CPP currently has eight electricity-powered chillers to produce chilled  water. AOC Has Implemented Many Measures to Manage Energy-Related Costs and Has Opportunities to Further Manage These Costs

Since 2008, AOC has implemented many measures to manage the  energy-related costs of the buildings served by CPP. AOC has additional opportunities to further manage its energy costs. Also, in fiscal year 2014, AOC installed new chillers at CPP. As described below, AOC  implemented some measures and intends to implement others as  resources allow. AOC also hired contractors to improve the energy efficiency of the Capitol  and House and Senate office buildings through conservation measures. These include upgrades to building lighting, plumbing, and mechanical  systems throughout the complex. AOC Decided to Pursue a Cogeneration System Based on Partial Updates of Its 2009 Long-term Plan but Did Not Follow Key Leading Federal Capital-Planning Practices

Based on a 2009 long-term plan and subsequent partial updates, AOC  decided that it should install a cogeneration system to replace aging  boilers, meet future demand for steam, and produce electricity. The draft July 2014 partial update said the electricity generated by the  cogeneration system would only be used within CPP and would not serve  the rest of the complex or be sold to a utility; CPP does not have the  infrastructure to provide electricity to the complex. AOC Officials Said Appropriations Would Not Likely Be Available and Intend to Finance the Cogeneration Project

AOC intends to procure the cogeneration system using a utility energy  services contract (UESC)—an agreement, similar to ESPCs described  previously, in which, in this case, a utility arranges financing to cover the  upfront costs of an energy project that a federal agency then repays over  the contract term from energy cost savings achieved by the project. However, AOC officials said that since upfront  appropriations would likely not be available to procure the cogeneration  system, they had decided to pursue the project using a UESC. However, by not fully updating its 2009  long-term plan, AOC has continued to pursue a cogeneration system  without up-to-date information on a variety of factors, such as the  changes in the natural gas markets and the realized impacts of AOC’s  demand reduction efforts, that could change the relative merits of the full  range of alternatives available to AOC for meeting its long-term needs. As  a result, AOC may not have identified the most cost-effective means to  heat and cool the complex. For example, the December 2014 draft plan recommends a  single turbine system that provides electricity to CPP and not the complex  The 2014 plans also did not fully take into account AOC’s efforts to  reduce the demand for steam through conservation measures in the  buildings served by CPP–which may include operational changes or  smaller capital investments–on future steam demand. AOC  officials said they instead relied on other sources of federal guidance,  such as NIST’s handbook on determining the life cycle costs of energy  conservation projects or DOE’s guidance for using UESCs to finance  such projects, an approach that led them to believe that it was  unnecessary to fully update the long-term energy plan before executing a  contract for the cogeneration project since its intent is to replace aging  boilers. Thus, the guidance AOC officials said they followed does not  substitute for first completing an up-to-date capital plan. Conclusions

AOC has implemented many measures to manage the costs of heating  and cooling the Capitol Complex and has achieved measurable results. Related to this, AOC’s planning to evaluate the relative merits of the  currently proposed cogeneration project has not followed key leading  practices identified in OMB, GAO, and other relevant capital-planning  guidance. These include not (1) fully updating the agency’s 2009 long- term energy plan to reflect changes in energy costs and demand that  occurred since the plan was issued; (2) fully assessing long-term energy  needs or the performance gap the project would address in light of  changes in key variables that could affect its relative merits; (3) identifying  a full range of alternatives for meeting future needs, including non-capital  or conservation measures; (4) conducting valid sensitivity or uncertainty  analyses; or (5) engaging an independent panel of experts to review  AOC’s updates of its long-term plan. AOC officials said they were  unaware of some of these leading practices and therefore did not follow  them. Recommendations for Agency Action

GAO is making two recommendations to the Architect of the Capitol. In  particular, this report examines: (1) measures AOC implemented since  GAO’s 2008 report to manage the energy-related costs of the buildings  served by CPP and opportunities, if any, to further manage these costs,  and (2) how AOC decided to procure a cogeneration system and the  extent to which AOC followed leading capital-planning practices. To identify measures AOC could potentially implement to further manage  its energy-related costs, we reviewed AOC reports and other documents,  such as energy audits of CPP’s steam and chilled water systems. However, given that many factors have changed that could potentially lead AOC to  reach a different, more cost-effective solution to meet any future performance gaps,  we continue to recommend that AOC fully update its long-term energy plan while  following key leading capital-planning practices and seek an independent review of  the plan and provide the results of this review to Congress. However, AOC did not update the  key assumptions in the context of a full update of its 2009 plan, which assessed a  broad range of options for meeting the complex’s heating and cooling needs.
Why GAO Did This Study

AOC's CPP heats and cools 25 buildings in the complex, including the Capitol and House and Senate office buildings. CPP does not have the infrastructure to distribute electricity to the buildings it serves. CPP buys fossil fuels (mostly natural gas) to run boilers that make steam and buys electricity to run chillers that make chilled water. CPP distributes the steam and chilled water for heating and cooling using a network of tunnels. AOC seeks to install a ‘cogeneration' system that would produce steam and electricity.
The House of Representatives report accompanying the Legislative Branch Appropriations Bill, 2014 included a provision for GAO to analyze potential cost savings at CPP. GAO analyzed (1) measures AOC implemented since 2008 to manage the energy-related costs of the complex and opportunities, if any, to further manage these costs, and (2) how AOC decided to procure a cogeneration system and the extent to which AOC followed leading capital- planning practices. GAO analyzed AOC budgets and plans; reviewed federal guidance on capital planning; and interviewed AOC staff and other stakeholders, including other heating and cooling plant operators.

What GAO Found

The Architect of the Capitol (AOC) implemented many measures since 2008 to manage the energy-related costs of the Capitol Complex (the complex) and has opportunities to further manage these costs. AOC updated some of the Capitol Power Plant's (CPP's) production and distribution systems to reduce energy use and increase efficiency. AOC also implemented measures to reduce energy consumption in the complex, such as conservation projects improving lighting and air-handling systems that yielded monetary savings. AOC has opportunities to implement other conservation measures in the complex. For example, energy audits by contractors identified additional opportunities to implement similar measures or other upgrades to lighting, mechanical, and plumbing systems to achieve additional energy and monetary savings. However, AOC officials said they have not implemented these measures but intend to act as resources become available.
AOC decided to procure a cogeneration system to produce electricity and steam based on a 2009 long-term plan and subsequent partial updates but did not follow key leading federal capital-planning practices. In 2009, AOC issued a long-term energy plan that stated it should pursue cogeneration to meet future steam demand and provide a new source of electricity for its chillers, enabling the agency to decrease electricity purchases. Partial updates to the plan in 2014 sought to justify the choice of a cogeneration system. However, AOC's planning did not follow key leading capital-planning practices developed by GAO and the Office of Management and Budget (OMB). First, though called for by leading federal planning practices, AOC has not fully updated the 2009 long-term plan, although changes in key planning assumptions, such as on fuel prices and the complex's demand for energy, have occurred. Instead, AOC intends to make a decision on implementing an $85 million cogeneration system before updating its long-term plan later in fiscal year 2015. Second, the 2014 partial updates to its 2009 plan that AOC has used to justify the project did not include complete information on the need or problem that the project would address. Third, the 2014 updates did not identify a full range of options for cost-effectively meeting projected future needs, including non-capital measures such as conservation. Fourth, the updates did not have valid sensitivity or uncertainty analyses to test key assumptions about whether the system would achieve sufficient savings over time—from decreased electricity purchases—to justify its costs. Related to this, AOC officials said that since upfront appropriations would likely not be available to procure the system, they had decided to use a third party to finance the project, thereby increasing its costs. These officials also said they relied on federal guidance for analyzing and financing energy projects. However, such guidance does not substitute for first completing an up-to-date capital plan. Finally, GAO's prior work has recommended using independent panels of experts to review complex projects such as a cogeneration system, but AOC has not engaged such a panel to review its 2014 updates to its long-term plan. AOC officials said they were unaware of some of these practices and that they needed to sign a contract quickly to avoid the risk of losing construction and air quality permits. Without updating its long-term energy plan and obtaining independent review, AOC may pursue a project that does not cost-effectively meet its needs.

What GAO Recommends

AOC should (1) update its long-term energy plan while following key leading practices, including considering a full range of measures to further manage costs, before committing to major energy projects at CPP, and (2) seek independent review of its plan. AOC disagreed with GAO's recommendations; GAO continues to believe they are valid, as discussed further in this report.