Many Members of Congress have expressed a continuing interest in improving energy efficiency and increasing the use of renewable energy. As a result, agency projects that could reduce federal energy usage, expand the use of renewable energy, and reduce federal energy costs may not be pursued. To address this challenge, Congress established alternative financing methods that utilize private sector resources and capabilities to facilitate federal energy projects. Two such alternative financing methods are energy savings performance contracts (ESPCs) and utility energy service contracts (UESCs). An ESPC is a multiyear contract between a federal agency and an energy service company. In general, under an ESPC, a federal agency agrees to pay an amount not to exceed the current annual utility costs for a fixed period of time (up to 25 years) to an energy service company, which finances and installs facility improvements. In return, the contractor assumes the performance risks of energy conservation measures during the contract period and guarantees that the improvements will generate energy cost savings sufficient to pay for the improvements over the length of the contract, as well as providing the energy services company a return on the investment. After the end of the contract, the agency benefits from reduced energy costs as a result of the improvements. A UESC is a contract between a federal agency and the serving utility. Under a UESC, the utility arranges financing for efficiency projects and renewable energy projects, and the costs are repaid by the agency over the length of the contract. When improvements yield savings in excess of the guarantee, the agency benefits and depending upon the contract, the ESCO may also benefit. Use of ESPCs and UESCs in Federal Energy Management

The Department of Energy's Federal Energy Management Program (FEMP) is the lead organization responsible for providing implementing rules and policies for ESPCs. FEMP also provides training, guidance, and technical assistance to assist federal agencies in achieving energy goals including cost or use reduction or renewable use, greenhouse gas reduction goals, and water conservation goals as directed through legislation or executive orders. Federal agencies are required to document progress toward energy saving goals through annual reporting to the President and Congress; FEMP compiles these data annually. ESPCs and UESCs apply to energy use at federal facilities—not to vehicles and equipment. Investments in Energy Efficiency and Renewable Energy

As part of annual reporting, FEMP compiles data on federal government investment in energy efficiency and renewable energy through ESPCs, UESCs, and direct obligations. As shown in Table 1 , investment in federal facility energy efficiency improvements during that period totaled nearly $21.7 billion (in constant 2017 dollars): direct obligations funded $14.5 billion, ESPCs funded $5.7 billion, and UESCs funded $1.5 billion. A separate GAO report focused on alternatively financed energy projects for the Department of Defense. CRS was unable to determine the cost savings achieved solely from ESPCs and UESCs across the federal government. However, FEMP provides data that may provide insight into broad trends in federal energy water consumption. Between FY2003 and FY2017, the annual total site-delivered energy use declined by more than 19% (a savings of 217 trillion British thermal units). Renewable electricity use (as a share of electricity consumption) and water savings (in gallons used) have been tracked and reported by FEMP over a shorter time period. Renewable electricity use has increased across the federal government from 3% of total electricity consumption (1,909 GWh) in FY2008 to nearly 11% (5,844 GWh) in FY2017. In addition to comprehensive energy and water data, annual data from selected energy and water conservation measures are available. GAO Reports on Energy Projects and Alternative Financing

The Government Accountability Office has examined alternative financing—including ESPCs and UESCs—for federal energy projects. Projects financed through ESPCs and UESCs were also included in a study conducted by GAO in 2016 to examine how the Department of Defense (DOD) determines the costs and benefits of a sample of renewable energy projects. In the 2016 report, GAO noted that DOD did not emphasize the use of some alternative financing mechanisms for renewable projects, including ESPCs and UESCs. According to DOD, these mechanisms may not realize federal tax benefits under requirements set by the Office of Management and Budget: 
Access to incentives. According to Army officials, the Army has structured ESPCs to allow private developers to capture federal incentives by owning the embedded renewable energy projects, but it stopped doing so after a 2012 Office of Management and Budget memorandum required government ownership of such renewable energy projects to avoid obligating the full cost of the project when the contract is signed. In 2017, GAO examined alternative financing for energy projects for DOD more broadly—the majority of these were financed using ESPCs or UESCs. Congressional Budget Office Scoring Policies

Congressional Budget Office (CBO) scoring policies for ESPCs and UESCs have changed over time. This coincided with the expiration of the BEA at the end of FY2002. In the 115 th Congress, the 2018 House Budget Resolution ( H.Con.Res. 71 ) directed CBO to change how ESPCs and UESCs are scored. Section 5109 directs CBO to estimate provisions for ESPCs and UESCs on a net present value basis with payments covering the period of the contract (up to 25 years). The scoring would classify the estimated net present value of the budget authority and any outlays as direct spending, and according to the accompanying report, "it would not change the fact that Federal agencies would continue to cover contractual payments through annual, discretionary appropriations." 71 ] that prohibits any savings estimated by CBO to be considered as an offset for purposes of budget enforcement applies only to legislation considered by the House of Representatives, not the Senate." Possible Issues for Congress

Both the executive branch and Congress have promoted energy efficiency within federal agencies. Since that time, ESPCs and UESCs have continued to be used to implement energy and water efficiency improvements at federal facilities. Congress has revised the policies enabling ESPCs and UESCs over time, and Congress may wish to assess additional changes going forward. However, CBO considers savings to offset budget enforcement differently for the House of Representatives and the Senate. GAO has recommended to federal agencies that they revise guidance for future projects to include additional information in measurement and verification reports for ESPCs and UESCs to provide better understanding of performance and the extent to which the financing mechanisms are achieving expected savings. The bills would also expand annual reporting requirements to the President and to Congress by requiring additional information on ESPCs and UESCs including
the investment value of the contracts, guaranteed energy savings compared to the actual energy savings for the previous year, plan for entering into contracts for the coming year, and an explanation for any previously submitted contracting plans that were not implemented. In the 115 th Congress, the "Energy and Natural Resources Act of 2017" ( S. 1460 ), introduced in June 2017, would also amend NECPA to facilitate the use of ESPCs and UESCs. The bill would clarify that the ESPCs and UESCs are to be considered by the Office of Management and Budget as best practices for meeting performance goals for energy-efficient and energy-saving information technology.
Many in Congress have expressed a continuing interest in improving energy efficiency and increasing the use of renewable energy. To facilitate investment in energy efficiency and renewable energy at federal facilities, Congress established alternative financing methods that utilize private sector resources and capabilities. Two such alternative financing methods are energy savings performance contracts (ESPCs) and utility energy service contracts (UESCs).
ESPCs and UESCs are contracts between a federal agency and another party—an energy service company or a utility, depending upon the contract type. In general, a federal agency agrees to pay an amount not to exceed the current annual utility costs for a fixed period of time to the company or utility, which finances and installs the energy-efficiency and renewable energy projects. The costs are repaid by the agency over the length of the contract. After the end of the contract, the agency benefits from any reduced energy costs as a result of the improvements.
The Department of Energy's Federal Energy Management Program (FEMP) is the lead organization responsible for providing implementing rules and policies for ESPCs. FEMP also provides training, guidance, and technical assistance to aid federal agencies in achieving energy and water goals. Federal agencies are required to document progress toward energy-saving goals through annual reporting to the President and Congress.
FEMP compiles agency data annually. Between FY2005 and FY2017, investment in federal facility energy efficiency improvements totaled nearly $21.7 billion (in constant 2017 dollars): direct obligations funded $14.5 billion, ESPCs funded $5.7 billion, and UESCs funded $1.5 billion. A lack of consistency in reporting across agencies for projects makes it challenging to document the cost savings achieved solely from ESPCs or UESCs. The available data may provide insight into broad trends in federal energy and water consumption. Over available reporting time periods, total site-delivered energy use has declined, renewable electricity use has increased as a percentage of total electricity consumption, and water use has declined.
The Government Accountability Office (GAO) has examined alternative financing for federal energy projects, including ESPCs and UESCs. In a 2016 study, GAO reported that the Department of Defense had identified challenges in using ESPCs and UESCs for renewable energy projects, as such financing mechanisms may not realize the federal tax benefits under requirements set by the Office of Management and Budget (OMB). Prior to 2012, the Army had structured ESPCs to allow private developers to capture federal incentives by owning renewable energy projects. The Army stopped doing so after a 2012 OMB memorandum required government ownership of such renewable energy projects to avoid obligating the full cost of the project when the contract is signed. A 2017 study by GAO examined energy projects for DOD more broadly and found that the majority of these were financed using ESPCs or UESCs.
Congressional Budget Office (CBO) scoring policies for ESPCs and UESCs have changed over time. The 2018 House Budget Resolution (H.Con.Res. 71) directed CBO to score ESPCs and UESCs on a net present value basis with payments covering the period of the contract. The estimated net present value of the budget authority and any outlays would be classified as direct spending; it would not change the fact that federal agencies would continue to cover contractual payments through annual, discretionary appropriations. H.Con.Res. 71 also prohibited any savings estimated by CBO to be considered as an offset for purposes of budget enforcement. This prohibition applies to budget enforcement in the House of Representatives; CBO considers estimated savings to offset budget enforcement differently for the House of Representatives and the Senate.
Congress has revised the policies enabling ESPCs and UESCs over time, and Congress may address additional changes going forward. Issues for possible consideration include reporting requirements, definitions of terminology including federal building and energy savings, and whether to expand the applicability of ESPCs and UESCs.
Many in Congress have expressed a continuing interest in improving energy efficiency and increasing the use of renewable energy. To facilitate investment in energy efficiency and renewable energy at federal facilities, Congress established alternative financing methods that utilize private sector resources and capabilities. Two such alternative financing methods are energy savings performance contracts (ESPCs) and utility energy service contracts (UESCs).
ESPCs and UESCs are contracts between a federal agency and another party—an energy service company or a utility, depending upon the contract type. In general, a federal agency agrees to pay an amount not to exceed the current annual utility costs for a fixed period of time to the company or utility, which finances and installs the energy-efficiency and renewable energy projects. The costs are repaid by the agency over the length of the contract. After the end of the contract, the agency benefits from any reduced energy costs as a result of the improvements.
The Department of Energy's Federal Energy Management Program (FEMP) is the lead organization responsible for providing implementing rules and policies for ESPCs. FEMP also provides training, guidance, and technical assistance to aid federal agencies in achieving energy and water goals. Federal agencies are required to document progress toward energy-saving goals through annual reporting to the President and Congress.
FEMP compiles agency data annually. Between FY2005 and FY2017, investment in federal facility energy efficiency improvements totaled nearly $21.7 billion (in constant 2017 dollars): direct obligations funded $14.5 billion, ESPCs funded $5.7 billion, and UESCs funded $1.5 billion. A lack of consistency in reporting across agencies for projects makes it challenging to document the cost savings achieved solely from ESPCs or UESCs. The available data may provide insight into broad trends in federal energy and water consumption. Over available reporting time periods, total site-delivered energy use has declined, renewable electricity use has increased as a percentage of total electricity consumption, and water use has declined.
The Government Accountability Office (GAO) has examined alternative financing for federal energy projects, including ESPCs and UESCs. In a 2016 study, GAO reported that the Department of Defense had identified challenges in using ESPCs and UESCs for renewable energy projects, as such financing mechanisms may not realize the federal tax benefits under requirements set by the Office of Management and Budget (OMB). Prior to 2012, the Army had structured ESPCs to allow private developers to capture federal incentives by owning renewable energy projects. The Army stopped doing so after a 2012 OMB memorandum required government ownership of such renewable energy projects to avoid obligating the full cost of the project when the contract is signed. A 2017 study by GAO examined energy projects for DOD more broadly and found that the majority of these were financed using ESPCs or UESCs.
Congressional Budget Office (CBO) scoring policies for ESPCs and UESCs have changed over time. The 2018 House Budget Resolution (H.Con.Res. 71) directed CBO to score ESPCs and UESCs on a net present value basis with payments covering the period of the contract. The estimated net present value of the budget authority and any outlays would be classified as direct spending; it would not change the fact that federal agencies would continue to cover contractual payments through annual, discretionary appropriations. H.Con.Res. 71 also prohibited any savings estimated by CBO to be considered as an offset for purposes of budget enforcement. This prohibition applies to budget enforcement in the House of Representatives; CBO considers estimated savings to offset budget enforcement differently for the House of Representatives and the Senate.
Congress has revised the policies enabling ESPCs and UESCs over time, and Congress may address additional changes going forward. Issues for possible consideration include reporting requirements, definitions of terminology including federal building and energy savings, and whether to expand the applicability of ESPCs and UESCs.