Energy Savings Performance Contracts: Reauthorization Issues (CRS Report for Congress)
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| Release Date |
Sept. 1, 2004 |
| Report Number |
RL32543 |
| Report Type |
Report |
| Authors |
Anthony Andrews, Resources, Science, and Industry Division |
| Source Agency |
Congressional Research Service |
Summary:
Since the 1970s, both the executive branch and Congress have promoted energy efficiency
within
federal agencies. When the federal government's energy-efficiency and conservation programs
received severe budget cuts in the 1980's, Shared Energy Savings and later Energy Savings
Performance Contracts were devised as part of the strategy to meet federal energy reduction goals.
Energy Savings Performance Contracts (ESPCs) offered federal agencies a novel means of
making energy-efficiency improvements to aging buildings and facilities. In return for privately
financing and installing energy conservation measures, a contractor received a specified share of any
resulting energy cost savings. The contractor, referred to as an Energy Service Company (ESCO),
guaranteed a fixed amount of energy and cost savings throughout the term of the contract, and bore
the risk of the improvement's failure to produce a projected energy savings. The sum of the
improvement's cost and its reduced level of energy cost could not exceed the pre-ESPC energy cost.
The term "energy conservation measure" (ECM) was applied to energy-efficiency improvements
such as energy- and water-saving equipment, and renewable energy systems such as solar energy
panels.
ESPCs were authorized in 1992 by amendments to the National Energy Conservation Policy
Act. Federal agencies' authorization to enter into ESPCs expired October 1, 2003. Legislative
attempts to reauthorize ESPCs in the 108th Congress stalled when the Congressional Budget Office
(CBO) scored ESPCs as mandatory spending that imposed a future financial obligation on the federal
government.
To date more than 340 ESPCs have been awarded with a total value of approximately $1.6
billion in private sector investments. None have failed to produce energy and cost savings. In
comparison to ESPCs, $3.17 billion in appropriated funds was invested in energy-reducing capital
improvements between FY1985 and FY2001, peaking at $288 million in FY1995 and declining to
$131 million by FY2001. As appropriations-funded energy conservation projects have been
declining since FY1995, federal managers have increasingly turned to ESPCs to fund energy
conservation measures.
Options for Congress include taking no further action on the sunset provision that ended
agencies' authorization to enter into ESPCs, extending the sunset provision, or extending the ESPC
authorization with amendments. Such amendments could include reducing the maximum contract
length and expanding the contract scope to non-building applications. This report will be updated
as the situation warrants.
