Guaranteed Energy Savings Contract: Indiana Code Chapter 36-1-12.5
The guaranteed energy savings contract is set up to reduce the energy use of a specified system (such a traffic signals), and the main benefit is that does not require a large upfront capital investment. Instead, the city or owner can pay for the upgrades out of the energy savings. Another advantage is that the energy savings contract gives the local government more flexibility on choosing a provider for the upgrade as opposed to the typical bid process. This allows the government freedom to pick the provider based on their own needs, as long as the energy savings will pay for the project within 10 years.

One of the main benefits of this program is the ability to have on provider handle the entire project. There are many companies that solely deal with energy savings contracting; and while this company will select and hire all the subcontractors, the city only has to pay one bill to the provider. This greatly simplifies the workload on the local government’s part of the job. In addition to not requiring upfront capital, this approach also allows the government and provider to shop around for third party financing to get the best deal. Finally, the risk is reduced as the responsibility of guaranteeing the energy savings falls on the provider, not the city or local government. This information was takien from “An Introduction to Guaranteed Energy Savings Contracts” that was published by the Indiana Department of Commerce and can be found at http://www.in.gov/doc/businesses/PDFs/GESC_Guidelines.pdf.

Other Options
Many companies and suppliers choose not to get involved with the Guaranteed Energy Savings Contract, and these companies often offer their own way to finance the project. Many suppliers have their own financing plans, which loosely revolve around the idea of simply providing a loan at a set interest rate. In addition to this financing through the supplier method, the local government always has the option of financing the upgrade internally. This may be accomplished through planning into the capital budget or simply negotiating a loan with a local bank.