D, and E.
Four changes were made at this final rule stage to the revisions
proposed in the rule published on September 25, 1995.
1. The Department has revised Sec. 965.407 to require that PHAs
with mastermeter systems must reevaluate these systems by making a
cost-benefit analysis at least every 5 years. The final rule changes
the period from 36 months to 5 years to be consistent with the energy
audit and the Comprehensive Grant Program five year plan.
2. The Department has revised Sec. 965.503 to streamline the
paragraph by eliminating the unnecessary language in the last sentence
which goes beyond the basic requirement.
3. The Department has revised Sec. 965.504(b) to streamline the
paragraph by eliminating unnecessary descriptive language beyond the
basic requirement.
4. The Department has revised Sec. 965.507(b) to clarify that
increases in utility allowances due to rate changes are not subject to
the 60-day notice requirement in Sec. 965.502(c).
III. Discussion of Public Comments on Proposed Rule
The Department received public comments from ten organizations
(seven public housing agencies (PHAs), one PHA trade organization and
two labor organizations) in response to the September 25, 1995 proposed
rule. One PHA commended HUD's efforts in simplifying part 965,
recommending no revisions. The following discussion summarizes the
remaining comments and provides HUD's responses to those comments.
Subpart A--Preemption of State Prevailing Wage Requirements With
Respect to Maintenance and Operation of Projects
Comment: While two PHAs concurred with the decision to retain this
subpart, two labor organizations strongly objected. Both organizations
cited their opposition to the rule when it was originally issued in
1988. They contended that lower rates do not equate to lower project
costs and that the capacity of the U.S. Department of Labor to produce
timely and accurate wage reports is questionable because of budget
cuts. One organization also suggested that the rule creates an unfunded
mandate upon the States.
Response: The Department appreciates the positions of the two labor
organizations. However, the Department points out that this issue was
the subject of considerable debate at the time the proposed and final
rules were issued in 1987/1988. It was also, as one of the
organizations correctly pointed out, challenged in the courts. The
court found in favor of the Department. The Department continues to
believe that the rule is in the best interest of the program and
declines to eliminate this subpart.
Subpart C--Energy Audits and Energy Conservation Measures
Comment: One PHA and a PHA trade organization suggested that HUD
should not require all PHAs, regardless of size or performance, to
conduct energy audits and undertake energy conservation measures. The
commenter suggested that standard and high performing PHAs and PHAs
with fewer than 250 units should be exempt unless there is evidence
that intervention by HUD is required on energy conservation issues.
Alternatively, it was recommended that if HUD requires all PHAs to
conduct the described activities, it should guarantee funding. Another
PHA raised similar concerns about funding of audits.
Response: First, it should be noted that HUD pays operating
subsidies through the Performance Funding System (PFS) (24 CFR part
990) for HAs that are not able to cover all operating costs, including
utilities, through rents charged to residents. Currently, the utility
component of the operating subsidy now exceeds $1 billion annually. The
appropriation for operating subsidy for Fiscal Years 1994 and 1995 was
only sufficient to fund
[[Page 7967]]
PHAs at 95 and 96 percent, respectively, of their eligibility level. It
is not guaranteed that future appropriations will result in a higher
percentage funding. Hence, the Department must ensure that PHAs conduct
audits as one means of holding down operating costs, including the cost
of utilities, and ensuring that the limited funds available for
operations are used as efficiently as possible.
It is erroneous to assume that a designation as a standard or high
performer under the Public Housing Management Assessment Program
automatically equates to having a good energy management program. HUD's
Office of Inspector General (OIG) recently completed an Audit Report
entitled ``Review of Opportunities To Reduce Utility Costs At Public
Housing Authorities.'' The OIG report was based on visits to
approximately 63 PHAs, which manage 41 percent of the 1.3 million
public housing units nationally. The OIG indicated that despite past
efforts:
Opportunities for reducing utility costs continue to exist and
are cost effective in many instances due to ongoing improvements in
technology. Housing authority managers need to be aware of,
evaluate, and give maximum consideration to these ongoing and new
opportunities when managing their utility costs. Because of
improvements in technology, managing utilities is a continuous
process that requires an ongoing energy management program.
The purpose of an energy audit is to identify the types and costs
of energy use in order to understand how energy is being used and to
identify and analyze alternatives that could substantially reduce
costs. PHAs that are effectively managing their utility consumption are
going through a dynamic process--evaluating current usage, implementing
recommendations for energy cost savings, and monitoring the results. A
good energy audit process can provide a PHA with many benefits and
insights and does not have to be very complex. In fact, some utility
companies do energy audits for free.
The Department views a regularly scheduled audit to be an essential
tool in reducing operating costs for PHAs and the Federal government.
Since the Federal government is paying the cost of operations,
including the utility costs, and the technology is constantly evolving,
it is reasonable and cost effective to require periodic energy audits
by all PHAs, regardless of size or performance. The Department
considers five year intervals to be the maximum time between regularly
scheduled audits, given the continuous changes that are occurring in
the energy industry.
It should be further noted that the requirement to perform an audit
is not new. It has been in the existing regulation for more than a
decade. The existing regulation required an audit within 36 months from
the effective date of the regulation (which was published in 1980) and
prior to a PHA's application for Comprehensive Modernization. The
proposed rule simply updates the existing requirement for the audit to
establish regular intervals when audits must be done.
HUD has eliminated most of the process-oriented requirements (e.g.,
most of the requirements in the current Secs. 965.303 and 965.304) in
favor of a results-oriented requirement (e.g., an audit performed in
accordance with State requirements). HUD also has eliminated the
provision in Sec. 965.302 of the proposed rule involving HUD approval
of energy audit standards.
A PHA can, as one commenter recommended, do the energy audit in
conjunction with its five-year action plan which is required for the
Comprehensive Grant Program. The modernization regulations are being
amended to require the incorporation of the energy conservation
measures resulting from an audit performed under this subpart.
With regard to the funding of energy audits, the Department
believes that a sound energy management program is fundamental to good
property management and that energy audits are a cost of doing business
that should be included as a part of an agency's operating budget. For
that reason, the final rule, in keeping with the existing rule,
provides that the audit is to be paid out of operating funds to the
extent feasible, and, where operating funds are insufficient, the cost
of the audit is an eligible cost for inclusion in a modernization
program. The Department disagrees that this existing requirement
represents an unfunded mandate.
The Department recommends that PHAs give serious consideration to
Secs. 965.305(b) and 965.308 of this rule. These sections, and the
applicable sections of part 990, provide incentives for PHAs to
undertake energy improvements through energy performance contracts
using non-HUD financing. Under this arrangement, a PHA may contract
with an energy service company to do an audit of its properties and
submit a proposal for the installation of energy conservation measures
using non-HUD financing. If the proposal is approved by HUD, HUD will
freeze the three year rolling base in the utility component of the PFS
for the utilities involved. The PHA must use at least 50 percent of the
consumption savings to pay debt service on the non-HUD financing,
retaining any balance.
The PHA benefits three ways from such an arrangement: (1) It
generates additional income from the savings not used for debt service
payments; (2) energy improvements are shifted from the PHA's
modernization program to non-HUD financing, thus, enabling the PHA to
do more work with its limited modernization funds; and (3) the PHA is
able to provide a better environment for its residents. As pointed out
in the OIG report, ``energy efficiency can become a competitive
advantage for housing authorities who want to attract residents through
increased resident comfort and decreased operating costs.'' Effective
energy use becomes a more critical issue as the public housing
community faces drastic changes in the nature of how they are funded
and operate. More information regarding energy performance contracting
and incentives to reduce utility costs is contained in HUD Notice PIH
95-26, issued April 28, 1995.
Comment: The PHA trade organization suggested that if HUD continues
to require energy audits of all PHAs, it should not require that HUD
review and pre-approve all energy performance contracts, especially for
standard and high-performing PHAs. Instead, the organization suggests
that the review of such contracts should be part of the independent
public accountant (IPA) process, as the Department proposes for the
calculation of resident utility allowances.
Response: Energy performance contracting is relatively new in the
public housing community and involves a more sophisticated two-step
procurement process that most PHAs have not used and are not familiar
with. Further, HUD must agree that the proposed savings will
materialize and be sufficient to amortize the debt service in order to
commit the Department to freezing the utility component of the PFS for
periods of up to 12 years. This represents a significant financial
investment on the part of the government. For these reasons, the
Department is retaining the pre-approval of energy performance
contracts.
Comment: One PHA recommended that HUD should develop criteria to
determine which housing authorities are in need of an energy audit. HUD
should evaluate a housing authority's energy performance by comparing
consumption and cost to a standard. This evaluation would determine
which housing
[[Page 7968]]
authorities need to conduct an energy audit. The PHA contends that PHAs
send in so many reports and information to HUD that the energy
performance of a housing authority could be determined by HUD.
Response: As noted above, energy audits are an essential part of an
ongoing energy management system. Technology is constantly changing,
and it is necessary to have properties reevaluated on a regular basis.
The recommendation is to rely on HUD to make a determination after the
PHA has been determined to be energy inefficient. The Department does
not believe that this is an effective management approach, particularly
given dwindling resources for PHAs and HUD.
Further, the Department does receive consumption information for
PHAs in conjunction with the PFS. The information reflects gross
consumption and is not broken down by individual projects or buildings,
both of which can vary significantly. HUD also requests utility
information in conjunction with its routine monitoring. Such monitoring
is done only on a limited basis. As noted above, the Department does
not believe that it is a good management practice for PHAs to wait for
HUD to determine energy efficiency. Given the cost to the Department
for operations, including utilities, it will retain the audit
requirement which has been in effect since 1980.
Subpart D--Individual Metering of Utilities for Existing PHA-Owned
Projects
Comment: One PHA indicated that residents should be required to pay
for utilities and that the PHA should charge a modest rent based on the
number of bedrooms in the unit.
Response: The Department agrees that individual metering is an
important component of a complete energy management system for property
managers. However, conversions should only be mandatory if they are
cost effective, and this subpart is written accordingly. The payment of
rent by public housing residents is, by law, based on income and is not
addressed by this rule.
Comment: One PHA indicated that it agrees that individual metering
is advisable, but that PHAs are capable of implementing these steps
independent of HUD regulation. The PHA questions the change in the
requirement in the existing rule which advises the PHA to consult with
residents, whereas the proposed rule makes such consultation mandatory.
Response: The Department agrees that many PHAs are capable of
implementing the provisions contained in the rule. However, it is also
true that many PHAs are reluctant to do so to avoid confrontational
situations with the residents and the possibility of litigation which
has accompanied such conversions in the past. Also, HUD pays the
utility costs in these cases and needs to ensure that the conversions
are accomplished where it is cost effective to do so. Because of the
cost to the Federal government, the Department is retaining this
requirement. With regard to consultation, residents are both the PHA's
and the Department's ultimate customer. The Department believes the
conversion to individual metering, while a good management practice,
will nevertheless significantly impact the residents and, therefore,
they must be consulted.
Comment: One PHA noted the requirement in Sec. 965.407 for PHAs
with mastermeter systems to reevaluate these systems by making a cost-
benefit analysis at least every 36 months. The PHA recommends a five-
year cycle to be consistent with the energy audit and the Comprehensive
Grant Program five year plan.
Response: The Department agrees with this recommendation and has
made the revision in the final rule.
Subpart E--Resident Allowances for Utilities
Comment: One PHA noted that a HUD Field Office did a Utility Review
and made a finding because it was not surcharging residents for water
for a washing machine. The PHA indicates that it felt that it had a
right to determine what appliances required surcharges but notes that
the regulation does not specifically mention washing machines. The PHA
also recommended that we specifically exempt elderly high rises in the
South from the requirement to charge residents for the energy to use a
PHA-furnished air conditioner. In the instant case, the individual
units had heat pumps for each unit which provide heat and air
conditioning. The PHA did not think it was possible to establish fair
surcharges because some run the air conditioning all the time while
others only run the air conditioning occasionally.
Response: The Department agrees that if laundromats are not
available, washing machines in units are reasonable, but not without
limitation. As has been described above, the amount of operating
subsidies is limited. It is, therefore, essential that PHAs undertake
measures to conserve energy. One such way is to establish an allowance
``which reflects a reasonable consumption of utilities by an energy-
conservative household of modest circumstances * * *.'' If the utility
is paid by the PHA and the resident exceeds the allowance, the resident
must be surcharged for the excess consumption. The regulation provides
PHAs with considerable latitude in the development of allowances,
within the basic framework described above. The Department plans to
issue a guidebook in the near future to assist PHAs in developing
utility allowances.
There is considerable debate as to the extent to which air
conditioning should be considered an essential component. As noted
earlier, the cost of utilities is in excess of $1 billion annually.
Appropriations for the last two years have been, and for the
foreseeable future, will be, insufficient to fund PHAs at 100 percent
of their eligibility under the PFS. Including air conditioning in
utility allowances beyond what is already specifically authorized would
seriously and adversely impact the level of funding for other critical
services such as maintenance. This will affect all PHAs around the
nation, since it will reduce the overall amount of operating subsidy
which is fixed. The Department's approach to this difficult issue is to
allow the capital costs to be an eligible expense while requiring the
resident to pay the costs of the energy associated with its use. The
Department is retaining the language in Sec. 965.505(e) as described in
the proposed rule.
Comment: Two PHAs indicate that HUD's criteria for establishing
utility allowances as required in Sec. 965.505(d)(1) through (9) should
be simplified. One PHA indicated that the nine factors that must be
taken into account have intimidated many PHAs into commissioning
expensive engineering studies in an effort to comply. The PHA suggests
that the language be simplified to allow for the use of previous
consumption histories. Another PHA suggested that the factors be
advisory.
Response: As noted in Sec. 965.505(c), the Department leaves the
complexity and elaborateness of the methods for establishing utility
allowances to the discretion of the PHA. HUD believes that the choice
in methodology is best handled at the local level where the PHA can use
a procedure suitable to available data and local experience. As such,
the rule does not intend to require only the use of the engineering
method to establish allowances. While the Department believes that the
engineering method will more closely approximate the objective stated
in
[[Page 7969]]
Sec. 965.505(a), the consumption method is acceptable and may be
appropriate for some PHAs. The Department believes that the ``factors''
cited, which have been in effect for more than a decade, are reasonable
and necessary to be ``considered'' regardless of the methodology used
in order to meet the objective in Sec. 965.505(a).
Comment: One PHA indicated that Sec. 965.507 states that utility
allowances must be revised if the rate changes more than 10 percent
between annual reviews. Utility rates can be volatile, particularly if
a housing authority purchases a utility, such as natural gas, directly
from the well-head. This could necessitate changing utility allowances
several times during a twelve month period. The PHA recommends revision
only on an annual basis. This PHA, along with others, indicated that if
HUD wants PHAs to be competitive in the housing market, air
conditioning must be considered a legitimate cost and should be
included in the utility allowances.
Response: To the extent that the market is volatile, any savings/
cost should be passed along to the resident. The Department previously
discussed the financial impact of including air conditioning in utility
allowances. No changes are being made to this section.
Comment: One PHA noted an apparent inconsistency. Specifically,
Sec. 965.502(c) requires residents to receive a 60-day notice of any
change to the utility allowances. Section 965.507(b), on the other
hand, requires that in cases of increases in utility allowances due to
rate changes, adjustments shall be effective the first day of the month
following the month in which the last rate change taken into account in
such revision became effective. The PHA suggested that it appears that
increases due to rate changes are not subject to the 60-day notice
requirement contained in Sec. 965.502(c).
Response: The PHA is correct that revisions due to rate changes
pursuant to Sec. 965.507(b) are not subject to the 60 day notice
requirement. The Department has added clarifying language.
Other Matters
Environmental Impact
A Finding of No Significant Impact with respect to the environment
for this rule was made at the proposed rule stage in accordance with
HUD regulations at 24 CFR part 50, which implement section 102(2)(C) of
the National Environmental Policy Act of 1969. The Finding of No
Significant Impact remains applicable to this final rule and is
available for public inspection between 7:30 a.m. and 5:30 p.m.
weekdays in the Office of the Rules Docket Clerk, Office of the General
Counsel, Department of Housing and Urban Development, Room 10276, 451
Seventh Street, SW., Washington, DC 20410.
Regulatory Flexibility Act
The Secretary, in accordance with the Regulatory Flexibility Act (5
U.S.C. 605(b)), has reviewed this rule before publication and by
approving it certifies that this rule would not have a significant
economic impact on a substantial number of small entities because the
rule reduces and streamlines existing requirements. PHAs will have
fewer mandatory requirements. No new additional requirements are being
imposed by this rule.
Executive Order 12612, Federalism
The General Counsel, as the Designated Official under section 6(a)
of Executive Order 12612, Federalism, has determined that this rule
does not have ``federalism implications'' because it does not have
substantial direct effect on the States (including their political
subdivisions), or on the distribution of power and responsibilities
among the various levels of government.
Executive Order 12606, The Family
The General Counsel, as the Designated Official under Executive
Order 12606, The Family, has determined that the rule will not have a
significant impact on family formation, maintenance, and well being,
and, therefore, is not subject to review under the order. No
significant changes in existing HUD policies or programs will result
from promulgation of this rule as those policies and programs relate to
family concerns.
Catalog of Federal Domestic Assistance
The Catalog of Federal Domestic Assistance Program number assigned
to this program is 14.850.
List of Subjects in 24 CFR Part 965
Energy conservation, Government procurement, Grant programs--
housing and community development, Lead poisoning, Loan programs--
housing and community development, Public housing, Reporting and
recordkeeping requirements, Utilities.
Accordingly, 24 CFR part 965 is amended as follows:
PART 965--PHA-OWNED OR LEASED PROJECTS--MAINTENANCE AND OPERATION
1. The authority citation for part 965 continues to read as
follows:
Authority: 42 U.S.C. 1437, 1437a, 1437d, 1437g, and 3535(d).
Subpart H is also issued under 42 U.S.C. 4821-4846.
Sec. 965.205 [Amended]
2. In subpart B, in Sec. 965.205, paragraph (a) is amended by
removing the parenthetical phrase ``(in section 305 of the ACC)'' from
the first sentence that immediately follows the paragraph heading.
3. Subpart C is revised to read as follows:
Subpart C--Energy Audits and Energy Conservation Measures
Sec.
965.301 Purpose and applicability.
965.302 Requirements for energy audits.
965.303 [Reserved].
965.304 Order of funding.
965.305 Funding.
965.306 Energy conservation equipment and practices.
965.307 Compliance schedule.
965.308 Energy performance contracts.
Subpart C--Energy Audits and Energy Conservation Measures
Sec. 965.301 Purpose and applicability.
(a) Purpose. The purpose of this subpart C is to implement HUD
policies in support of national energy conservation goals by requiring
PHAs to conduct energy audits and undertake certain cost-effective
energy conservation measures.
(b) Applicability. The provisions of this subpart apply to all PHAs
with PHA-owned housing, but they do not apply to Indian Housing
Authorities. (For similar provisions applicable to Indian housing, see
part 950 of this chapter.) No PHA-leased project or Section 8 Housing
Assistance Payments Program project, including a PHA-owned Section 8
project, is covered by this subpart.
Sec. 965.302 Requirements for energy audits.
All PHAs shall complete an energy audit for each PHA-owned project
under management, not less than once every five years. Standards for
energy audits shall be equivalent to State standards for energy audits.
Energy audits shall analyze all of the energy conservation measures,
and the payback period for these measures, that are pertinent to the
type of buildings and equipment operated by the PHA.
[[Page 7970]]
Sec. 965.303 [Reserved]
Sec. 965.304 Order of funding.
Within the funds available to a PHA, energy conservation measures
should be accomplished with the shortest pay-back periods funded first.
A PHA may make adjustments to this funding order because of
insufficient funds to accomplish high-cost energy conservation measures
(ECM) or where an ECM with a longer pay-back period can be more
efficiently installed in conjunction with other planned modernization.
A PHA may not install individual utility meters that measure the energy
or fuel used for space heating in dwelling units that need substantial
weatherization, when installation of meters would result in economic
hardship for residents. In these cases, the ECMs related to
weatherization shall be accomplished before the installation of
individual utility meters.
Sec. 965.305 Funding.
(a) The cost of accomplishing cost-effective energy conservation
measures, including the cost of performing energy audits, shall be
funded from operating funds of the PHA to the extent feasible. When
sufficient operating funds are not available for this purpose, such
costs are eligible for inclusion in a modernization program, for
funding from any available development funds in the case of projects
still in development, or for other available funds that HUD may
designate to be used for energy conservation.
(b) If a PHA finances energy conservation measures from sources
other than modernization or operating reserves, such as a loan from a
utility entity or a guaranteed savings agreement with a private energy
service company, HUD may agree to provide adjustments in its
calculation of the PHA's operating subsidy eligibility under the PFS
for the project and utility involved based on a determination that
payments can be funded from the reasonably anticipated energy cost
savings (See Sec. 990.107(g) of this chapter).
Sec. 965.306 Energy conservation equipment and practices.
In purchasing original or, when needed, replacement equipment, PHAs
shall acquire only equipment that meets or exceeds the minimum
efficiency requirements established by the U.S. Department of Energy.
In the operation of their facilities, PHAs shall follow operating
practices directed to maximum energy conservation.
Sec. 965.307 Compliance schedule.
All energy conservation measures determined by energy audits to be
cost effective shall be accomplished as funds are available.
Sec. 965.308 Energy performance contracts.
(a) Method of procurement. Energy performance contracting shall be
conducted using one of the following methods of procurement:
(1) Competitive proposals (see 24 CFR 85.36(d)(3)). In identifying
the evaluation factors and their relative importance, as required by
Sec. 85.36(d)(3)(i) of this title, the solicitation shall state that
technical factors are significantly more important than price (of the
energy audit); or
(2) If the services are available only from a single source,
noncompetitive proposals (see 24 CFR 85.36(d)(4)(i)(A)).
(b) HUD Review. Solicitations for energy performance contracting
shall be submitted to the HUD Field Office for review and approval
prior to issuance. Energy performance contracts shall be submitted to
the HUD Field Office for review and approval before award.
4. Subpart D is revised to read as follows:
Subpart D--Individual Metering of Utilities for Existing PHA-Owned
Projects
Sec.
965.401 Individually metered utilities.
965.402 Benefit/cost analysis.
965.403 Funding.
965.404 Order of conversion.
965.405 Actions affecting residents.
965.406 Benefit/cost analysis for similar projects.
965.407 Reevaluations of mastermeter systems.
Subpart D--Individual Metering of Utilities for Existing PHA-Owned
Projects
Sec. 965.401 Individually metered utilities.
(a) All utility service shall be individually metered to residents,
either through provision of retail service to the residents by the
utility supplier or through the use of checkmeters, unless:
(1) Individual metering is impractical, such as in the case of a
central heating system in an apartment building;
(2) Change from a mastermetering system to individual meters would
not be financially justified based upon a benefit/cost analysis; or
(3) Checkmetering is not permissible under State or local law, or
under the policies of the particular utility supplier or public service
commission.
(b) If checkmetering is not permissible, retail service shall be
considered. Where checkmetering is permissible, the type of individual
metering offering the most savings to the PHA shall be selected.
Sec. 965.402 Benefit/cost analysis.
(a) A benefit/cost analysis shall be made to determine whether a
change from a mastermetering system to individual meters will be cost
effective, except as otherwise provided in Sec. 965.405.
(b) Proposed installation of checkmeters shall be justified on the
basis that the cost of debt service (interest and amortization) of the
estimated installation costs plus the operating costs of the
checkmeters will be more than offset by reduction in future utilities
expenditures to the PHA under the mastermeter system.
(c) Proposed conversion to retail service shall be justified on the
basis of net savings to the PHA. This determination involves making a
comparison between the reduction in utility expense obtained through
eliminating the expense to the PHA for PHA-supplied utilities and the
resultant allowance for resident-supplied utilities, based on the cost
of utility service to the residents after conversion.
Sec. 965.403 Funding.
The cost to change mastermeter systems to individual metering of
resident consumption, including the costs of benefit/cost analysis and
complete installation of checkmeters, shall be funded from operating
funds of the PHA to the extent feasible. When sufficient operating
funds are not available for this purpose, such costs are eligible for
inclusion in a modernization project or for funding from any available
development funds.
Sec. 965.404 Order of conversion.
Conversions to individually metered utility service shall be
accomplished in the following order when a PHA has projects of two or
more of the designated categories, unless the PHA has a justifiable
reason to do otherwise, which shall be documented in its files.
(a) In projects for which retail service is provided by the utility
supplier and the PHA is paying all the individual utility bills, no
benefit/cost analysis is necessary, and residents shall be billed
directly after the PHA adopts revised payment schedules providing
appropriate allowances for resident-supplied utilities.
(b) In projects for which checkmeters have been installed but are
not being utilized as the basis for determining utility charges to the
residents, no benefit/cost analysis is necessary. The checkmeters shall
be used as the basis for utility charges, and residents shall be
surcharged for excess utility use.
(c) Projects for which meter loops have been installed for
utilization of
[[Page 7971]]
checkmeters shall be analyzed both for the installation of checkmeters
and for conversion to retail service.
(d) Low- or medium-rise family units with a mastermeter system
should be analyzed for both checkmetering and conversion to retail
service, because of their large potential for energy savings.
(e) Low- or medium-rise housing for the elderly should next be
analyzed for both checkmetering and conversion to retail service, since
the potential for energy saving is less than for family units.
(f) Electric service under mastermeters for high-rise buildings,
including projects for the elderly, should be analyzed for both use of
retail service and of checkmeters.
Sec. 965.405 Actions affecting residents.
(a) Before making any conversion to retail service, the PHA shall
adopt revised payment schedules, providing appropriate allowances for
the resident-supplied utilities resulting from the conversion.
(b) Before implementing any modifications to utility services
arrangements with the residents or charges with respect thereto, the
PHA shall make the requisite changes in resident dwelling leases in
accordance with 24 CFR part 966.
(c) PHAs must work closely with resident organizations, to the
extent practicable, in making plans for conversion of utility service
to individual metering, explaining the national policy objectives of
energy conservation, the changes in charges and rent structure that
will result, and the goals of achieving an equitable structure that
will be advantageous to residents who conserve energy.
(d) A transition period of at least six months shall be provided in
the case of initiation of checkmeters, during which residents will be
advised of the charges but during which no surcharge will be made based
on the readings. This trial period will afford residents ample notice
of the effects the checkmetering system will have on their individual
utility charges and also afford a test period for the adequacy of the
utility allowances established.
(e) During and after the transition period, PHAs shall advise and
assist residents with high utility consumption on methods for reducing
their usage. This advice and assistance may include counseling,
installation of new energy conserving equipment or appliances, and
corrective maintenance.
Sec. 965.406 Benefit/cost analysis for similar projects.
PHAs with more than one project of similar design and utilities
service may prepare a benefit/cost analysis for a representative
project. A finding that a change in metering is not cost effective for
the representative project is sufficient reason for the PHA not to
perform a benefit/cost analysis on the remaining similar projects.
Sec. 965.407 Reevaluations of mastermeter systems.
Because of changes in the cost of utility services and the periodic
changes in utility regulations, PHAs with mastermeter systems are
required to reevaluate mastermeter systems without checkmeters by
making benefit/cost analyses at least every 5 years. These analyses may
be omitted under the conditions specified in Sec. 965.406.
5. Subpart E is revised to read as follows:
Subpart E--Resident Allowances for Utilities
Sec.
965.501 Applicability.
965.502 Establishment of utility allowances by PHAs.
965.503 Categories for establishment of allowances.
965.504 Period for which allowances aare established.
965.505 Standards for allowances for utilities.
965.506 Surcharges for excess consumption of PHA-furnished
utilities.
965.507 Review and revision of allowances.
965.508 Individual relief.
Subpart E--Resident Allowances for Utilities
Sec. 965.501 Applicability.
(a) This subpart E applies to public housing, including the Turnkey
III Homeownership Opportunities program. This subpart E also applies to
units assisted under sections 10(c) and 23 of the U. S. Housing Act of
1937 (42 U.S.C. 1437 et seq.) as in effect before amendment by the
Housing and Community Development Act of 1974 (12 U.S.C. 1706e) and to
which 24 CFR part 900 is not applicable. This subpart E does not apply
to Indian housing projects (see 24 CFR part 950).
(b) In rental units for which utilities are furnished by the PHA
but there are no checkmeters to measure the actual utilities
consumption of the individual units, residents shall be subject to
charges for consumption by resident-owned major appliances, or for
optional functions of PHA-furnished equipment, in accordance with
Sec. 965.502(e) and 965.506(b), but no utility allowance will be
established.
Sec. 965.502 Establishment of utility allowances by PHAs.
(a) PHAs shall establish allowances for PHA-furnished utilities for
all checkmetered utilities and allowances for resident-purchased
utilities for all utilities purchased directly by residents from the
utilities suppliers.
(b) The PHA shall maintain a record that documents the basis on
which allowances and scheduled surcharges, and revisions thereof, are
established and revised. Such record shall be available for inspection
by residents.
(c) The PHA shall give notice to all residents of proposed
allowances, scheduled surcharges, and revisions thereof. Such notice
shall be given, in the manner provided in the lease or homebuyer
agreement, not less than 60 days before the proposed effective date of
the allowances or scheduled surcharges or revisions; shall describe
with reasonable particularity the basis for determination of the
allowances, scheduled surcharges, or revisions, including a statement
of the specific items of equipment and function whose utility
consumption requirements were included in determining the amounts of
the allowances or scheduled surcharges; shall notify residents of the
place where the PHA's record maintained in accordance with paragraph
(b) of this section is available for inspection; and shall provide all
residents an opportunity to submit written comments during a period
expiring not less than 30 days before the proposed effective date of
the allowances or scheduled surcharges or revisions. Such written
comments shall be retained by the PHA and shall be available for
inspection by residents.
(d) Schedules of allowances and scheduled surcharges shall not be
subject to approval by HUD before becoming effective, but will be
reviewed in the course of audits or reviews of PHA operations.
(e) The PHA's determinations of allowances, scheduled surcharges,
and revisions thereof shall be final and valid unless found to be
arbitrary, capricious, an abuse of discretion, or otherwise not in
accordance with the law.
Sec. 965.503 Categories for establishment of allowances.
Separate allowances shall be established for each utility and for
each category of dwelling units determined by the PHA to be reasonably
comparable as to factors affecting utility usage.
Sec. 965.504 Period for which allowances are established.
(a) PHA-furnished utilities. Allowances will normally be
established on a quarterly basis; however, residents may be surcharged
on a monthly basis. The allowances
[[Page 7972]]
established may provide for seasonal variations.
(b) Resident-purchased utilities. Monthly allowances shall be
established. The allowances established may provide for seasonal
variations.
Sec. 965.505 Standards for allowances for utilities.
(a) The objective of a PHA in designing methods of establishing
utility allowances for each dwelling unit category and unit size shall
be to approximate a reasonable consumption of utilities by an energy-
conservative household of modest circumstances consistent with the
requirements of a safe, sanitary, and healthful living environment.
(b) Allowances for both PHA-furnished and resident-purchased
utilities shall be designed to include such reasonable consumption for
major equipment or for utility functions furnished by the PHA for all
residents (e.g., heating furnace, hot water heater), for essential
equipment whether or not furnished by the PHA (e.g., range and
refrigerator), and for minor items of equipment (such as toasters and
radios) furnished by residents.
(c) The complexity and elaborateness of the methods chosen by the
PHA, in its discretion, to achieve the foregoing objective will depend
upon the nature of the housing stock, data available to the PHA and the
extent of the administrative resources reasonably available to the PHA
to be devoted to the collection of such data, the formulation of
methods of calculation, and actual calculation and monitoring of the
allowances.
(d) In establishing allowances, the PHA shall take into account
relevant factors affecting consumption requirements, including:
(1) The equipment and functions intended to be covered by the
allowance for which the utility will be used. For instance, natural gas
may be used for cooking, heating domestic water, or space heating, or
any combination of the three;
(2) The climatic location of the housing projects;
(3) The size of the dwelling units and the number of occupants per
dwelling unit;
(4) Type of construction and design of the housing project;
(5) The energy efficiency of PHA-supplied appliances and equipment;
(6) The utility consumption requirements of appliances and
equipment whose reasonable consumption is intended to be covered by the
total resident payment;
(7) The physical condition, including insulation and
weatherization, of the housing project;
(8) Temperature levels intended to be maintained in the unit during
the day and at night, and in cold and warm weather; and
(9) Temperature of domestic hot water.
(e) If a PHA installs air conditioning, it shall provide, to the
maximum extent economically feasible, systems that give residents the
option of choosing to use air conditioning in their units. The design
of systems that offer each resident the option to choose air
conditioning shall include retail meters or checkmeters, and residents
shall pay for the energy used in its operation. For systems that offer
residents the option to choose air conditioning, the PHA shall not
include air conditioning in the utility allowances. For systems that
offer residents the option to choose air conditioning but cannot be
checkmetered, residents are to be surcharged in accordance with
Sec. 965.506. If an air conditioning system does not provide for
resident option, residents are not to be charged, and these systems
should be avoided whenever possible.
Sec. 965.506 Surcharges for excess consumption of PHA-furnished
utilities.
(a) For dwelling units subject to allowances for PHA-furnished
utilities where checkmeters have been installed, the PHA shall
establish surcharges for utility consumption in excess of the
allowances. Surcharges may be computed on a straight per unit of
purchase basis (e.g., cents per kilowatt hour of electricity) or for
stated blocks of excess consumption, and shall be based on the PHA's
average utility rate. The basis for calculating such surcharges shall
be described in the PHA's schedule of allowances. Changes in the dollar
amounts of surcharges based directly on changes in the PHA's average
utility rate shall not be subject to the advance notice requirements of
this section.
(b) For dwelling units served by PHA-furnished utilities where
checkmeters have not been installed, the PHA shall establish schedules
of surcharges indicating additional dollar amounts residents will be
required to pay by reason of estimated utility consumption attributable
to resident-owned major appliances or to optional functions of PHA-
furnished equipment. Such surcharge schedules shall state the resident-
owned equipment (or functions of PHA-furnished equipment) for which
surcharges shall be made and the amounts of such charges, which shall
be based on the cost to the PHA of the utility consumption estimated to
be attributable to reasonable usage of such equipment.
Sec. 965.507 Review and revision of allowances.
(a) Annual review. The PHA shall review at least annually the basis
on which utility allowances have been established and, if reasonably
required in order to continue adherence to the standards stated in
Sec. 965.505, shall establish revised allowances. The review shall
include all changes in circumstances (including completion of
modernization and/or other energy conservation measures implemented by
the PHA) indicating probability of a significant change in reasonable
consumption requirements and changes in utility rates.
(b) Revision as a result of rate changes. The PHA may revise its
allowances for resident-purchased utilities between annual reviews if
there is a rate change (including fuel adjustments) and shall be
required to do so if such change, by itself or together with prior rate
changes not adjusted for, results in a change of 10 percent or more
from the rates on which such allowances were based. Adjustments to
resident payments as a result of such changes shall be retroactive to
the first day of the month following the month in which the last rate
change taken into account in such revision became effective. Such rate
changes shall not be subject to the 60 day notice requirement of
Sec. 965.502(c).
Sec. 965.508 Individual relief.
Requests for relief from surcharges for excess consumption of PHA-
purchased utilities, or from payment of utility supplier billings in
excess of the allowances for resident-purchased utilities, may be
granted by the PHA on reasonable grounds, such as special needs of
elderly, ill or disabled residents, or special factors affecting
utility usage not within the control of the resident, as the PHA shall
deem appropriate. The PHA's criteria for granting such relief, and
procedures for requesting such relief, shall be adopted at the time the
PHA adopts the methods and procedures for determining utility
allowances. Notice of the availability of such procedures (including
identification of the PHA representative with whom initial contact may
be made by residents), and the PHA's criteria for granting such relief,
shall be included in each notice to residents given in accordance with
Sec. 965.502(c) and in the information given to new residents upon
admission.
[[Page 7973]]
Dated: February 22, 1996.
MaryAnn Russ,
Acting Assistant Secretary for Public and Indian Housing.
[FR Doc. 96-4679 Filed 2-28-96; 8:45 am]
BILLING CODE 4210-33-P
