Utility Efficiency Projects Top $1.1 Billion

November 1, 2002

Ever since the Energy Policy Act of 1992 gave Federal agencies authority and encouragement to partner with utility companies, the level of investment for energy efficiency projects has continued to grow. During the past decade, 60 electric and gas utilities have implemented efficiency projects and upgrades at Federal facilities, investing more than $700 million through utility energy service contracts (UESCs). When coupled with $400 million of Congressional appropriations leveraged by utility-financed investment, the total is now more than $1.1 billion. This investment is saving the Federal government an estimated $160 million per year. The positive trend is expected to continue, resulting in additional utility energy efficiency projects with Federal agencies and facilities.

A voluntary data reporting effort from utilities and agencies has been underway for more than 4 years, which has allowed FEMP to examine important trends in the UESC process. UESC activity is about evenly split between defense and civilian agencies. The Department of the Navy, U.S. Marine Corps, and Department of the Air Force have completed the largest projects, followed by the General Services Administration, the Department of Veterans Affairs, and the Department of the Army. Another 18 agencies have also availed themselves of this financing mechanism.

Another interesting trend in project activity is the rate of investment in UESCs over the last several years as shown in the graph (see below). The data reveals a trend of growing private sector investment in UESC projects.

This line graph depicts three investment areas for UESC project investments: federal sector, private sector, and total capital investment (note, investment based on projects' capital costs). The vertical axis is millions of as-spent dollars in increments of $200, starting with 0 and ending with $1,200. The horizontal axis depicts award dates in yearly increments, starting with October 1993 and ending with October 2002. The data shows growing private sector investment in UESC projects. Specifically, the federal investment begins to increase starting about October 1995, and gradually increases to about $250 million, then levels to about $300 million at October 2002. For private sector investment, investment slowly increases to about $20 million in October 1995, then gradually increases to just under $200 million by October 1998. In October 1998 private investment increases sharply to about $500 million by October 2000 and about $700 million by October 2001 and hits about $800 million by October 2002. Total capital investment by October 1995 is more than about $50 million, then increases steadily to about $200 million in October 1997, $400 million by October 1998, until it hits about $1,100 million by October 2002.

Agencies have applied utility investments in 10 technology categories, listed in descending order by expenditure:

comprehensive upgrades,
lighting and mechanical system upgrades,
lighting retrofits,
cogeneration/combined heat and power,
mechanical system upgrades,
boilers/chillers retrofits,
steam system upgrades and improvements,
controls,
energy and water combined projects, and
installation of heat pumps.

Along with lower commodity bills, the quiet success story of these investments is greater comfort and productivity for Federal personnel.

FEMP actively encourages partnerships between agencies and utility companies to continually improve the ease and accessibility of UESCs. FEMP regularly brings partners together under the auspices of the Federal Utility Partnership Working Group (FUPWG) to share best practices and to facilitate additional utility-financed projects. Membership in FUPWG requires nothing more than an interest to share and learn. The next FUPWG meeting is scheduled in Tampa, Florida, on November 19-20, 2002.

FEMP, along with staff from the General Services Administration, also conducts training workshops on implementing projects through the use of UESC and areawide contracting for Federal contracting officers and energy managers.

Despite their apparent success, UESCs are still an underutilized procurement tool in the Federal government. To help remedy this, FEMP is increasing its outreach to utilities. At present, nearly all the utilities that offer the UESC financing vehicle are investor-owned. FEMP is initiating contact with investor-owned utilities that do not currently offer UESCs to encourage them to consider offering that service to their Federal customers. FEMP has also recently made special efforts to increase the participation of local gas distribution companies and rural electric cooperatives. (See article "Natural Gas LDCs: Options for Utility Financing")

FEMP's Web site at www.eere.energy.gov/femp/utility provides information and resources available to agencies seeking utility-financed solutions to their energy problems. A great way to learn more about UESCs is to contact the Energy Efficiency and Renewable Energy (EREC) Clearinghouse at 800-DOE-EREC to request a free copy of FEMP's 15-minute UESC videotape. The videotape is an effective tool to encourage agencies and utilities to build energy efficiency partnerships.

For more information, please contact David McAndrew, FEMP Utility Team Leader, at 202-586-7722 or david.mcandrew@ee.doe.gov.