Energy Savings Performance Contracts Rescued

March 11, 2004
09:57 AM
Tonight, in a bipartisan effort led by Sens. Jeff Bingaman (D-NM) and Jim Inhofe (R-OK), the Senate took an important step toward reinstating the federal government’s authority for Energy Savings Performance Contracts. In a unanimous voice vote, the Senate amended the Budget Resolution to rectify a scoring problem which has prevented this important efficiency mechanism from being renewed. Energy Savings Performance Contracts are the premier tool for promoting energy efficiency within the federal government. Authority for the popular and innovative program expired last September, halting more than $300 million in projects nationwide. The Inhofe-Bingaman amendment received strong support from a broad coalition of organizations, companies, labor and interest groups, ranging from the Chamber of Commerce to USPIRG. A letter from the coalition follows. March 11, 2004 The Honorable Don Nickles, Chairman Budget Committee United States Senate The Honorable Kent Conrad, Ranking Member Budget Committee United States Senate Dear Chairman Nickles and Senator Conrad: We urge you to support a change to resolve a Congressional Budget Office (CBO) scoring issue that has adversely impacted the “Energy Savings Performance Contract Program” (ESPC), and ask for your cooperation and assistance. This valuable energy efficiency program has been successfully operating for over 10 years and has now been “scored”, for the first time, by CBO. In reality, ESPCs have had a positive budgetary impact. The program saves millions of federal dollars and creates thousands of local jobs while saving energy. Due in part to a new CBO score, the program is in jeopardy. On September 30, 2003, authority for the program expired, and during this period the Federal government has already lost more than $300 million in private sector investment. We strongly agree with Chairman Domenici's comments on this issue. In a letter he sent to you on February 27, 2004, he states: "The truth is that these contracts cost the government nothing. ESPC contracts are designed to recoup their cost through savings of energy and water. The terms of the contracts require that cost savings are sufficient to recoup the cost of improvements. If the improvements fail to achieve the guaranteed savings, then the contractor must reimburse the government. The Committee believes that CBO should reconsider the manner in which it scores ESPCs so that this valuable and popular program can be extended at the earliest possible date." Congress established this innovative program in 1992 to improve the federal government’s energy efficiency by harnessing private sector resources to fund up front the necessary energy efficiency improvements. The program was not scored by CBO when it was established in 1992, nor was it scored by CBO when reauthorized in 1998. It was scored for the first time as part of the Energy Bill when Congress, with strong bi-partisan support, proposed a permanent reauthorization. Under new scoring rules, CBO only scores the program "obligations," but does not take into account the savings that ESPC projects produce. Energy efficiency contractors are required to guarantee energy savings before they are paid from these savings. According to OMB, the ESPC program enables federal agencies to: "Obtain new capital equipment, reduce energy costs, improve indoor environment, and reduce pollution without increasing budgetary outlays.” (June 12, 2003, Memorandum from Marcus Peacock, Associate Director, OMB) The current lapse in ESPC authority is having serious impacts: -- Projects for energy infrastructure improvements have halted across the federal government. This is very significant since, as appropriated dollars have become scarce, the U.S. government uses ESPC for almost 40% of its energy infrastructure upgrades. The Office of the Secretary of Defense recently reported that in 2003, 70% of energy infrastructure improvements were through ESPCs. -- Progress towards meeting mandated energy usage reduction at federal facilities has been seriously hindered. -- Industry partners who perform ESPCs for the federal government are being forced to idle their workforce; therefore, many contractors are deploying their manpower elsewhere or downsizing. -- Because energy service companies usually hire locally, the delay in reauthorization is being felt in communities around the country. For every $10 million in projects, 40-60 employees are hired. The current lapse has cost 2,000-plus jobs. -- The federal government stands to lose millions of dollars a year in potential savings. This program has been considered a "win-win" program with strong support by a diverse coalition of industry, environmentalists, and labor unions. We believe that the CBO scoring is a highly inaccurate reflection of a program that has operated successfully over the past ten years, saving federal dollars and energy. We ask for your assistance and support to rectify this CBO budget issue, and assist us in getting this program reauthorized as soon as possible. Please feel free to contact Jennifer Schafer at 202-554-5828, Kara Saul Rinaldi at 202-530-4348 or Judy Blanchard at 408-5831 for additional information. Sincerely, U.S. Chamber of Commerce Kateri Callahan Alliance to Save Energy Michael Marvin Federal Performance Contracting Coalition National Association of Manufacturers Michael Mathis The International Brotherhood of Teamsters Tom Kuhn Edison Electric Institute Terry E. Singer National Association of Energy Service Companies Rick Norment National Council for Public Private Partnerships Mark Wenzler National Environmental Trust Karen G. Wayland Natural Resources Defense Council Ken Mentzer North American Insulation Manufacturer's Association Glenn Hamer Solar Energy Industries Association John Jimison U.S. Combined Heat and Power Association Anna Aurilio U.S. Public Interest Research Group Marchant Wentworth Union of Concerned Scientists George Sakellaris Ameresco David Modi American Standard Companies John Mahoney Chevron Energy Solutions John M. Newcomb EMCOR Energy & Technologies S. Lynn Sutcliffe EnergySolve LLC George H. Gilmore, Jr. Exelon Enterprises Gerald Koenig Hannon Armstrong Kent Anson Honeywell Mark Wagner Johnson Controls, Inc. Matthew W Addison Nexant Neil Petchers NORESCO Dan Shugar PowerLight Corporation James B. Redden Select Energy Services, Inc. Erbin Keith Sempra Energy Solutions Charles Castine Alliant Energy Integrated Services Mike Gregg Cogenex Corporation Henry K. Lee PFG Energy Capital Gary M. Fechter Princeton Energy Systems Jim Adams Energy Systems Group Contract Services Association of America Bob Dixon Siemens Building Technologies Rob Andersen Trane Ron Kenedi Solar Systems Division SHARP Electronics Corporation Richard Brent Solar Turbines Incorporated Scott Sklar The Stella Group, Ltd.

# # #