Vol. 22   No. 1
March 2016
  • MGE Talks Business
News Briefs

Shared Savings makes HVAC update affordable for condo development

MGE lowers customers' bills due to lower fuel costs

Sondra Retzlaff and Mary Brumley, of the Charing Cross Condominiums, used MGE Shared Savings to finance a high-efficiency boiler system.

When the Charing Cross Station condominiums were built in 1971, they featured a state-of-the-art cast iron boiler. Consistent maintenance and a dedicated building staff kept the system working well as it approached its 45th birthday. But the condo association knew the system's days were numbered.

"My understanding is that HVAC systems from the 1970s had a life of about 30 years," said Sondra Retzlaff, president of the condo association. "Our energy bills were rising and, when the system needed a repair, replacement parts were hard to find. Plus, prospective buyers were expressing concern about the age of the mechanicals. We knew an old system could affect their purchase decision."

Audit and system failures drive update

In 2014, an owner who was familiar with the Focus on Energy program (for energy efficiency improvements) asked the condo association to conduct an audit and explore ways to cut energy costs.

"The audit showed that we were running at about 65% efficiency. Then we had a failure of both of the system's water heaters," Retzlaff said. "It was critical to move forward on an update—especially before cold weather hit—but we were very concerned about the cost. We feared we'd have to assign a special assessment."

Luckily, Focus on Energy pointed the board to MGE and its Shared Savings program.

Shared Savings program leverages energy savings

Shared Savings is a revolving loan program for MGE customers. MGE provides up-front financing, and the customer repays the loan through energy savings. "The customer can choose a payback schedule of up to 10 years. Many try to align their loan payment to match energy savings," said Randy Popp, a senior engineer at MGE.

To participate, a business must submit their proposal prior to construction or installation. The approval process has two steps:

  1. A technical check to ensure the project meets MGE's energy-saving standards.
  2. Due diligence to determine that the customer can meet the terms of the loan.

More than 300 MGE business customers have used Shared Savings. "Organizations often tell us it can be hard to get affordable funding on a loan for an energy efficiency upgrade," Popp said. "This program is a win for the user and the community because it cuts energy use."

"We're pleased with the terms of the loan," Retzlaff said. "We were able to fund the update at a favorable interest rate, we're saving energy and we're applying our energy savings back to the financing. Plus, if everything goes as intended, we'll pay off the loan quite a few years before we'll need to update the system again."

Switching to a modular system

The condo association team and the building's HVAC supplier made the decision to update to a four-unit, modular boiler. The new system operates at 96% efficiency and has programmable controls that automatically adjust the system based on heating demands. The system cycles through the four units to moderate wear.

"The current estimate is that we should save about $500 a month on natural gas, which is about a third of our previous energy costs," Retzlaff said. "We're hopeful there will be some electrical savings with the modular units and, potentially, some maintenance savings. We'll analyze this in the coming year."

MGE makes the process easy

Board members found the MGE staff to be informative, responsive and helpful. "We appreciated that they were available to answer questions and provide advice but that they allowed us to choose our system and our vendor," Retzlaff said. "We had worked with an HVAC team that knew our building, and it was great that Shared Savings didn't restrict our choice. It was a positive experience."