How to Save Energy

September 24, 1996

THE DAILY FED

How to Save Energy

Performance contracts provide incentives to service companies to find ways to save agencies money by installing and operating energy-efficient equipment and training government personnel in maintaining the equipment and measuring the energy savings.

In return, the contractor receives a share of the savings resulting from its efforts until the contract expires. After that time, the government keeps all of the savings and the equipment. (For a graphical representation of how the process works, click here.)

The Energy Policy Act of 1992 set a goal of lowering government consumption of energy by 20 percent below 1985 levels by the year 2000. A March 1994 executive order incrased the goal to a 30 percent reduction by 2005. The energy act directed agencies to use performance contracting because it enables them to implement conservation measures at no capital cost to the government.

The GAO report said the National Park Service was the first civilian agency to sign a performance contract for energy conservation. The contract awarded $2.3 million to CES/Way International, Inc., of Houston, Texas, for energy saving improvements at the Statue of Liberty and Ellis Island. Savings resulting from the improvements will be split between CES/Way and the National Park Service for the 15-year lifespan of the contract. In addition, the contractor will receive a rebate of $1.1 million from the local utility company. Once the 15-year period is over, the National Park Service will assume all cost savings and will acquire the energy saving equipment CES/Way installed, now valued at $1.2 million.

The Bureau of Prisons awarded a contract earlier this year for a solar hot water system at an Arizona prison. And the State Department awarded a performance contract this summer for its Washington headquarters.