[Federal Register Volume 76, Number 222 (Thursday, November 17, 2011)]
[Proposed Rules]
[Pages 71287-71293]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-29640]



[[Page 71287]]

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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Part 905

[Docket No. FR-5507-P-01]
RIN 2577-AC84


Public Housing Energy Audits

AGENCY: Office of the Assistant Secretary for Public and Indian 
Housing, HUD.

ACTION: Proposed rule.

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SUMMARY: This rule proposes to revise HUD's energy audit requirements 
applicable to HUD's public housing program for the purpose of 
clarifying such requirements, as well as identifying energy-efficient 
measures that need to be addressed in the audit and procedures for 
improved coordination with physical needs assessments. In addition, the 
rule moves the energy audit requirements to a different part of HUD's 
title of the Code of Federal Regulations.

DATES: Comment Due Date: January 17, 2012.

ADDRESSES: Interested persons are invited to submit comments regarding 
this proposed rule to the Regulations Division, Office of General 
Counsel, Department of Housing and Urban Development, 451 7th Street 
SW., Room 10276, Washington, DC 20410-0500. Communications must refer 
to the above docket number and title. There are two methods for 
submitting public comments. All submissions must refer to the above 
docket number and title.
    1. Submission of Comments by Mail. Comments may be submitted by 
mail to the Regulations Division, Office of General Counsel, Department 
of Housing and Urban Development, 451 7th Street SW., Room 10276, 
Washington, DC 20410-0500.
    2. Electronic Submission of Comments. Interested persons may submit 
comments electronically through the Federal eRulemaking Portal at 
http://www.regulations.gov. HUD strongly encourages commenters to 
submit comments electronically. Electronic submission of comments 
allows the commenter maximum time to prepare and submit a comment, 
ensures timely receipt by HUD, and enables HUD to make them immediately 
available to the public. Comments submitted electronically through the 
http://www.regulations.gov Web site can be viewed by other commenters 
and interested members of the public. Commenters should follow the 
instructions provided on that site to submit comments electronically.

    Note:  To receive consideration as public comments, comments 
must be submitted through one of the two methods specified above. 
Again, all submissions must refer to the docket number and title of 
the rule.

    No Facsimile Comments. Facsimile (fax) comments are not acceptable.
    Public Inspection of Public Comments. All properly submitted 
comments and communications submitted to HUD will be available for 
public inspection and copying between 8 a.m. and 5 p.m. weekdays at the 
above address. Due to security measures at the HUD Headquarters 
building, an advance appointment to review the public comments must be 
scheduled by calling the Regulations Division at (202) 402-3055 (this 
is not a toll-free number). Individuals with speech or hearing 
impairments may access this number via TTY by calling the Federal Relay 
Service, toll-free, at (800) 877-8339. Copies of all comments submitted 
are available for inspection and downloading at http://www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: Jeffrey Riddel, Director, Office of 
Capital Improvements, Office of Public and Indian Housing, Department 
of Housing and Urban Development, 451 7th Street SW., Washington, DC 
20410-8000; telephone number (202) 402-7378 (this is not a toll-free 
number). Hearing- or speech-impaired individuals may access this number 
through TTY by calling the toll-free Federal Relay Service at (800) 
877-8339.

SUPPLEMENTARY INFORMATION: 

I. Background

    Because of the increasing importance of energy conservation, HUD is 
taking a more proactive approach toward encouraging energy efficiency 
in its housing programs. In order for public housing agencies (PHAs) to 
improve their capital planning processes, HUD determined that there is 
a need for stronger energy audit data.
    Under existing regulations, all PHAs must complete an energy audit 
for each PHA-owned project under management at least once every 5 
years. The existing regulations also require that standards for energy 
audits be equivalent to state standards. However, state standards for 
energy audits are variable or nonexistent (see, for example, the map of 
state energy codes by the Department of Energy at http://www.energycodes.gov/states/). Accordingly, it is HUD's view that energy 
audit standards present an area where additional guidance will produce 
more useful results.
    In this rule, HUD proposes the energy conservation measures (ECMs) 
that a PHA must consider at a minimum when performing an energy audit. 
This rule also proposes certain minimum qualifications for energy 
auditors procured by PHAs to perform energy audits.
    While this rule proposes ECMs that must be considered, as well as 
certain standards for energy audits and minimum qualifications for 
energy auditors, HUD specifically seeks public comment on whether there 
are other standards and qualifications that HUD should consider 
adopting.
    HUD will be publishing separately a proposed rule on physical needs 
assessments (PNAs) that will require the completion of PNAs in 
conjunction with energy audits in order to integrate the audit properly 
with the PNA. The PNA rule proposes to require data derived from the 
energy audit to be included in a PNA, to facilitate the identification 
of cost-effective ECMs. ECMs also include water-related efficiency 
measures. If a PNA and energy audit are performed together, there could 
be cost savings to PHAs to the extent that many of the same components 
are reviewed for each. Through this rule and the PNA rule, HUD seeks to 
have PHAs move toward coordinating the performance of PNAs and energy 
audits with each other, to maximize the effective use of this type of 
information.
    HUD specifically seeks comments from PHAs and other interested 
parties as to an appropriate time frame for performance and submission 
requirements.
    Coordination between an energy auditor and PNA provider is 
considered to be important in the capital improvement decision-making 
process. As the consulting industry that services PHAs and the public 
housing program is introduced to coordinated or integrated PNAs and 
energy audits, the costs associated with performing both of these 
assessments may be reduced. Since energy conservation products are 
often newer technology whose prices tend to be reduced over time and 
because utility costs are more volatile than general costs, 2 years is 
considered by HUD to be the maximum time frame between the performance 
of an energy audit and a PNA that maintains cost and pricing alignment. 
In addition, coordination between an energy auditor and PNA provider is 
considered to be important for the evaluation of technical issues in 
the selection of component products and the sequencing of improvements. 
Coordination of the timing of these activities may reduce the 
possibility of additional cost to the PHA for consulting services 
outside of the contract cycle of professional providers.

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    HUD is interested in receiving feedback concerning the feasibility 
of requiring PHAs to coordinate the performance of energy audits and 
PNAs. HUD specifically invites comment on the potential benefits, 
feasibility, or challenges of preparing energy audits in conjunction 
with PNAs. HUD also specifically seeks public comment on how quickly 
energy audit information becomes obsolete for cost projection and 
strategic planning in a PNA.

II. This Proposed Rule

A. Overview of Changes

    This proposed rule moves the regulations pertaining to energy audit 
requirements, which are currently codified in 24 CFR 965.302, to 24 CFR 
905.300(b)(10)-905.300(b)(15), and clarifies HUD's requirements for 
energy audits performed in conjunction with PNAs.
    Also through this rule, HUD proposes to modify these regulations 
to:
    (1) Define an energy audit, ECMs, and ``green'' measures.
    (2) Establish content and submission requirements for an energy 
audit, and facilitate the integration of the energy audit with the PNA 
that PHAs are required to conduct every 5 years. While many states have 
not adopted auditing standards (see http://www.energycodes.gov/states/
), the PHA would still be required to comply with standards adopted for 
their state, where applicable. HUD is not at this time prescribing a 
specific energy audit form, so long as the required data is collected, 
and so long as energy auditing systems and formats are available from a 
number of sources, including the Department of Energy, Building 
Performance Institute (BPI), and the Residential Energy Services 
Network (RESNET).
    (3) Define Core ECMs that must be considered and require further 
evaluation of those ECMs that have the potential for cost-effective 
implementation. Core ECMs generally represent commonplace conservation 
measures that have demonstrated track records of reducing energy and 
water consumption in a cost-effective manner and that can be routinely 
evaluated by an energy auditor. This rule defines Core ECMs in broad 
categories. Examples within the categories include: Changes to the 
building envelope such as insulation; energy-efficient mechanical 
equipment; low-flow water devices and other water conservation 
measures; energy-efficient lighting systems, including compact 
fluorescent lighting and motion controls; and Energy Star-certified 
appliances. As technology advances over time, HUD will provide further 
examples of ECMs in guidance.
    (4) Recognize Advanced ECMs that may be addressed. PHAs are 
encouraged, but not required to consider Advanced ECMs, which represent 
alternative measures comprising advanced or experimental technology 
which, compared to the Core ECMs, can be more challenging to evaluate 
and implement. These are not alternatives that auditors would normally 
consider unless directed to do so, or unless there were local 
precedents that caused the measures to become commonly accepted local 
alternatives. Examples of Advanced ECMs include renewable energy 
technologies, such as solar and geothermal power, and green 
construction.
    (5) Require that ECMs identified in the energy audit as cost-
effective be organized into those with: Paybacks of 12 years or less, 
paybacks of greater than 12 and less than or equal to 20 years, and 
paybacks of more than 20 years. The 12-year and 20-year benchmarks 
correspond with the benchmarks for an Energy Performance Contract 
(EPC).
    (6) Establish minimum qualifications for an energy auditor, and
    (7) Provide for extension of the requirement to complete an initial 
energy audit in instances where industry capacity is a constraint.
    This rule would not require PHAs to implement particular ECMs; 
however, the energy audit must provide PHAs with accurate information 
about ECMs for the PHAs to consider. It is HUD's position that when 
PHAs capture the cost-effectiveness data for ECMs, PHAs will implement 
the measures more frequently.
    The proposed rule would require payback analysis for Core ECMs. 
Current guidance for a payback analysis is contained in the HUD 
publication ``Energy Conservation for Housing--A Workbook,'' dated 
September, 1998 (available at http://portal.hud.gov/hudportal/HUD?src=/program_offices/public_indian_housing/programs/ph/phecc/resources), 
and this proposed rule would clarify and modify that guidance. The 
payback analysis in the proposed rule would recognize that for a 
replacement component, the incremental cost of a more efficient 
component should be used to determine cost-effectiveness. For example, 
if an Energy Star appliance costs $100 more than a standard appliance 
with the same estimated life and the component has to be replaced, in 
order for the Energy Star appliance to be cost-effective, it must cost 
$100 less to operate than the standard component over the designated 
payback period.
    The result of a payback analysis would be considered in the context 
of this rule as a threshold for further evaluation of an ECM. A more 
detailed cost analysis may be conducted that includes complete 
lifecycle cost analysis; however, the baseline audit requires only that 
those lifecycle costs be generally identified, not that they be 
subjected to detailed cost analysis.
    The proposed rule would not prevent PHAs from pursuing more 
advanced utility conservation and green measures, at their option. In 
making the distinction between Core ECMs and Advanced ECMs, HUD is 
recognizing extensive opportunities in public housing for simple cost-
effective energy conservation improvements, while acknowledging that 
more advanced work may be possible in certain circumstances. The 
engineering and implementation costs of advanced technologies often 
make them impractical outside of the context of a comprehensive 
redevelopment, remodeling, or incentivized program, such as an EPC or 
targeted grant program. HUD's view is that it is preferable to 
concentrate limited funding on improvements that have been proven to be 
generally cost-effective and broadly available to PHAs. PHAs have 
different priorities and local requirements with respect to utility 
conservation and green improvements. Many improvements, while not 
providing monetary cost effectiveness, provide benefits in the form of 
an improved living environment for residents or a contribution to 
broader societal environmental goals. HUD recognizes those benefits, 
and encourages PHAs to consider a wide variety of measures. HUD's 
Office of Healthy Homes and Lead Hazard Control and the Environmental 
Protection Agency's Indoor Air Quality Standards, as well as Office of 
Public and Indian Housing (PIH) notices on green building, are useful 
resources for a PHA that is considering a program of green 
improvements.
    While it is HUD's position that the performance of the energy audit 
at the same time as the PNA would be more efficient for PHAs, 
particularly in circumstances where a single provider can perform both 
services, HUD also recognizes that circumstances may not allow a PHA to 
perform both services together. Accordingly, this rule does not require 
the performance of the energy audit simultaneously with the PNA. HUD 
recognizes circumstances where an energy audit would be performed 
outside the 5-year cycle, such as an energy audit performed in relation 
to an EPC or another development project, or

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to meet another HUD requirement. As in the case of a PNA, the first 
energy audit under the new final rule resulting from this proposed rule 
is likely to be the most costly and require the most intensive effort, 
with subsequent updates benefitting from the information collected in 
prior audits. HUD also recognizes that the capacity of the energy 
auditing industry might be limited in some areas, and allows for a 
delay in the performance of the audit in cases where local shortages in 
these professional services exist.
    The rule does not propose to require an investment grade energy 
audit such as one that might be prepared for an energy performance 
contract or in order to evaluate a financial transaction. HUD is 
especially interested in receiving comments about appropriate energy 
audit requirements, as well as certification requirements and 
professional standards for energy auditors. HUD is interested in 
hearing from both the energy auditing industry and entities that have 
experience managing a real estate portfolio and have integrated energy 
audits into their planning process. HUD is also interested in receiving 
comments about any multiple purposes for which portfolio managers have 
used energy audits. HUD also invites comments about the proposed 
categories of ECMs that should be addressed in an energy audit, and 
conservation measures that are appropriate for use on a nationwide 
basis. HUD further invites comments from public housing and other 
interested parties on the needed capacity for performing integrated 
energy audits and PNAs.

III. Findings and Certifications

Paperwork Reduction Act

    The information collection requirements contained in this proposed 
rule have been submitted to the Office of Management and Budget (OMB) 
under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520). In 
accordance with the Paperwork Reduction Act, an agency may not conduct 
or sponsor, and a person is not required to respond to, a collection of 
information, unless the collection displays a currently valid OMB 
control number.
    The burden of the information collections in this proposed rule is 
estimated as follows:
    Reporting and Recordkeeping Burden:

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                                                                                     Estimated
                                                                     Number of     average time      Estimated
                Section reference                    Number of     responses per        for        annual burden
                                                    respondents     respondent      requirement     (in hours)
                                                                                    (in hours)
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905.300(b)(10) \1\..............................             620               1              65          40,300
905.300(b)(14) \2\..............................             620               1              25          15,500
905.300(b)(14)(vii) \3\.........................              62               1              45           2,790
900.300(b)(15) \4\..............................              62               1              45           2,790
                                                 ---------------------------------------------------------------
    Total Paperwork Burden for the New Rule.....  ..............  ..............  ..............          61,380
    Total Burden from Previous Rule (24 CFR       ..............  ..............  ..............          29,440
     965.302) \5\...............................
                                                 ---------------------------------------------------------------
    Total additional burden as a result of this   ..............  ..............  ..............          31,940
     rule.......................................
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     In accordance with 5 CFR 1320.8(d)(1), HUD is soliciting comments 
from members of the public and affected agencies concerning this 
collection of information to:
    (1) Evaluate whether the proposed collection of information is 
necessary for the proper performance of the functions of the agency, 
including whether the information will have practical utility;
    (2) Evaluate the accuracy of the agency's estimate of the burden of 
the proposed collection of information;
    (3) Enhance the quality, utility, and clarity of the information to 
be collected; and
    (4) Minimize the burden of the collection of information on those 
who are to respond, including through the use of appropriate automated 
collection techniques or other forms of information technology; e.g., 
permitting electronic submission of responses.
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    \1\ Burden of energy audit performed once every 5 years for each 
of 3,200 PHAs, including data collection and site inspection.
    \2\ Burden of analysis and comprehensive report.
    \3\ Optional burden of expanded analysis as directed by PHA, 
estimated to be exercised by 10 percent of respondents.
    \4\ Optional burden of considering green measures as directed by 
PHA, estimated to be exercised by 10 percent of respondents.
    \5\ OMB Control No. 2577-0062.
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    Interested persons are invited to submit comments regarding the 
information collection requirements in this rule. Under the provisions 
of 5 CFR part 1320, OMB is required to make a decision concerning this 
collection of information between 30 and 60 days after today's 
publication date. Therefore, a comment on the information collection 
requirements is best assured of having its full effect if OMB receives 
the comment within 30 days of today's publication. This time frame does 
not affect the deadline for comments to the agency on the proposed 
rule, however. Comments must refer to the proposal by name and docket 
number (FR-5361) and must be sent to:

HUD Desk Officer, Office of Management and Budget, New Executive Office 
Building, Washington, DC 20503, Fax number: (202) 395-6947, and
Collette Pollard, Reports Liaison Officer, Department of Housing and 
Urban Development, 451 7th Street, SW., Room 4160, Washington, DC 
20410.

Interested persons may submit comments regarding the information 
collection requirements electronically through the Federal eRulemaking 
Portal at http://www.regulations.gov. HUD strongly encourages 
commenters to submit comments electronically. Electronic submission of 
comments allows the commenter maximum time to prepare and submit a 
comment, ensures timely receipt by HUD, and enables HUD to make them 
immediately available to the public. Comments submitted electronically 
through the http://www.regulations.gov Web site can be viewed by other 
commenters and interested members of the public. Commenters should 
follow the instructions provided on that site to submit comments 
electronically.

Regulatory Planning and Review

    OMB reviewed this proposed rule under Executive Order 12866 
(entitled ``Regulatory Planning and Review''). This rule was determined 
to be a

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``significant regulatory action,'' as defined in 3(f) of the order 
(although not an economically significant regulatory action, as 
provided under section 3(f)(1) of the order). The docket file is 
available for public inspection between the hours of 8 a.m. and 5 p.m. 
weekdays in the Regulations Division, Office of General Counsel, 
Department of Housing and Urban Development, 451 7th Street SW., Room 
10276, Washington, DC 20410-0500. Due to security measures at the HUD 
Headquarters building, an advance appointment to review the docket file 
must be scheduled by calling the Regulations Division at (202) 708-3055 
(this is not a toll-free number). Hearing- or speech-impaired 
individuals may access this number through TTY by calling the toll-free 
Federal Information Relay Service at (800) 877-8339.
    This proposed rule would revise HUD's energy audit requirements 
applicable to HUD's public housing program for the purpose of 
clarifying such requirements and defining energy-efficient measures and 
audit procedures. It is estimated that the cost burden to PHAs could be 
up to $40 million every 5 years or $8 million annually. Notwithstanding 
the relatively modest cost to perform energy audits, there is a 
potential for PHAs to realize substantial savings. Each year, about 
$1.2 billion is budgeted for utilities for housing authorities. 
Assuming that this rule is effective and energy audits are successfully 
translated into energy savings, where, for example, only 10 percent 
efficiency and cost were achieved, it would translate into about $120 
million in budget savings annually that could be affected to other 
uses. When tenant-paid utilities are included, the annual savings may 
be up to $173 million under the same conditions. Notwithstanding the 
potential benefit, this proposed rule is not economically significant 
as defined by Executive Order 12866 and OMB Circular A-4.
    The potential costs of the rule are as follows. The new Energy 
Audit Rule does not change the current requirement that all PHAs 
perform an energy audit at least once every 5 years. However, there 
will be an economic impact to the extent that the new standards for 
performance exceed the standard of performance for the state in which 
each PHA is located.
    The cost to perform the enhanced energy audit can be approximated 
using existing examples and HUD's own experience. HUD's Office of 
Affordable Housing Preservation (OAHP) manages the Green Retrofit 
Program (GRP), which involves OAHP direct engagement of providers to 
perform Physical Needs Assessment and Energy Audits for affordable 
housing projects. The GRP energy audit includes all of the components 
generally understood to be found in a baseline energy audit. HUD is 
using the GRP format as a source for the development of energy audit 
standards to be used in public housing, and the energy audit standards 
in the new rule will be comparable in complexity/comprehensiveness. 
OAHP has shared a summary of its costs to perform PNAs during Fiscal 
Year 2009/10 using its format for a set of 66 projects nationwide. 
These projects averaged 96 units per project. The average cost for the 
energy audit portion of the GRP for these projects was reported as 
$3,314 per project or $32.86 per unit.
    In the absence of detailed cost figures for the energy audits 
currently being performed by PHAs, the most conservative approach to 
estimating the burden is to use the GRP figure of $32.86 per unit. Even 
without a mitigating adjustment for the current economic investment 
that PHAs are making to this activity, the economic burden to PHAs 
would be $39,864,536 ($32.86 x 1,213,163) every 5 years, or $7,972,907 
annually. A mitigating adjustment of 50 percent to account for the 
existing burden is not an unreasonable assumption. Such an adjustment 
would reduce the 5-year and annual additional burden to $19,932,268 and 
$3,986,453, respectively.
    There are also benefits to the rule. Nationwide, PHA-paid utility 
costs total around $1.3 billion annually, or about 25 percent of the 
costs to operate public housing. It is estimated that an additional 
$430 million in utility costs are paid by residents, but indirectly are 
paid by PHAs in the form of utility allowances that reduce resident 
rents. Assuming that this rule is effective and, for example, only 10 
percent efficiency were achieved, that would translate into about $173 
million in budget savings annually that could be realized and affected 
to other uses.

Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (2 U.S.C. 
1531-1538) (UMRA) establishes requirements for federal agencies to 
assess the effects of their regulatory actions on state, local, and 
tribal governments and the private sector. This rule does not impose 
any federal mandate on any state, local, or tribal government or the 
private sector within the meaning of UMRA.

Environmental Impact

    This proposed rule that does not direct, provide for assistance or 
loan and mortgage insurance for, or otherwise govern, or regulate, real 
property acquisition, disposition, leasing, rehabilitation, alteration, 
demolition, or new construction, or establish, revise or provide for 
standards for construction or construction materials, manufactured 
housing, or occupancy. Accordingly, under 24 CFR 50.19(c)(1), this 
proposed rule is categorically excluded from environmental review under 
the National Environmental Policy Act of 1969 (42 U.S.C. 4321).

Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et seq.) 
generally requires an agency to conduct a regulatory flexibility 
analysis of any rule subject to notice and comment rulemaking 
requirements, unless the agency certifies that the rule will not have a 
significant economic impact on a substantial number of small entities. 
All PHAs have been required to complete energy audits, which 
essentially review building systems for the purpose of assessing 
whether the project would benefit from energy conservation measures. 
This rule also clarifies the scope of the energy audit that would be 
made pursuant to the existing energy audit requirements, rather than 
creating a new requirement for PHAs. To the extent that the standards 
for the energy audit pursuant to this rule are more burdensome than the 
current state standards required for energy audits, there may be some 
incremental cost to some PHAs to perform audits to this standard. 
However, this cost would be miniscule fraction of each PHA's capital 
grant, and so would not be a significant economic impact. For example, 
making the most conservative assumption--that each small PHA would be 
required to hire an independent auditor rather than using existing 
staff time--the incremental cost would be $32.86 per unit per 5 years, 
or $6.57 per unit per year. The capital fund grant averages $1595 per 
unit, per year, so that the cost as a percentage of capital grant is 
only 0.4 percent. In actuality, the costs may be lower, because at 
least some small PHAs will have the staff resources to perform the 
audit in-house.
    Notwithstanding the determination that this rule would not have a 
significant impact on PHAs, HUD specifically invites any comments 
regarding any less burdensome alternatives to this rule that will meet

[[Page 71291]]

HUD's objectives as described in this preamble.

Executive Order 13132, Federalism

    Executive Order 13132 (entitled ``Federalism'') prohibits, to the 
extent practicable and permitted by law, an agency from promulgating a 
regulation that has federalism implications and either imposes 
substantial direct compliance costs on state and local governments and 
is not required by statute or preempts state law, unless the relevant 
requirements of section 6 of the Executive Order are met. This rule 
does not have federalism implications and does not impose substantial 
direct compliance costs on state and local governments or preempt state 
law within the meaning of the Executive Order.

Catalog of Federal Domestic Assistance Number

    The Catalog of Federal Domestic Assistance number for 24 CFR part 
905 is 14.872.

List of Subjects in 24 CFR 905

    Grant programs--housing and community development, Public housing, 
Reporting and recordkeeping requirements.

    Accordingly, for the reasons stated in the preamble, HUD proposes 
to amend 24 CFR part 905, as proposed to be revised at 76 FR 6661, 
February 7, 2011, as follows:

PART 905--THE PUBLIC HOUSING CAPITAL FUND PROGRAM

    1. The authority statement for part 905 continues to read as 
follows:

    Authority: 42 U.S.C. 1437g, 42 U.S.C. 1437z-2, and 3535(d).

Subpart C--General Program Requirements

    2. Amend Sec.  905.300 by adding paragraphs (b)(10) through (b)(15) 
to read as follows:


Sec.  905.300  Capital Fund submission requirements.

* * * * *
    (b) * * *
    (10) Energy audits. All PHAs shall complete an energy audit for 
each PHA-owned project under management, not less than once every 5 
years, unless otherwise specified in this part.
    (i) Energy audits consist of reviews of building systems to 
evaluate and identify projected costs, savings, and payback periods 
related to implementing any of a variety of potential energy 
conservation measures. Energy audits required by this part may, but are 
not required to, also identify green measures, or measures that do not 
result in energy savings, but which instead result in environmental 
benefits, such as improving indoor air quality.
    (ii) The purpose of this subpart is to provide minimum standards 
with respect to the performance of energy audits. PHAs are not required 
to implement any specific energy conservation measure identified in an 
energy audit, except to the extent required by other statutes, rules, 
or regulations. An energy audit, however, must provide PHA staff with 
accurate information about the condition of the PHA's properties with 
respect to energy conservation measures and to the payback associated 
with energy conservation measures. The audit may also provide 
information about the environmental or potential health benefits of 
green measures.
    (iii) PHAs shall integrate utility management with capital 
planning, to maximize energy conservation and efficiency measures in a 
comprehensive approach to building design, development, and 
maintenance. Energy audits shall be conducted in conjunction with HUD's 
required PNA. Any planned, ongoing, or completed energy, utility, and 
green improvements must be captured in the PNA in a form and manner 
prescribed by HUD.
    (iv) PHAs shall not be required to complete an energy audit for any 
project that is less than 5 years old at the time the PHA is required 
to complete the energy audit. PHAs shall not be required to complete an 
energy audit for any project for which a removal from the public 
housing inventory has been approved by HUD, such as a demolition, 
disposition, conversion to homeownership, or other conversion action.
    (v) The first two energy audits completed under this section shall 
be completed in accordance with a time frame delineated by HUD.
    (vi) When a PHA is required to submit an energy audit pursuant to 
this part for the first time, a PHA has the option of submitting an 
existing audit completed within the last 2 years if:
    (A) The audit meets the data requirements under this section; and
    (B) The audit was completed by an auditor that meets the 
requirements of this section.
    (vii) When a PHA is required to complete and submit an energy audit 
for the first time, a PHA may request an additional 2 years to submit 
the audit if it cannot find a qualified auditor. To obtain HUD's 
approval, a PHA must provide documentation to its field office that 
demonstrates it issued a well-structured Request for Proposal (RFP) in 
accordance with 24 CFR 85.36, and received no bids from qualified 
respondents.
    (11) Energy and water conservation measures (ECMs). ECMs are 
devices, systems, or processes that may reduce utility and energy 
consumption. For the purposes of this subpart, ECMs include ``Core 
ECMs'' and ``Advanced ECMs.''
    (12) Core ECMs are defined as broadly available energy conservation 
measures that have proven track records of reducing energy and water 
consumption in a cost-effective manner. Core ECMs include, but are not 
limited to, the following ECM categories:
    (i) Building envelope (ECMs such as, but not limited to, wall or 
attic insulation, roofs, storm doors, weatherization, radiant barriers, 
and windows);
    (ii) Heating, cooling, and other mechanical equipment systems and 
controls (ECMs such as, but not limited to, energy efficient furnaces, 
air handlers, fans, condensers, boilers, hot water heaters, 
programmable thermostats, equipment refurbishment and commissioning, 
duct sealing, duct insulation, pipe insulation, water heating controls, 
and ventilation);
    (iii) Water conservation (ECMs such as, but not limited to, low 
flow toilets, faucets, showerheads, and alternate irrigation);
    (iv) Power, lighting systems, and controls (ECMs such as, but not 
limited to, compact fluorescent lighting, LED fixtures and exit 
signage, photocell controls, and motion controls);
    (v) Appliances (ECMs such as, but not limited, to Energy Star-rated 
refrigerators, clothes washers, and dishwashers).
    (13) Advanced ECMs are defined as alternative measures comprising 
advanced or experimental technology which, compared to Core ECMs, can 
be more challenging to evaluate and implement. These are not 
alternatives that auditors would normally consider unless directed to 
do so, or unless there were local precedents that caused the measures 
to become commonly accepted local alternatives. Advanced ECMs include, 
but are not limited to:
    (i) Fuel conversions;
    (ii) Conservation technologies (e.g., green construction 
techniques, building energy management systems, and xeriscaping \6\); 
and
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    \6\ Xeriscaping is the conservation of landscape irrigation 
water through creative and efficient landscape design.

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[[Page 71292]]

    (iii) Energy generating technologies and renewable energy systems 
(e.g., solar, geothermal, and cogeneration \7\).
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    \7\ Cogeneration is the use of the byproduct of energy 
generation, primarily thermal energy, for other purposes that would 
normally require additional energy.
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    (14) Energy audit technical requirements and reporting. (i) An 
energy audit shall analyze utility consumption, review property and 
building data, and evaluate Core ECMs that could result in cost-
effective energy and water conservation. At the option of the PHA, an 
energy audit may also evaluate Advanced ECMs and green measures.
    (ii) Energy audits for public housing shall at a minimum consider 
the Core ECMs and provide a comprehensive assessment report that 
includes:
    (A) A summary review of the findings of any previous energy audits;
    (B) An assessment of the existing property physical components 
affecting energy consumption, including an evaluation of the 
performance and condition of components within the Core ECM categories.
    (C) An assessment of building operations, maintenance, and resident 
education as it relates to energy conservation and green practices;
    (D) Analysis of fuel, electricity, and water bills and usage for at 
least the PHA-held accounts for trend analysis and industry 
benchmarking, and for tenant-held accounts where usage information is 
in the possession of the PHA;
    (E) Identification and evaluation of all energy conservation 
measures considered, which shall include at least those that have the 
potential for cost-effective implementation;
    (F) Categorization of recommended energy conservation measures into 
improvements with payback periods of 12 years or less, greater than 12 
and less than or equal to 20 years, and more than 20 years;
    (G) Projected cost of ECMs, and where a standard (less energy-
efficient) building component is available, the projected cost of the 
standard component and the incremental cost of the ECM;
    (H) Projected annual savings in water consumption;
    (I) Projected annual energy consumption savings in the appropriate 
unit of measurement (i.e., kilowatt-hours, British Thermal Unit 
(BTU),\8\ gallons, cubic feet etc.) for recommended ECMs;
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    \8\ A BTU is defined as the amount of heat required to raise the 
temperature of 1 pound (0.454 kg) of liquid water by 1[emsp14][deg]F 
(0.556 [deg]C) at a constant pressure of one atmosphere.
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    (J) Projected annual savings in dollars for recommended ECMs;
    (K) Expected useful life of all ECMs and green measures;
    (L) Identification of life cycle costs or savings of ECMs and green 
measures, including disposal costs and maintenance costs; and
    (M) Energy auditor recommendations for optimal sequencing of ECM 
implementation for maximum benefit.
    (iii) The energy audit will identify related physical work items 
that must be implemented at the same time to assure that a specific ECM 
can provide the maximum savings calculated, as well as to maintain 
health and safety (e.g., the installation of an energy-efficient boiler 
may require that new, wider distribution lines be installed or rerouted 
to maximize the potential savings that could be realized from the 
boiler; and a weatherization project may require adjustments to 
ventilation systems to maintain adequate fresh air exchange). These 
complementary activities should be viewed as part of an improvement 
package required to achieve the overall energy savings.
    (iv) Data and findings from prior energy audits that are deemed 
reliable and remain valid may be carried over to subsequent audits.
    (v) Where ECMs would replace existing components at the end of 
their useful life, the payback period shall be calculated by dividing 
the incremental cost of replacement with an ECM as compared with a 
standard component, by the projected annual savings of the ECM as 
compared with a standard component. Where ECMs would replace existing 
components before the end of their useful life (early replacement), the 
payback period calculation shall be modified to add the value of the 
remaining useful life of the component being replaced to the 
incremental cost of the ECM. This payback period calculation shall be 
modified in a manner acceptable to HUD. Where ECMs would improve a 
project by adding new systems or new functionality, such as in the case 
of energy-generating equipment, the payback period shall be calculated 
by dividing the total cost of the ECM by the projected annual savings.
    (vi) The energy audit shall differentiate between activities that 
are routine operating and maintenance activities and ECMs that are 
capital expenditures and can be financed with capital funds. Cleaning 
or changing air filters on certain mechanical equipment is a routine 
operational maintenance function that may result in energy conservation 
but is not an eligible capital expense.
    (vii) For purposes of this part, the potential for cost-effective 
implementation of an energy conservation measure must be evaluated when 
the payback period is equal to or less than the estimated useful life 
of the component or 12 years, whichever is less. Complete lifecycle 
cost analysis to refine cost impacts of energy conservation measures is 
recommended for those measures initially determined to be cost-
effective.
    (viii) The energy auditor shall report on a project-level basis. 
The energy auditor shall submit a baseline report to the PHA and may 
submit an expanded report, as noted below. The report shall include the 
elements in Sec.  905.300(b)(14)(i) for at least the ECMs identified in 
Sec.  905.300(b)(14)(i)(D). The baseline report shall include a 
recommendation as to whether the PHA should complete more extensive 
engineering reviews to determine whether consideration of Advanced ECMs 
or others would be warranted. The energy auditor's recommendation shall 
be based upon the potential lifecycle cost savings of the ECMs, the 
complexity associated with implementing the ECMs, and the age and 
condition of the project as a whole. If the PHA directs the energy 
auditor to complete additional analysis on these ECMs, the energy audit 
shall be expanded to include that analysis.
    (ix) There may be occasions outside of the 5-year cycle when an 
energy audit is appropriate and necessary to comply with state-specific 
energy policies, participate in local utility company incentive 
programs, pursue an energy performance contract, or evaluate the 
financial condition of a project. Nothing in this subpart is to be 
construed as prohibiting an energy audit at any time that the PHA 
determines it to be in the interest of the project.
    (x) Capital or operating funds may be used for energy audits 
whenever they are performed.
    (xi) Energy audits required in this section do not need to be 
investment grade energy audits,\9\ but must cover all projects, and be 
sufficient to determine projected savings and to prioritize potential 
work based on the goals and objectives identified by the PHA (e.g., 
quickest payback, largest payback, speed of implementation, etc.). Any 
energy audit may rely on data from a HUD-required prior energy audit 
(such as described in part Sec.  905.300(b)(14)(i)

[[Page 71293]]

or performed in relation to an energy performance contract) conducted 
on the same property, if the previous audit was completed within 2 
years of the time of a required PNA or energy audit, and if the 
previous audit meets the data requirements of the audits prescribed by 
this section.
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    \9\ Investment Grade Energy Audits are prepared specifically to 
support a financial transaction such as an energy performance 
contract.
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    (xii) While the timing of an energy audit is coordinated with a 
PNA, there are several instances when HUD may require a current or 
updated energy audit. These include but are not limited to:
    (A) When requesting HUD permission to transfer excess cash from one 
project to another;
    (B) At the direction of HUD, when HUD energy consumption data or 
industry benchmarks indicate that a project's energy consumption levels 
are excessive when compared to similar projects within the project's 
climatic zone;
    (C) When required to substantiate an exception to the Total 
Development Cost Limit in reference to 24 CFR 941.306; and
    (D) When the PHA is substandard under any applicable performance 
rating system used by HUD to assess project-level performance both in 
terms of operations and financial condition.
    (xiii) The energy auditor shall be experienced in the performance 
of residential building energy audits and shall hold a current, valid 
certification from a state energy audit certifying agency for the state 
where the property is located or a nationally recognized energy audit 
certification provider, or hold other certification acceptable to HUD 
or expressed in HUD guidance.
    (15) Green measures. (i) Green measures are products, systems or 
processes that do not necessarily conserve energy, but result in other 
environmental benefits. These include, for example: use of low 
volatility or nonvolatile organic compound cabinets, flooring, paints, 
or sealants; physical changes required to effectively implement 
integrated pest management; and hazardous waste or construction debris 
removal processes.
    (ii) An energy audit shall identify green measures if the PHA 
directs the energy auditor to include them in the energy audit, but 
they are not required to be included. Where an energy audit includes 
green measures, it shall identify the projected cost of the green 
measure, and where a standard building component is available, it shall 
identify the projected cost for the standard component and the 
incremental cost of the green measure.

    Dated: October 21, 2011.
Sandra B. Henriquez,
Assistant Secretary for Public and Indian Housing.
[FR Doc. 2011-29640 Filed 11-16-11; 8:45 am]
BILLING CODE 4210-67-P