Energy Savings Performance Contracting Re-Authorized through FY 2006

November 30, 2004

Federal agencies can once again use Energy Savings Performance Contracts (ESPCs) to finance new federal energy saving projects. The House-Senate Conference Committee for the FY 2005 Defense Authorization bill (H. 4200) completed work on the conference report, and over the weekend of October 9-10 was approved separately by the House and Senate. On October 28, 2004, the National Defense Authorization Act for Fiscal Year 2005 was signed into law by the President. H.R. 4200 extends from 2003 to September 30, 2006, authority for all federal agencies to use ESPC contracts to finance federal energy management and water projects. Section 1090, Energy Savings Performance Contracts under Title X - General Provisions, amends Sections 801-804 of the National Energy Conservation Policy Act. The amendments are summarized below.

Defines the term "energy savings" to mean -

A reduction in the cost of energy, water, or wastewater treatment, from a base cost established through a methodology set forth in the contract, used in an existing federally owned building or buildings or other federally owned facilities as a result of –

  1. the lease or purchase of operating equipment, improvements, altered operation and maintenance, or technical services;
  2. the increased efficient use of existing energy sources by cogeneration or heat recovery, excluding any cogeneration process for other than a federally owned building or buildings or other federally owned facilities; or
  3. the increased efficient use of existing water sources in either interior or exterior applications.

Defines "energy savings contract" and "energy savings performance contract" to mean –

A contract that provides for the performance of services for the design, acquisition, installation, testing, and where appropriate, operation, maintenance, and repair, of an identified energy or water conservation measure or series of measures at one or more locations. Such contracts shall, with respect to an agency facility that is a public building, be in compliance with the prospectus requirement and procedures of section 3307 of title 40, United States Code.

Defines energy or water conservation measure to mean –

  1. an energy conservation measure, as defined in section 551 of the National Energy Conservation Policy Act; or
  2. a water conservation measure that improves the efficiency of water use, is life-cycle cost-effective, and involves water conservation, water recycling or reuse, more efficient treatment of waste water or stormwater, improvements in operation or maintenance efficiencies, retrofit activities, or other related activities, not at a federal hydroelectric facility.

Furthermore, the bill directs the Secretary of Energy to complete a review of the ESPC program within 180 days of enactment of the Act to:

  • Identify statutory, regulatory, and administrative obstacles preventing Federal agencies from fully utilizing the program.
  • Use the review to identify all areas for increasing program flexibility and effectiveness, including audit and measurement verification requirements, accounting for energy use in determining savings, contracting requirements, in including identification of additional qualified contractors, and energy efficiency services covered.
  • Report findings to Congress.
  • Implement identified administrative and regulatory changes to increase program flexibility and effectiveness to the extent that such changes are consistent with statutory authority.

For more information on Energy Saving Performance Contracts, contact Tatiana Strajnic at 202-586-9230 or