Delaware auditor: Sustainable energy initiative isn’t cost-effective

DOVER — A report from Delaware Auditor R. Thomas Wagner Jr. raises questions about transparency and actual cost savings in a program to lower energy costs and environmental impact.

The auditor’s office concluded the state’s investment does not contain an independent mechanism to measure energy savings or protect the state from having to repay bonds, a finding the program’s executive director disagrees with.

Wagner by .

R. Thomas Wagner

The Sustainable Energy Utility Inc. was created by the state to lower Delawareans’ energy bills and the impact of energy production and use on the environment. Target areas include renewable energy and energy conservation but, according to the auditor’s office, the state doesn’t have a way to calculate energy savings or prove the analyses delivered by contractors are accurate.

A total of $67.4 million in bonds was issued in 2011 for various energy conservation efforts. The bonds mature, or are due, Sept. 15, 2034.

The state “could not offer evidence of a study or thoughtful analysis” showing the program’s impact was a net positive one, the report says.

“The energy conservation measures included changing light fixtures and bulbs, installing new heating and cooling units that proved to be unreliable and improperly installed, and reducing water flow on sinks through the installation of faucet aerators that were eventually removed because they proved to soak employees as they washed their hands,” reads the scathing report.

“By design, ongoing monitoring of cost savings for the Legislative Mall Complex project is solely based on calculations using manufacturers’ estimates of energy usage and spot measures of installed equipment. Further, the state’s accounting for the energy funding and contractual payments is so complex, the state will never know whether true cost savings is occurring.”

That’s disputed by Tony DePrima, the executive director of the Delaware Sustainable Energy Utility. Mr. DePrima said the auditor’s office did not request the latest documentation or speak to experts in the field.

“I think it will stand up to any scrutiny by people with technical knowledge of what these contracts about,” he said.

The report says a funding-out clause, language that provides protection for the state and is commonly included in contracts, is not present in this deal, meaning the state is essentially locked into a 20-year payment schedule.

However, Mr. DePrima said the methods being used to measure savings are standard in the industry and the audit does not consider all the potential savings.

“I think that they’re pointing out — which is true — that there are some costs that weren’t included in the energy savings, but they’re failing to include that there are savings that weren’t included either,” he said.

While the Sustainable Energy Utility’s bonds were not intended to be backed by the state, repayment is supported by Delaware, according to the auditor’s office. Moody’s Investors Service website says the state’s General Fund is responsible for appropriating funds for the bonds, the report says.

The bonds were used for Delaware Technical Community College’s George, Stanton and Terry campuses, Delaware State University, Legislative Mall, several state buildings and three cabinet agencies.

For the Legislative Mall Complex, the state expected to save about $2.75 million over 20 years as a result of the program. However, the audit found “The cost of maintenance and repairs for Fiscal Years 2015 and 2016 has significantly depleted the projected difference.”

About $4.8 million was spent on the complex, but the auditor’s office said the state is on the hook for more than $8 million in repayments.

“At the conclusion of this inspection I was left asking: ‘How and why was the state’s best interest subordinated to the interest of the SEU and its partners?’” Mr. Wagner said in a statement.

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