Managed Utility Services Contracts

In a Managed Utility Service Contract (MUSC), a developer builds and operates energy-efficient systems on the campus and pays the campus' energy bills through a formalized agreement for a specified contractual period.

The owner, in this case the research campus, bears no upfront cost through this agreement, pays the developer an amount similar to their traditional utility bill, and can treat the financial arrangement as an off-balance sheet. Because of the energy-use savings, the developer is then able to apply this monthly revenue to capital cost repayment and maintenance costs.

In addition to removing the burden of an upfront cost, the campus also benefits from cost-neutral efficiency improvements and operational cost savings over the term of the contract.

This contract is similar to an energy savings performance contract; however in this case the utility company (instead of an ESCO) delivers the energy services and pays for upgrades in exchange for payments from the research campus. Payments are made from the energy cost savings generated by the project.

For an overview and example of structuring, please refer to the CalCEF and Federal Energy Management Program utility energy service contracts websites.