	Introduction

The federal government consumed roughly 57.4 million megawatt-hours (0.1958 quads) of electricity to operate all of its U.S. facilities in FY2007 (the latest information available), making it the single largest U.S. electric consumer. The Department of Defense (DOD) alone consumed more than half, some 29 million megawatt-hours. However, the federal Power Marketing Administrations (PMAs) generate hydropower at more than twice the volume of annual federal power consumption, over 127 million megawatt-hours. EPAct 2005 required federal agencies to reduce energy consumption and improve energy efficiency through increased use of renewable energy. As federal agencies work to meet their renewable energy goals, they encounter a number of options and barriers in contracting with small renewable power generators. This report summarizes the various statutes and regulations authorizing the General Services Administration (GSA), the Department of Defense (DOD), and other federal agencies to enter into contracts for their electric utility services and purchase of renewable generated electricity. Utility services include electricity, natural gas, water, sewerage, thermal energy, chilled water, hot water, and steam. GSA, in turn, has delegated to DOD the authority to enter into utility service contracts on behalf of the military departments. The FAR describes an "area-wide contract" as a "contract entered into between the GSA and a utility service supplier to cover utility service needs of Federal agencies within the franchise territory of the supplier" (the utility's geographically regulated service area). Demand-Side Management

Demand response and load management programs are a form of utility incentive programs. In these programs, utility companies typically provide rate incentives and/or cash payments to their customers in exchange for curtailing their energy demand during peak usage periods. Federal agencies can take advantage of this opportunity through their utility service provider. Utility Energy Service Contracts

Utility energy service contracts (UESCs) enable federal agencies to enter contracts with utilities to implement energy- and water-related improvements at their facilities. Agencies may fund projects with appropriations, or the utility may arrange to finance the project and recover the cost through its billing charge. Energy savings performance contracts (ESPCs) enable federal agencies to install energy efficiency improvements with no upfront capital expenditure, thus eliminating the need for directly appropriating funds for the energy efficiency improvement. 101-508 ) pay-as-you-go (PAYGO) rules. The Energy Independence and Security Act of 2007 ( P.L. EISA also authorized federal agencies to combine appropriated funds with ESCO private financing for ESPCs' improvements. Contracts for Energy for Military Installations

DOD has the unique authority to enter into contracts for up to 30 years for services that provide and operate energy production facilities on military installations, and, in turn, purchase the energy generated from such facilities (in 10 U.S.C. Under the 1978 Public Utilities Regulation Policies Act (PURPA), the Southern California Edison (SCE) must buy the power. PURPA defined a new class of generating facilities that would receive special rate and regulatory treatment. PURPA also required utilities to buy power from QFs within their service territory (with some exceptions) at the utility's "avoided cost" of power production via a state authorized "power purchase" contract—more commonly referred to as a "power purchase agreement." However, state laws and regulations vary on allowing small qualified generators to sell the agreements. States are more likely to permit their use for renewable generated power when the purchaser is a utility, because the utility is responsible for providing firm uninterrupted power to its customers. The 2005 Energy Policy Act (EPAct) directed a study to determine the economic and engineering feasibility of combining wind generated energy with hydropower and a demonstration project that uses wind energy generated by Indian tribes. Contracts for public utility services have terms up to 10 years, funded through annual appropriations. The 1990 Budget Enforcement Act (BEA, P.L.
The federal government purchases roughly 57 million megawatt-hours of electricity annually (based on FY2007 data, the latest information available), making it the single largest U.S. energy consumer. The Department of Defense (DOD) alone consumes over 29 million megawatt-hours. The federal Power Marketing Administrations (PMAs) sell electricity at more than twice the volume of federal power purchases, over 127 million megawatt-hours of hydropower annually, and are projected to produce wind-generated energy far in excess of the 2005 Energy Policy Act (EPAct) mandates for increasing federal use of renewable energy.
Various statutes and regulations authorize federal agencies to enter into contracts for their utility services and designate the General Services Administration (GSA) as the lead federal contracting agency. Utility services include electricity, natural gas, water, sewerage, thermal energy, chilled water, hot water, and steam. GSA may enter into "area-wide contracts" for up to 10 years with electric utility service suppliers to cover the needs of federal agencies within the supplier's franchise territory. GSA has delegated certain authority to DOD to enter into utility service contracts on behalf of the military departments, and delegated similar authority to other federal agencies. DOD can also enter into contracts for up to 30 years for services to operate energy generating facilities on military installations. To meet the EPAct renewable energy goals, multi-year "power purchase agreements" (upwards of 10 to 20 years) are proposed with small and merchant renewable power generators. The agreements would fully commit funds up front, contrary to the pay-as-you-go rules of the 1990 Budget Enforcement Act.
In addition to utility service contracts, federal agencies can also take advantage of utility sponsored incentive programs for reducing energy demand. Demand response and load management programs provide rate incentives and/or cash payments to utility customers in exchange for curtailing their energy demand during peak usage periods. Utility energy service contracts (UESCs) enable federal agencies to enter into contracts with utilities to implement energy and water related improvements at their facilities. Agencies may also fund energy-savings improvement projects with appropriations, or the utility may arrange to finance the project's capital cost up front and recover the investment through its rate charge. Energy saving performance contracts (ESPCs) enable federal agencies to install energy efficiency improvements with no upfront capital costs. The 2007 Energy Independence and Security Act (EISA) authorized federal agencies to combine appropriated funds and energy service companies' (ESCO) private financing for ESPCs. The authority expands agencies' opportunities to install solar energy generation.
The 1978 Public Utilities Regulation Policies Act (PURPA) defined a new class of small renewable energy generators that produce less than 80 megawatts and required electric utilities to purchase the electricity generated at the utility's "avoided cost" of power production via a state-authorized "power purchase" contract (also referred to as a power purchase agreement). However, state laws and regulations vary on the use of the contracts. States are more likely to permit the contracts when the purchaser is a utility, because the utility is responsible for providing firm uninterrupted power to the customer. Four PMAs market and distribute hydropower in 34 states to public utility districts and cooperatives at cost-based rates. EPAct directed the PMAs to study the economic and engineering feasibility of combining wind-generated energy with hydropower and to conduct a demonstration project that uses wind energy generated by Indian tribes. Short of amending federal contract authority, federal agencies may have recourse to meet EPAct mandates by purchasing power through the PMAs.