Citizens Conservation Corporation (CCC) is awaiting approval from the Securities and Exchange Commission on the purchase of a large portion of its assets by EUA Cogenics, a subsidiary of Eastern Utility Associates (EUA). Our company is going off in two directions, said CCC president Steve Morgan. The part that does performance contracting will become EUA/Citizens Conservation Services.

The new affiliation is designed to give CCC stronger financing capabilities to take advantage of new performance contracting opportunities in the public housing market, namely, 1991 U.S. Department of Housing and Urban Development (HUD) regulations allowing public housing authorities to keep a portion of the savings generated through energy-efficiency improvements. Morgan said CCC is seeking similar incentives for the assisted housing market, and is proposing to pilot the concept on a project in Lansing, Michigan. More commonly known as Section 8 housing, assisted housing is privately owned, with rents subsidized for low income tenants.

The HUD regulations provide public housing authorities with a fiscal incentive to improve the energy efficiency of their facilities. While HUD provides public housing authorities with operating and modernization subsidies, when it comes down to energy-efficiency performance contracting, money is limited and the need exceeds the funds available, said Bill Thorson, director of the maintenance and supply division of HUD's Office of Public and Indian Housing. Of the $2.5 billion that Congress appropriates annually for operating the nation's public housing projects each year, about $1 billion goes to pay for utilities.

Regulations now allow housing authorities to enter into performance contracts to implement energy-saving measures, using a portion of the savings to pay off the investment. HUD will freeze the authority's utility subsidy--which is normally based on an historical, three-year average--for up to 12 years, allowing the authority to pay off the project and make a little extra money that can be used for other purposes.

The housing authorities use at least half of the savings to pay the debt service on the project, and keep the rest, said Thorson. It generates some discretionary funds and allows them to shift items they normally cover with modernization funding. So far, only about 20 projects have been initiated under the regulation, but with 3,400 public housing authorities operating facilities nationwide, the potential for energy savings is immense.

HUD's Thorson said energy performance contracting only makes sense for larger facilities, 500-plus unit projects that might expect $200,000-$500,000 in savings. For the smaller projects, however, the HUD regulations provide a simpler mechanism for financing energy-efficiency improvements in public housing. An authority can hire a contractor to do the audit and use non-HUD financing to fund the project. HUD will add the cost of debt service to the authority's operating subsidy for these smaller, short payback programs. We don't freeze the base, but you get to keep the savings for those first three years, Thorson explained.

CCC also opened an office in San Francisco last year, when they won a contract for Pacific Gas & Electric Company's (PG&E) Power Saving Partners Program. It's kind of unique because there's no cost share by the property owners, said CCC program manager Larry Bravo. PG&E pays us over the course of the term of the program, through 2003, based on verified savings. The burden is on us to install measures that are persistent and show good savings.

CCC has completed the lighting phase of its first project under the PG&E contract, two 200-unit apartment buildings operated by Christian Church Homes in Oakland, California. Bravo expects to save the owner $35,000 annually on those two buildings as a result of the lighting measures alone. Those dollar savings translate into an estimated 30 kW peak reduction and annual energy savings of 243,000 kWh. We're phasing the measures in, which gives the owners a comfort level with us, he said. They get some savings, and we get some payments from PG&E, which makes it easier to go on and do the more complicated measures.

CCC has another eight buildings scheduled for retrofits under the PG&E program. PG&E is sponsoring retrofits in a variety of areas under the program, but CCC is the only contractor serving the multifamily sector under the program.

CCC currently employs about 20 people, 15 of whom will move to Lowell, Massachusetts, where EUA is based. Remaining CCC staffers will continue to pursue the organization's mission of promoting energy efficiency in multifamily buildings, with an emphasis on low-income housing, researching the persistence of savings, and providing technical assistance to other non-profits and state agencies. Since 1981, CCC has retrofitted more than 15,000 multifamily units.

EUA Cogenics is the energy-efficiency services subsidiary of Eastern Utilities, a Boston-based electric utility that serves parts of Massachusetts and Rhode Island. The company--which began its life as Citizens Heat and Power, a division of Citizens Energy--has 210 employees and operations in about 30 states. It's a natural evolution for us to get involved in the housing market, said EUA Cogenics president Joseph Patrick, explaining that EUA Cogenics previously concentrated on the institutional building market, serving schools, hospitals and government buildings. It's a pretty logical merger, he said.