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Energy & Water Savings Performance Contract

As part of the Climate Action Plan (CAP) implementation and Council Policy 900-03: Zero Emissions Municipal Buildings and Operation Policy (ZEMBOP), the City is advancing its first Energy & Water Savings Performance Contract (EWSPC) to reach municipal energy and electrification goals. The project delivers LED retrofits for 36,000 streetlights and energy and water efficiency retrofits to 40 facilities, including the full electrification of 10 libraries, 12 Parks & Recreation facilities, and the Ridgehaven Green Building. Over half of the sites (25) are in communities of concern as defined by the City’s Climate Equity Index. The project also includes deployment of over 1.7 MW of solar and nearly 4 MWh of battery energy storage. These retrofits are expected to garner an annual energy reduction of over 11 TWh of electricity, 50,000 therms of natural gas, and 4.6M gallons of water, equating to 260 MT CO2e. Financially, these measures will result in approximately $4.9M in avoided operational costs across electricity, natural gas, water, and maintenance annually.  

To deliver this project the City has entered into a contract with Willdan, an Energy Service Company (ESCO) responsible for construction, commissioning, staff training, three years of operations of selected systems, and savings measurement and verification. The EWSPC is coupled with a tax-exempt lease financing agreement with Webster Bank valued at nearly $112M. Projected energy and water cost savings are projected to completely offset financing payments across the 25-year financing term. The project did not require any upfront capital from the City.

To learn more about the specific facilities and scopes of work included in the portfolio, visit the Department of General Services - Energy Projects Progress Web Map.

Background

The City began working on this project in 2020 when it incorporated California Government Code 4217.10-4217.18 into the municipal code to allow for direct procurement of ESPCs. The code allows governments to execute energy service contracts and facility financing contracts in the best interest of the City without separating the project scoping and construction contract into separate bid processes when the anticipated cost to the public agency will be less than the expected marginal cost of energy that the agency would have consumed in the absence of the services.

Over the next several years, the City pursued the following actions:

Electrification Study (2022-2024): An electrification study was completed at 400 municipal facilities to inventory natural gas-burning equipment and power capacity, identify electric system alternatives, and identify costs associated with electrification retrofits. The study was done by Kitchell CM through an as-needed energy consultant contract with the City.

Third Party Owner’s Rep (August 2022): Tetra Tech was selected as the City’s Third-Party Owner’s Representative to provide guidance and technical expertise throughout the performance contracting process. Tetra Tech subject matter experts participated in the subsequent development of the ESCO RFSQ, short list selection, and subsequent RFI to determine the Portfolio 1 ESCO. 

ESCO Selection (May-September 2023): Staff worked with the Purchasing & Contracting Department, Public Works division to release a Request for Statements of Qualifications (RFSQ) to Energy Services Companies (ESCOs). Staff from Energy Division, Tetra Tech SMEs, and other internal stakeholder departments reviewed qualifications for 11 ESCOs and established a short list of five (5) ESCOs that the City may choose to partner with in the future. Staff then released a written Request for Information (RFI) to the five shortlisted ESCOs and performed interviews to gather information about their approach to pursuing deep energy retrofits at City facilities, taking into account our aging infrastructure, decarbonization goals, zero emissions policy (ZEMBOP), and funding constraints, among other considerations, and selected Willdan as the first ESCO partner.

Portfolio 1 Established (August-October 2023): Utilizing the information gathered through the Electrification Study, Energy Division staff identified potential City facilities for the first ESPC Portfolio in coordination with Asset Managing Departments, Department of General Services, and the Capital Improvements Program at Engineering & Capital Projects Department. A list of 60 existing municipal facilities, plus a portfolio of streetlights, were provided to Willdan for a preliminary assessment of potential energy improvements. 

  • Facilities were selected based on several considerations:             
  • Facilities must be anticipated to operate in the same capacity for at least 25 years;
  • Facilities must not be involved in an active Capital Improvement Project (CIP) nor slated for a CIP in the five-year CIP plan;
  • Facilities must not be known to have hazardous materials present to the extent that remediation would be cost-prohibitive; 
  • Facilities should be distributed across the City but prioritize those facilities that serve Communities of Concern; and
  • The results of the Electrification Study - specifically anticipated costs to electrify and improve electric infrastructure.

Preliminary Assessments (January-December 2024): Willdan performed Preliminary Assessments (PAs) at the Portfolio 1 sites at no cost to the City. Willdan provided the PAs results (representing approximately 30% design), indicating which sites from the Portfolio are a good fit for an ESPC project. Willdan identified scope opportunities at all 60 sites and created preliminary cost, energy savings, and simple payback estimates (i.e. how long it will take to pay back upfront costs using avoided energy costs/savings). Staff circulated the preliminary results from Willdan to asset managers and socialized the preliminary financial pro forma with Department of Finance staff and City leadership. 

Investment Grade Audits (January-September 2025): Following the PA results, the City executed a sole source Investment Grade Audit contract with Willdan to perform Investment Grade Audits (IGAs) at 60 sites and 49,000 streetlights. Investment Grade Audits include physical surveys of the streetlights capturing current attributes, fixture type, etc. They also included site walks with potential subcontractors – electrical, HVAC, general contractors, plumbing, etc. – at all potential building sites. These site walks occurred over two weeks in coordination with Energy division staff and the relevant AMDs. From this, Willdan advanced 90% designs and competitively bid the work to subcontractors to secure the best price for the City. Willdan also developed a GIS streetlight map and attribute table providing the City with valuable streetlight data including location, fixture type, and condition, all in one database. 

In September 2025, Willdan provided final IGA results, indicating $154M in viable projects across all audited assets. The cost of the IGA is $735,142, which has been included in the total scope and financing package of this contract. Should the City Council choose not to award the ESPC and Financing agreement, the City will owe Willdan the IGA balance. 

HazMat Investigations (January-June 2025): In parallel to Willdan’s IGA activities, Energy division staff coordinated with the Environmental Services Department (ESD) Asbestos, Lead and Mold Program to authorize hazardous material investigations at the ESPC portfolio facilities, including identification of Asbestos Containing Material (ACM) and lead-based materials that would be disturbed by future ESPC retrofits, based on the scopes proposed in the PA results. The cost for remediation during construction has been included in the ESPC scope. 

Final Scope & Financing Iterations (September-November 2025): In addition to the IGA results, Willdan also engaged several potential financing partners to provide the City with options on various financing structures and terms including payback periods, upfront costs, tax exemptions, etc.  These options, in turn, informed adjustments to the retrofit scope of work so that the scope and financing contracts met three main priorities: the scope (1) could be financed over 25 years in which avoided energy costs completely offset financing payments (principle and interest); (2) met the requirements the City’s zero emissions policy (ZEMBOP), which requires facilities be completely electrified when replacing two or more energy systems; and (3) did not require any upfront capital from the City while still having the projected funds from the energy savings be equal to or greater than the cost of installation. 

These requirements resulted in the removal of some more expensive project scope elements that provided little to no energy cost savings. While the portfolio approach leverages cost-effective measures like LED streetlight retrofits to cover the costs of more expensive retrofits (i.e. electrification and roof repairs), not all measures or sites were able to remain in the portfolio. Similarly, of the 49,000 streetlights audited, approximately 10,000 were removed from the scope due to high material and labor costs. The financing also considered the elimination of anticipated Investment Tax Credits (ITC) for battery energy storage systems based on new federal program deadlines established in summer 2025, which also informed the removal of several sites.

City Council Review & Approval (January-February 2026): Staff brought the proposed item to City Council via direct docket on January 27, 2026. City Council approved the item unanimously, and final adoption took place on February 10, 2026. The ESWPC with Willdan was executed on March 17, 2026, and the financing agreement closed on April 14, 2026. 

Construction (Summer 2026-Summer 2028): Construction will kick off in summer 2026 and is expected to last two years. Visit the Department of General Services - Energy Projects Progress Web Map for updates on progress at specific sites. 

Energy