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Utility Energy Services Contracts

One of the best ways for Federal agencies to implement efficiency and renewable energy projects is through partnerships with their franchised or serving utilities. Federal agencies often enter into utility energy service contracts (UESCs) to implement energy improvements at their facilities.

With a UESC, the utility typically arranges financing to cover the capital costs of the project. Then the utility is repaid over the contract term from the cost savings generated by the energy efficiency measures. With this arrangement, agencies can implement energy improvements with no initial capital investment; the net cost to the Federal agency is minimal, and the agency saves time and resources by using the one-stop shopping provided by the utility.

More than 45 electric and gas utilities have provided project financing for energy and water efficiency upgrades at Federal facilities, investing more than $600 million through utility energy services contracts since 1995. The Edison Electric Institute has committed to encouraging $2 billion in private investment funding by 2010 for life-cycle, cost-effective Federal facility improvement projects. In fiscal year 2000, $157 million in private-sector investments generated $35 million in savings at Federal facilities. These projects are now paying for themselves from a share of the cost savings resulting from efficiency improvements.

The Energy Policy Act of 1992 authorizes and encourages Federal agencies to participate in utility energy efficiency programs offered by electric and gas utilities and by other program administrators (e.g., state agencies). These programs range from equipment rebates (i.e., utility incentives) to delivery of a complete turnkey project. Federal legislation and numerous legal opinions demonstrate that agencies have full authority to enter into utility energy service contracts as well as take advantage of utility incentive programs.