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National Association of Energy Service Companies

Policy Priorities

Federal - 2nd Quarter 2008


NAESCO, the Federal Performance Contracting Coalition and representatives of GELAT, an ESPC coalition staffed by the Alliance to Save Energy, have been holding a series of meetings regarding the need for the establishment of a discrete set of ESPC program objectives that might be obtainable in the last year of the Administration. The likelihood that some of the senior managers at DOE and DOD will leave their posts before the election presents the groups with an even more limited timeframe in which to refine program parameters and encourage rapid implementation of the energy management provisions contained in the Energy Independence and Security Act of 2007.

The group, in its discussions, has also focused on the longer-term need to prepare for the transition teams that will be put into place after the election. There is agreement about the need to make sure that legislative and agency staffers are sufficiently aware of remaining ESPC program challenges so staff can provide the transition teams with a coherent picture of what program challenges remain to be addressed. In addition, briefing efforts now can provide the groundwork for the March '09 DOE budget deliberations.

Working with the Federal Performance Contracting Coalition and GELAT, NAESCO has developed several drafting papers identifying concerns shared by all three groups and crafting recommendations which can be used by lobbyists from all of the groups. This effort is intended to help co-ordinate the lobbying message being presented by all of the groups in their visits on the Hill. The group has identified several specific requests to discuss with Congressional staff and members.

Overall Challenge: Declining Investment in Energy Efficiency

The ESPC profile has been raised by the passage of the Energy Independence and Security Act of 2007 (EISA), in which Congress codified and expanded energy management programs and goals already established by the Energy Policy Act of 2005 and Executive Order 13423, and the support of the Administration in pursuing energy efficiency in federal facilities. However, despite the increased commitment to ESPCs by the legislative and executive branches, DOE acknowledges that the historical record of investment in energy efficiency over the last five years (FY2003-FY 2007) has been one of underperformance. Total investment {defined as Direct Appropriations, use of the Utility Energy Savings Contracts , and use of the Energy Savings Performance Contracts) has never topped the $720 million recorded in FY 2003, of which $429 million (60%) consisted of ESPCs. Over the last five years, the amount of total investment has declined, hitting an all time low in FY2004, during the period the ESPC program was awaiting Congressional reauthorization.

Challenge :Unclogging the Project Pipeline

There is a potential in 2008 to dramatically increase the overall energy efficiency investment level to a total of $1.755 billion of which $1.23 billion (70%) is projected to consist of ESPCs. This investment level is consistent with the annual investment required under Executive Order 13432 and EISA in order to meet the mandated 30% energy reduction goal in 2015. The two largest agencies with projects in the current project pipeline are DOE, which has $520 million in projects (42%) and DOD with $576 million in projects (47%). The challenge facing the federal government is translating these proposed projects into delivery orders that can be implemented in the field at the facilities.

A related issue is that a significant number of projects in the pipeline have been “descoped”, that is the size of the proposed investment has been reduced by contracting officers looking to reduce the contract term and focusing on payback. Many of the measures being rejected are renewable technologies. The net effect of the “descoping” is to undermine the expressed goals of the Executive Order, EISA, and DOE's internal goals to generate 90,000 MWh of renewable generation across 14 DOE sites.

Chief among the recommendations is to encourage DOE to initiate a “Project Blitz” similar to the one conducted by DOE in 2006.The sustained and co-ordinated effort by contracting and procurement officers, FEMP and Office of EE/RE program and policy staff led by Assistant Secretary of Energy Andy Karsner had a significant impact in getting projects out of the pipeline, in the ground, and generating dollar and energy savings. We believe another accelerated project blitz could result in similar results. Another key recommendation is to accelerate the project implementation oversight by the Executive Offices of the President and senior department management at DOE and DOD.

Challenge: Tracking Implementation Progress

Maintaining oversight and ensuring implementation of the numerous energy management and program provisions contained within EISA are significant challenges for Congress and the Executive Branch. Among the provisions that can be especially useful to track implementation progress is Section 432 of EISA that contains many of the tools needed for successful oversight of federal energy management efforts. Data collection is critical to every aspect of energy program success since establishing baseline consumption and monitoring ongoing energy consumption patterns is critical to establishing the metrics of energy reduction initiatives. In general, the agencies and individual federal facilities have not collected the type of data necessary for proper oversight and reporting requirements. Standardizing as well as streamlining information collection and reporting requirements is critical to the overall success of all federal energy initiatives. Therefore, our chief recommendation is to ensure the necessary data collection and reporting system is in place as quickly as possible.

Challenge: Using Congressional Oversight Powers Stimulate the Use of ESPCS by Civilian Agencies and DOE

We believe that oversight hearings should be scheduled on DOE's energy efficiency investment underperformance as well as the inability of DOD to continue to comply with the existing requirements on energy consumption and reduction initiatives let alone the new requirements in EISA Section 432 which asks even more from DOD. As such, we believe that both DOE and DOE need to hear from their Congressional oversight committees of jurisdiction about the importance of meeting their energy targets and complying with legislation.

We are asking both the authorizing and appropriating Congressional committees to press the agencies and departments under their jurisdiction to increase the level of energy efficiency at their facilities and increase the use of ESPCs to deliver the energy efficiency investment. Individuals charged with operations and maintenance of facilities should be questioned about their specific activities to comply with the energy efficiency mandates and should be asked to report on the magnitude of energy being saved and dollar savings being generated.

Among our recommendations are for the committees to send letters to agency heads to request current information about the level of energy efficiency investment at their facilities, how they are using ESPCs, UESCs and direct appropriations to maximize energy and dollar savings, and the level of operations and maintenance costs savings being recognized in their facilities as a result of these investments in energy efficiency. We have also provided sample questions to use when the appropriate Secretaries, Assistant Secretaries and others testify before these committees. We also suggest that these committees ask the Department over which they have jurisdiction for a report, within 30 days, on the status of all ESPC projects that have been initiated but not awarded.