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Legal Considerations in Implementing Green Energy Retrofitting Projects & Earning Financial Incentives from NYSERDA




On August 8, 2012 Jay B. Itkowitz gave a presentation at the New York Association of Realty Managers at a very important program NYARM hosted, entitled:  Legal Considerations in Implementing Green Energy Retrofitting Projects & Earning Financial Incentives from NYSERDA.


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Legal Considerations in Implementing Green Energy Retrofitting Projects & Earning Financial Incentives from NYSERDA


1. The New York State Energy Research and Development Authority (NYSERDA) implements a Multifamily Performance Program (MPP) which provides financial incentives for eligible multifamily residential buildings in New York State to meet certain state-recognized standards for energy efficiency and consumption.


2. This discussion briefly discusses the legal implications of the process that buildings must undertake in conjunction with a chosen Multifamily Performance Partner (Partner) and NYSERDA in order to have a green retrofitting project approved by NYSERDA and qualify to receive the significant financial incentive payments from the state.


3. Eligibility: The project must:

· concern a new or existing multifamily, residential building with five (5) or more units;


· be located within the service territory of one of New York State’s investor-owned utility companies;


· pay into the System Benefits Charge upon receipt of an electric or gas energy bill.


· Participants are required to certify their eligibility on their application.


· Projects larger than 500 units require pre-approval from NYSERDA.


· Projects designated as “affordable housing” must meet documentation requirements and certify that they are affordable projects.


4. Choosing a Partner: This step is perhaps the most important part of the process as the Partner is the primary resource for the project providing a variety of services including, but not limited to;


· explaining the requirements of the Program,


· processing and submitting all of the paperwork for the Program (including incentive requests),


· conducting a review of the project’s design, creating a model of the project design and ensuring its compliance with the various methods or project ‘Paths’ that are required by NYSERDA,

· working in conjunction with the developer and design team to recommend a set of improvements to the project design to achieve the Program’s minimum reduction target as identified in the Energy Reduction Plan; and

· Inspecting the installed work to ensure it conforms to the rules of the Program and with the assumptions made in the Energy Reduction Plan.

· NOTE: The building, i.e. the Participant Company (“Participant”), is responsible for separately contracting with the Partner and managing its performance. Notice must be provided to NYSERDA if the Participant chooses another Partner midway through the process.

5. Incentive Payments[1]: The first thing to note is that there are different incentives for new versus existing multifamily residential buildings and respectively, different agreements that govern the MPP depending on which type of project the Participant is undertaking.

· “Notice-to-Proceed to Construction”: A Participant may forfeit its right to receive incentives if it proceeds with a project prior to receiving the“Notice-to-Proceed to Construction” from NYSERDA indicating approval of its plan. See para. 5 of MPP Terms and Conditions agreement.

· Payment Triggers: NYSERDA’s obligation to pay incentives is only triggered upon its approval of MPP documents and plan implementation along the way, which of course, remains in its sole discretion. See para. 5 of MPP Terms and Conditions agreement.

· Clawback Provision: Pursuant to paragraphs 23 and 24 of the MPP Terms and Conditions, NYSERDA has the right to audit the Participants records re: energy usage and costs of retrofitting and, where appropriate, retroactively reduce incentive payments made that fail to meet the prescribed standards.

· Tax Implications: Pursuant to paragraph 11, the MPP Terms & Conditions agreement waives any liability for taxes that the Participant may incur as a consequence of receiving NYSERDA payments. A tax expert should be consulted to assess the potential tax liability, if any.

· Reservation of Rights to Limit Incentives: Pursuant to paragraph 14, NYSERDA reserves the right to stop approving incentive applications at any time.

· Reservation of “Stop Work” Right: Failure to comply with the project progress requirements as set forth in paragraph 6 of the MPP agreement can trigger NYSERDA’s right to issue a stop-work order on the project causing forfeiture of any earned incentives.

6. Post-Construction Data Disclosure& Analysis: Participants are required to provide NYSERDA with copies of their utility bills or provide electronic access to the bills using the electronic Data Release Author  ization Form (DRAF) as described in paragraph 8, for five years following execution of the DRAF. The post-construction follow up and analysis will also include follow-up visits, audits, and on-site inspections.

7. Confidentiality: Participating in NYSERDA’s MPP program may compromise a degree of confidentiality re: the business records of the Participant given that the state-run program is subject to New York State’s Freedom of Information Law. Participants who wish to preserve trade secrets should clearly label such materials as “confidential” although NYSERDA cannot guarantee the preservation of any privilege. See para. 10 of MPP Terms & Conditions Agreement.

8. Disputes, No Arbitration Clause: Paragraph 27 of the MPP Terms & Conditions Agreement precludes arbitration as a means of resolving disputes arising from this program.  This clause may affect how a Participant negotiates its contract with the Partner. In other words, a binding arbitration clause in an agreement between a Participant and Partner could be held unenforceable if NYSERDA is also a party in interest to the proceeding.

[1] In addition to incentive payments, low-interest project financing is also available through Green Jobs – Green NY. NYSERDA provides lenders up to 50 percent of the principal borrowed, to a maximum of $5,000 per unit or $500,000 per energy-saving project, at 0% interest rate. This innovative arrangement benefits both borrowers, who thus enjoy interest rates at about half the market rate for loans up to $1 million, and lenders, who can open new relationships at reduced risk. 


And here we were at the September 12, 2012 NYARM conference!




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