Mandatory Provisions for Major Renovation Projects

That is our understanding. If you are not altering the walls or roof then you do not need to meet the prescriptive requirements. The envelope U-value, etc. are not mandatory provisions.

You can refer to this CIR:
12/10/2008 - Credit Interpretation Request
The team is requesting that you please verify the meaning of the sentence in ASHRAE 90.1, Table G3.1 regarding baseline envelope requirements for existing buildings.."For existing building envelopes, the baseline building design shall reflect existing conditions prior to any revisions that are part of the scope of work being evaluated". Please confirm if this means that the walls, roof, windows, etc for the baseline is to be modeled to match the existing conditions NOT according to the values in Table 5.5-1 thru 5.5-8.

2/20/2009 - Ruling
If an existing envelope component is untouched, the baseline is as that component exists. However, if an existing component is modified, the baseline needs to meet the requirements for alterations in Section 5.1.3.

Just checked Section 5.1.3 and it does not explicitly say that prescriptive envelope requirements need to be met for alterations. So in my opinion, any alterations in an existing building is allowed to be worse than prescriptive minimums. In which case the baseline, reflecting the prescriptive minimums, would be better than then proposed design.

Am I interpreting this correctly?

No, the baseline and proposed models would both reflect the existing condition. See Appendix G Table G3.1(f) under the baseline column.

Another question for this thread: How do the fenestration area restrictions in Chapter 5 apply to existing building energy models? Table G3.1, 5, c. states that "The fenestration areas for envelope alterations shall reflect the limitations on area, U-factor, and SHGC as described in Section 5.1.3." The table also goes on under Table G3.1,5, f. to state that "For existing building envelopes, the baseline building design shall reflect existing conditions prior to any revisions that are part of the scope of work being evaluated."
If I have a situation where I have an existing building with more than 40% glazing, I'm removing all the existing windows in their entirety (including sash and frame), and installing a new glazing system where the old ones were (keeping the ratio above 40% and not touching the rest of the envelope), am I allowed to keep the same window to gross wall ratio in the baseline (higher than 40%), or am I required to limit the window to gross wall ratio to a maximum of 40% as stated in section 5.5.4.2.1 which becomes part of Appendix G via the reference to section 5.1.3? Let’s assume my project is conducting an “envelope alteration” in that envelope components (windows) are being replaced and the building is not undergoing a change in use classification or category.
If I follow Table G3.1, 5, c., it directs me to the “area, U-factor, and SHGC” requirements in section 5.1.3. Section 5.1.3 says that if I don’t meet one of the exceptions, I must comply with Section 5 (let’s assume I don’t qualify for an exception). Section 5 includes a 40% window to gross wall limitation under section 5.5.4.2.1. Since I’m required to follow the “area” requirements in section 5.1.3, am I supposed to limit the baseline building to no more than 40% glazing? If yes, am I not violating Table G3.1, 5, f. which says the baseline envelope must reflect existing conditions (greater than 40% window to gross wall ratio)?

The Baseline cannot have a greater than 40% window to wall ratio, so you would need to proportionally adjust the Baseline window area to be at 40%. I'd say that G3.1.5.f primarily refers to the insulating values and less to the existing areas. As you found this is not eminently clear however.

Fun playing ring-around-the-standard with 90.1 isn't it? :-)