[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
GREEN BUILDINGS--AN EVALUATION OF
ENERGY SAVINGS PERFORMANCE CONTRACTS
=======================================================================
JOINT HEARING
BEFORE THE
SUBCOMMITTEE ON OVERSIGHT &
SUBCOMMITTEE ON ENERGY
COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY
HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
FIRST SESSION
__________
THURSDAY, JUNE 27, 2013
__________
Serial No. 113-39
__________
Printed for the use of the Committee on Science, Space, and Technology
Available via the World Wide Web: http://science.house.gov
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COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY
HON. LAMAR S. SMITH, Texas, Chair
DANA ROHRABACHER, California EDDIE BERNICE JOHNSON, Texas
RALPH M. HALL, Texas ZOE LOFGREN, California
F. JAMES SENSENBRENNER, JR., DANIEL LIPINSKI, Illinois
Wisconsin DONNA F. EDWARDS, Maryland
FRANK D. LUCAS, Oklahoma FREDERICA S. WILSON, Florida
RANDY NEUGEBAUER, Texas SUZANNE BONAMICI, Oregon
MICHAEL T. McCAUL, Texas ERIC SWALWELL, California
PAUL C. BROUN, Georgia DAN MAFFEI, New York
STEVEN M. PALAZZO, Mississippi ALAN GRAYSON, Florida
MO BROOKS, Alabama JOSEPH KENNEDY III, Massachusetts
RANDY HULTGREN, Illinois SCOTT PETERS, California
LARRY BUCSHON, Indiana DEREK KILMER, Washington
STEVE STOCKMAN, Texas AMI BERA, California
BILL POSEY, Florida ELIZABETH ESTY, Connecticut
CYNTHIA LUMMIS, Wyoming MARC VEASEY, Texas
DAVID SCHWEIKERT, Arizona JULIA BROWNLEY, California
THOMAS MASSIE, Kentucky MARK TAKANO, California
KEVIN CRAMER, North Dakota ROBIN KELLY, Illinois
JIM BRIDENSTINE, Oklahoma
RANDY WEBER, Texas
CHRIS STEWART, Utah
VACANCY
------
Subcommittee on Oversight
HON. PAUL C. BROUN, Georgia, Chair
F. JAMES SENSENBRENNER, JR., DAN MAFFEI, New York
Wisconsin ERIC SWALWELL, California
BILL POSEY, Florida SCOTT PETERS, California
DAVID SCHWEIKERT, Arizona EDDIE BERNICE JOHNSON, Texas
KEVIN CRAMER, North Dakota
LAMAR S. SMITH, Texas
------
Subcommittee on Energy
HON. CYNTHIA LUMMIS, Wyoming, Chair
RALPH M. HALL, Texas ERIC SWALWELL, California
FRANK D. LUCAS, Oklahoma ALAN GRAYSON, Florida
RANDY NEUGEBAUER, Texas JOSEPH KENNEDY III, Massachusetts
MICHAEL T. McCAUL, Texas MARC VEASEY, Texas
RANDY HULTGREN, Illinois MARK TAKANO, California
THOMAS MASSIE, Kentucky ZOE LOFGREN, California
KEVIN CRAMER, North Dakota DANIEL LIPINSKI, Illinois
RANDY WEBER, Texas EDDIE BERNICE JOHNSON, Texas
LAMAR S. SMITH, Texas
C O N T E N T S
Thursday, June 27, 2013
Page
Witness List..................................................... 2
Hearing Charter.................................................. 3
Opening Statements
Statement by Representative Paul C. Broun, Chairman, Subcommittee
on Oversight, Committee on Science, Space, and Technology, U.S.
House of Representatives....................................... 8
Written Statement............................................ 9
Statement by Representative Dan Maffei, Ranking Minority Member,
Subcommittee on Oversight, Committee on Science, Space, and
Technology, U.S. House of Representatives...................... 10
Written Statement............................................ 10
Statement by Representative Cynthia Lummis, Chairwoman,
Subcommittee on Energy, Committee on Science, Space, and
Technology, U.S. House of Representatives...................... 11
Written Statement............................................ 12
Statement by Representative Eric Swalwell, Ranking Minority
Member, Subcommittee on Energy, Committee on Science, Space,
and Technology, U.S. House of Representatives.................. 13
Written Statement............................................ 14
Statement by Representative Eddie Bernice Johnson, Ranking
Member, Committee on Science, Space, and Technology, U.S. House
of Representatives............................................. 15
Written Statement............................................ 15
Witnesses:
Dr. Kathleen Hogan, Deputy Assistant Secretary for Energy
Efficiency, U.S. Department of Energy
Oral Statement............................................... 17
Written Statement............................................ 19
Dr. Woodrow Whitlow, Jr., Associate Administrator, Mission
Support Directorate, National Aeronautics and Space
Administration
Oral Statement............................................... 27
Written Statement............................................ 29
Ms. Jennifer Schafer, Executive Director, Federal Performance
Contracting Coalition
Oral Statement............................................... 34
Written Statement............................................ 36
Mr. Ron King, President Advisor, National Insulation Association
Oral Statement............................................... 42
Written Statement............................................ 44
Discussion....................................................... 60
Appendix I: Answers to Post-Hearing Questions
Dr. Kathleen Hogan, Deputy Assistant Secretary for Energy
Efficiency, U.S. Department of Energy.......................... 78
Dr. Woodrow Whitlow, Jr., Associate Administrator, Mission
Support Directorate, National Aeronautics and Space
Administration................................................. 111
Ms. Jennifer Schafer, Executive Director, Federal Performance
Contracting Coalition.......................................... 115
Mr. Ron King, President Advisor, National Insulation Association. 122
Appendix II: Additional Material for the Record
Letter submitted by Representative Eric Swalwell, Ranking
Minority Member, Subcommittee on Energy, Committee on Science,
Space, and Technology, U.S. House of Representatives........... 130
GREEN BUILDINGS--AN EVALUATION OF
ENERGY SAVINGS PERFORMANCE CONTRACTS
----------
THURSDAY, JUNE 27, 2013
House of Representatives,
Subcommittee on Oversight &
Subcommittee on Energy
Committee on Science, Space, and Technology,
Washington, D.C.
The Subcommittees met, pursuant to call, at 10:04 a.m., in
Room 2318 of the Rayburn House Office Building, Hon. Paul Broun
[Chairman of the Subcommittee on Oversight] presiding.
[GRAPHIC] [TIFF OMITTED]
Chairman Broun. Good morning. This joint hearing of the
Subcommittee on Oversight and the Subcommittee on Energy will
come to order.
Good morning and welcome to today's joint hearing. In front
of you are packets containing the written testimony, the
biographies, and truth-in-testimony disclosures for today's
witnesses. Before we get started, since this is a joint hearing
involving two Subcommittees, I want to explain how we will
operate procedurally so all Members will understand how the
question-and-answer period will be handled. As always, we will
alternate between the majority and the minority Members. We
will recognize those Members present at the gavel in order of
seniority on the full Committee, and those coming in after the
gavel will be recognized in the order of their arrival.
I now recognize myself for five minutes for an opening
statement.
Today's hearing is titled, ``Green Buildings--An Evaluation
of Energy Savings Performance Contracts.'' Energy Savings
Performance Contracts, also known as ESPCs, are a unique
mechanism by which the private sector pays for energy
conservation measures at Federal facilities, and are reimbursed
for their work out of the resulting savings in utility cost.
Each contract creates jobs in the private sector while the
Federal Government benefits from valuable upgrades without
putting taxpayers on the line.
That last part is what makes this program particularly
appealing, because during these constrained economic times, it
is imperative that we manage our limited funds as best we can
and be creative about accomplishing our goals while maximizing
our strained resources.
However, as I have realized in my experience as a Member of
Congress, when it comes to government programs, no matter how
effective and efficient, they can all be improved. A couple of
reports on ESPCs have raised some legitimate concerns about the
complexity of these contracts. A 2005 GAO report, the most
recent one on the subject, questioned whether agencies were
getting the best deal possible from energy service companies in
part based on the limited number of financiers available to the
private sector for such projects.
A NASA IG report from earlier this year raised specific
questions about an early contract involving Johnson Space
Center. The report questioned if NASA employees were
sufficiently trained in handling ESPCs because the Johnson
contract did not require annual reports to verify the energy
conservation measures were generating savings.
I realize the GAO report is dated and that the NASA IG
report focused on an early contract, but they raise important
questions. The most important features of these contracts are
their flexibility in not relying on taxpayer dollars for the
services provided and the ability to categorically identify and
measure savings. To be assured of the success and effectiveness
of ESPCs, we need meaningful transparency, accountability, and
oversight during the length of all contract terms.
Additionally, despite a 2011 memo from the President
encouraging agencies to engage in $2 billion worth of
performance-based contracting by the end of this year, Federal
agencies continue to encounter challenges in their efforts to
``green'' their buildings. The White House Council on
Environmental Quality and the Office of Management and Budget
recently released their annual agency energy and sustainability
scorecards. Ironically, the green buildings category was
notably problematic because out of 19 agencies that provided
timely information, 10 scored in the red and yellow categories,
while 5 others could not even be scored.
Perhaps instead of continuing to announce new broad and
sweeping policies related to global warming, the President
could focus on his current costly regulations that are already
in the books. Perhaps instead of bypassing Congress to
implement a plan by Executive Order that launches a ``war on
coal''--as well as a war on jobs--this Administration could
work with Congress on an all-of-the-above energy approach that
includes coal, energy efficiency, and everything in between.
While my Democratic colleagues and I don't always see eye-
to-eye on the issues that we review in this hearing room, I do
believe we agree on the value and benefit of ESPCs, and I look
forward to hearing from our witnesses on how we can improve the
program.
[The prepared statement of Mr. Broun follows:]
Prepared Statement of Representative Paul C. Broun, Chairman,
Subcommittee on Oversight
Today's hearing is titled ``Green Buildings--An Evaluation of
Energy Savings Performance Contracts.''
Energy Savings Performance Contracts, also known as ESPCs, are a
unique mechanism by which the private sector pays for energy
conservation measures at federal facilities, and are reimbursed for
their work out of the resulting savings in utility costs. Each contract
creates jobs in the private sector while the federal government
benefits from valuable upgrades without putting taxpayers on the line.
That last part is what makes the program particularly appealing,
because during these constrained economic times, it is imperative we
manage our limited funds as best we can, and be creative about
accomplishing our goals while maximizing our strained resources.
However, as I have realized in my experience as a Member of
Congress, when it comes to government programs, no matter how effective
and efficient, they can all be improved. A couple of reports on ESPCs
have raised some legitimate concerns about the complexity of these
contracts. A 2005 GAO report, the most recent one on the subject,
questioned whether agencies were getting the best deal possible from
energy service companies in part based on the limited number of
financiers available to the private sector for such projects. A NASA IG
report from earlier this year raised specific concerns about an early
contract involving Johnson Space Center. The report questioned if NASA
employees were sufficiently trained in handling ESPCs because the
Johnson contract did not require annual reports to verify that the
energy conservation measures were generating savings.
I realize the GAO report is dated and that the NASA IG report
focused on an early contract, but they raise important questions. The
most important features of these contracts are their flexibility in not
relying on taxpayer dollars for the services provided, and the ability
to categorically identify and measure savings. To be assured of the
success and effectiveness of ESPCs, we need meaningful transparency,
accountability and oversight during the length of all contract terms.
Additionally, despite a 2011 memo from the President encouraging
agencies to engage in $2 billion worth of performance-based contracting
by the end of this year, federal agencies continue to encounter
challenges in their efforts to ``green'' their buildings. The White
House Council on Environmental Quality and the Office of Management and
Budget recently released their annual agency energy and sustainability
scorecards. Ironically, the green buildings category was notably
problematic because out of 19 agencies that provided timely
information, ten scored in the red and yellow categories, while five
others could not even be scored.
Perhaps instead of continuing to announce new broad and sweeping
policies related to global warming, the President could focus on his
current costly regulations already in the books. Perhaps instead of
bypassing Congress to implement a plan by executive order that launches
a ``war on coal''--as well as a war on jobs--this Administration could
work with Congress on an ``all of the above'' energy approach that
includes coal, energy efficiency, and everything in-between.
While my Democratic colleagues and I don't always see eye-to-eye on
the issues we review in this hearing room, I do believe we agree on the
value and benefit of ESPCs, and I look forward to hearing from our
witnesses on how we can help improve the program.
Chairman Broun. Now, I will recognize the Ranking Member,
my good friend and gentleman from New York, Mr. Maffei, for his
opening statement.
Mr. Maffei. I thank you, Mr. Chair. And I do want to thank
both you and Chairwoman Lummis for holding this hearing today,
and indeed all of the Members. And we are also honored to be
joined by the distinguished Ranking Member of the full
Committee, Ms. Bernice Johnson--Eddie Bernice Johnson from
Texas. I am always honored to be in the same room with her.
And I do want to concur with the statements of the Chairman
in terms of Energy Savings Performance Contracts. I will submit
my full statement to the record, but these are--at a time when
all Federal agencies are fiscally challenged, these are an idea
worth pursuing. ESPCs are widely seen as a good idea with
potential large savings to the Federal Government and the U.S.
taxpayer.
Like any government program, they need to be properly
managed and carefully overseen. They have been implemented so
far primarily through the Department of Energy's Federal
Emergency--I am sorry--Federal Energy Management Program. And
since 1998, the program has awarded ESPC projects through 25
separate Federal agencies for a total estimated savings of $7.2
billion. And most of these projects have occurred without any
indication of abuse.
However, a recent audit of NASA Energy Savings Contracts by
the NASA Inspector General found that that is not always the
case. And while the NASA IG documented a case of poor
government oversight, I believe if properly managed, Energy
Savings Performance Contracts, our partnership between the
Federal Government and the business community that can well
serve the U.S. taxpayers and help conserve and protect our
natural resources.
So I do look forward to hearing from the witnesses today
about how to properly manage and oversight these contracts that
improve the energy efficiency while reaping potential large
Federal cost savings.
And I do again want to thank the Chairman for holding this
hearing. I do note this is particularly well-timed with the
President's speech on Tuesday. I don't know if you are
coordinating that on purpose. But I do appreciate you doing
this because I do think that these--this is a really good idea
potentially, very--offering very much savings as long as we
execute it correctly, and Congressional oversight is an
important component of that.
I yield back.
[The prepared statement of Mr. Maffei follows:]
Prepared Statement of Representative Dan Maffei, Ranking Minority
Member, Subcommittee on Oversight
Thank you Chairman Broun and Chairwoman Lummis for holding this
hearing today.
Energy Savings Performance Contracts or E-S-P-Cs are contracting
vehicles that have permitted federal agencies to meet energy
efficiency, renewable energy, water conservation and emissions
reduction goals since they were first established by Congress in 1986.
They allow federal agencies to implement energy efficient projects with
limited up-front costs and significant long-term savings in unique
public-private partnerships.
As part of these arrangements private sector Energy Service
Companies (ESCOs) conduct comprehensive energy audits of federal
facilities and identify long-term energy savings that will pay for the
cost of the project over the term of the contract with the federal
agency. The private contractor is responsible for paying for the
building or facility's modifications up front and once the contract
ends the cost savings accrue to the federal agency.
E-S-P-Cs have been implemented primarily through the Department of
Energy's Federal Energy Management Program (FEMP) and since 1998 the
program has awarded ESPC projects through 25 separate federal agencies
for a total estimated savings of $7.2 billion dollars.
At a time when all Federal agencies are fiscally constrained I
believe ESPCs are an idea worth pursuing. ESPCs are widely seen as a
good idea with potential large savings to the federal government and
U.S. taxpayer. But like any government program they need to be properly
managed and carefully overseen. A recent audit of NASA's Energy Savings
Contracts by the NASA Inspector General found that is not always the
case.
While the NASA IG documented a case of poor government oversight,
but I believe if properly managed Energy Savings Performance Contracts
(ESPCs) are a win-win for the federal government, American taxpayer and
U.S. business community.
I look forward to hearing from our witnesses today about how to
ensure proper management and oversight of these contracts that improve
federal energy efficiency while reaping potentially large federal cost
savings.
Chairman Broun. Thank you, Mr. Maffei.
The Chair now recognizes the Chairman of the Subcommittee
on Energy, Mrs. Lummis, for her opening statement. You are
recognized.
Mrs. Lummis. Thank you very much, Mr. Chairman. And
welcome, all, to this morning's hearing on Energy Savings
Performance Contracts.
Improved energy efficiency can be a commonsense, market-
oriented solution to lower energy bills. Just as consumers may
choose to purchase more efficient vehicles to save on fuel
costs and homeowners install insulation to reduce energy bills,
the Federal Government should take similar steps when they make
economic sense.
ESPCs are a mechanism to do that. ESPCs provide for a
public-private partnership to increase the energy efficiency of
federally owned facilities. The private sector assumes the
upfront costs while sharing the rewards of reduced energy costs
with American taxpayers. The Federal Government owns or leases
almost 400,000 buildings, so even minor improvements to
individual facilities can accumulate into major savings.
As with all government initiatives, it is important that
ESPCs are implemented with maximum effectiveness. ESPC projects
must be monitored for quality control and energy savings must
be verified. Federal agencies should look at the overall
impacts of a project. I look forward to hearing from the
witnesses today on exploring opportunities and challenges
associated with the use of ESPCs.
While ESPCs represent a mutually beneficial, market-based
approach to reducing energy costs, they contrast sharply with
the regulatory onslaught that President Obama announced on
Tuesday. The President is again pushing an agenda that will
punish hard-working American families. His approach consists of
policies already rejected by Congress in a bipartisan fashion.
He wants expensive energy mandates, job-killing regulations,
and hidden energy taxes.
These increased energy costs and burdensome regulations
will punish our economy, especially for my State of Wyoming; it
is the Nation's second-leading energy producer. Even more
concerning are the direct consequences of higher energy costs
on American households living paycheck to paycheck. And we have
new information that shows how many people are living paycheck
to paycheck. As household energy costs soar, moms' and dads'
economic security slips away. As American families struggle to
pay the Obama electricity tax, they will have less for their
children's college fund, less for emergencies like unexpected
illnesses or job loss, less to provide care for their aging
parents, less for day-to-day expenses just to make ends meet.
And why? So the President can impose more regulation, more
mandates, and more taxes, chasing carbon reductions that are
already occurring under current law.
While increasing the cost of energy might make the most
privileged among us gleeful, you will forgive the millions of
underprivileged Americans and the billions of poor around the
world living in the literal dark for not supporting this
elitist regime.
President Obama's efforts to threaten family energy
security stand in stark contrast to my views and those of my
colleagues on the Republican side of the aisle, pro-family
energy strategies that take full advantage of America's
abundant domestic energy supply, including natural gas, coal,
oil, nuclear, renewables, and energy efficiency, which we will
be discussing here today. I hope the President takes notice. We
don't need carbon policy dictated from the White House. We need
to work together to produce real results.
Thank you for the time, Mr. Chairman. I yield back.
[The prepared statement of Mrs. Lummis follows:]
Prepared Statement of Representative Cynthia Lummis, Chairwoman,
Subcommittee on Energy
Chairman Lummis: Improving energy efficiency can be a commonsense,
market-oriented solution to lower energy bills. Just as consumers may
choose to purchase more energy efficient vehicles to save on fuel
costs, and just as homeowners install insulation to reduce electric
bills, the Federal government should take similar steps when they make
economic sense. Energy Savings Performance Contracts, or ESPCs, are a
mechanism to do just that.
ESPCs provide for a public-private partnership to increase the
energy efficiency of federally owned facilities. In doing so, the
private sector assumes the upfront costs, while sharing the rewards of
reduced energy costs with American taxpayers. The Federal government
owns or leases almost 400,000 buildings, so even minor improvements to
individual facilities can accumulate into major savings.
However, as with all government initiatives, it is important that
ESPCs are implemented with maximum effectiveness. For example, ESPC
projects must be monitored for quality control and energy savings must
be verified. Federal agencies should look at the overall impact of a
project, not solely at the dollar value attached to it. I look forward
to hearing from the witnesses today and exploring opportunities and
challenges associated with the use of ESPCs. It is important to note
that, while ESPCs represent a mutually, beneficial, market-based
approach to reducing energy costs, they contrast sharply with the
heavy-handed regulatory onslaught that President Obama announced on
Tuesday.
The President is again pushing an extremist environmental agenda,
the costs of which will fall most harshly on hard-working American
families. His approach consists of worn policies already rejected by
Congress in a bipartisan fashion, and doubles down on his preferred
approach of expensive energy mandates, job-killing regulations, and
hidden energy taxes.
These increased energy costs and burdensome regulations will
throttle our economy, especially for my state of Wyoming, the nation's
leading energy producer. Even more concerning are the direct
consequences of higher energy costs on American households, living
paycheck to paycheck.
As household energy costs soar, moms and dads will be left grasping
as their economic security slips away. They will have less for their
children's college fund. They will have less for an emergency, such as
an unexpected illness or job loss. They will have less to provide care
for their aging parents. They will have less for day-to-day expenses,
all so the President can have more regulation, more mandates, and more
taxes.
President Obama's policies stand in stark contrast to House
Republicans' ``all of the above'' energy strategy. This strategy takes
full advantage of America's abundant domestic energy supply, including
coal, oil, nuclear, natural gas and energy efficiency, as we will
discuss here today.Thank you for the time and I yield back.
Chairman Broun. Thank you, Mrs. Lummis.
The Chair now recognizes Mr. Swalwell for his opening
statement. You are recognized for five minutes.
Mr. Swalwell. Thank you, Chairman Broun, Chairman Lummis,
also Ranking Member Maffei, and of course our Committee Ranking
Member, Ms. Bernice Johnson. I look forward to having this
hearing today.
Energy Savings Performance Contracts, also known as ESPCs,
are truly a win-win-win tool for the Federal Government and the
U.S. taxpayer. The Federal Government is the largest energy
customer in the country with over 1.2 million buildings that it
is responsible for and hundreds of thousands of acres that it
is also responsible for. ESPCs save money, improve energy
efficiency, and reduce carbon pollution all with little to no
upfront cost required.
As I am sure we will hear about more from this panel today,
ESPCs, as well as Utility Energy Service Contracts, or UESCs,
have a proven track record of saving the government billions of
dollars and hundreds of trillions of BTUs so far.
I know these contracts work well because when I served as a
city councilmember in the City of Dublin, California, I worked
to implement our own local equivalent of an Energy Savings
Performance Contract, and when I served on the Council, we saw
a savings of approximately $100,000 per year over the life of
the lease that we signed.
The City of Livermore, our neighbor in Dublin, also enjoys
an annual savings of $74,000 a year over the life of their
lease. Of course, these improvements will last longer than the
15 years it will take to repay the lease, and in year 16, each
city anticipates a savings of roughly $675,000 a year.
They will also tell you that, in addition to the savings,
the real advantages of the program are the ability to move
forward with these energy-saving improvements with very little
risk and the access it gives communities like Livermore and
Dublin to expertise that they wouldn't be able to otherwise
afford.
One example we should be particularly proud of is the NASA
Ames Research Center project. Thanks to the partnership between
NASA and Pacific Gas and Electric, also known as PG&E, they
were able to craft a plan that will exceed their energy
efficiency and renewable energy goals. The UESC will result in
an annual energy savings of 159 million BTUs, which will
provide an 11 percent reduction in overall energy intensity. In
short, these contracts are not only good for local economic
budgets, for the Federal budget, they are also good to make our
Earth healthier.
PG&E also has a UESC project with the Veterans
Administration in California. This project includes five
separate medical center projects throughout California and over
two million square feet. The project will save 15.7 million
gallons of water, 1.3 million burns of natural gas, 9 gigawatt
hours of electricity, and $1.6 million annually in water and
energy costs. Federal energy programs not only benefit the
government entities that realize the savings from these
improvements, but they also enjoy broad support from private
industry.
To that end, I would like to submit to the record with
permission from the Chair a letter from a number of groups and
businesses, including the Chamber of Commerce and the Business
Roundtable applauding the Obama Administration for their focus
on energy efficiency and encouraging continuation and expansion
of these activities.
I look forward to discussing how this unique authority
might be improved upon and used for a wider range of
applications such as the Federal vehicle fleet at our Nation's
array of energy-hungry data centers. I expect that our national
laboratories--we also have two of those in my Congressional
District, Sandia and Lawrence Livermore--would be able to make
great use of such improvements as well.
Thank you again, Mr. Chair, and I yield back the balance of
my time.
[The prepared statement of Mr. Swalwell follows:]
Prepared Statement of Representative Eric Swalwell, Ranking Minority
Member, Subcommittee on Energy
Thank you Chairman Broun and Chairman Lummis for holding this
hearing today, and I also want to thank the witnesses for being here.
Energy Savings Performance Contracts, or ESPCs, are truly a win-
win-win tool for the federal government and the U.S. taxpayer. The
federal government is the largest energy customer in the country and
ESPCs save money, improve energy efficiency, and reduce carbon
pollution, all with little-to-no upfront cost required. As I'm sure
we'll hear more about from this panel, ESPCs, as well as Utility Energy
Services Contracts, or UESCs, have a proven track record of saving the
federal government billions of dollars and hundreds of trillions of
BTUs so far.
I know these Contracts work because I have seen them work in my own
district. In Dublin, California where I served on the City Council, we
have seen a savings of approximately $100,000 annually over the life of
the lease.
The city of Livermore, California will enjoy an annual savings of
$74,000 a year over the life of their lease. Of course these
improvements will last longer than the 15 years it will take to repay
the lease and in year 16, they anticipate a savings of approximately
$675,000 a year. They will also tell you that, in addition to the
savings, the real advantages of this program are the ability to move
forward with these energy-saving improvements with very little risk and
the access it gives communities like Livermore and Dublin to expertise
that they otherwise couldn't afford.
One example we should be particularly proud of is the NASA Ames
Research Center Project. Thanks to the partnership between NASA and
Pacific Gas & Electric, they were able to craft a plan that will exceed
their energy efficiency and renewable energy goals. This UESC will
result in an annual energy savings of 159,909 million BTUs, which will
provide an 11 percent reduction in overall energy intensity.
PG&E also has a UESC project with the Veterans Administration in
California. This project includes five separate medical centers
throughout California and over two million square feet. The project
will save: 15.7 million gallons of water; 1.3 million therms of natural
gas; 9 gigawatt-hours of electricity; and $1.6 million annually in
water and energy costs.
Federal energy efficiency programs not only benefit the government
entities that realize savings from these improvements, but they enjoy
broad support from private industry. To that end, I would like to
submit for the record a letter from a number of groups and businesses,
including the Chamber of Commerce and the Business Roundtable,
applauding the Obama Administration for their focus on energy
efficiency and encouraging continuation and expansion of these
activities.
I look forward to discussing how this unique authority might be
improved upon and used for a wider range of applications, such as the
federal vehicle fleet or our nation's array of energy hungry data
centers. I expect that our national laboratories, like Lawrence
Livermore and Sandia, would be able to make great use out of such
improvements.
Chairman Broun. Mr. Swalwell, did I hear unanimous consent
request to enter that letter into the record?
Mr. Swalwell. Yes, please, Mr. Chair.
Chairman Broun. We have a unanimous consent request.
Hearing no objections, so ordered.
[The information follows:]
Chairman Broun. I now recognize the Ranking Member of the
full Committee, my dear friend from Texas, Ms. Eddie Bernice
Johnson. Ms. Johnson, you are recognized for five minutes.
Ms. Johnson. Thank you very much, Mr. Chairman.
And I want to thank you for holding this hearing along with
Chairwoman Lummis to evaluate Energy Savings Performance
Contracts. And I want to thank the witnesses as well for being
here today.
Energy Savings Performance Contracts, or the ESPCs, are
tools capable of providing substantial financial and
environmental benefits to both the Federal Government and
companies in the private sector. A study conducted by the Oak
Ridge National Laboratory earlier this year found that the
extra cost savings of an ESPC project to the government are
nearly twice as great as the guaranteed savings.
Investments in energy efficiency improvements can reduce
energy costs, as well as generate much-needed jobs through the
acquisition and development of necessary infrastructure and
equipment. Often, the useful life of the equipment extends well
beyond the performance period of the ESPCs.
Another key component of many ESPCs is the training and
implementation of sustainable energy practices. I look forward
to hearing from these witnesses on how we encourage the use of
ESPCs to help make the Federal Government a leader and a leader
in energy efficient building technology.
And I thank you and I yield back the balance of my time.
[The prepared statement of Ms. Johnson follows:]
Prepared Statement of Representative Eddie Bernice Johnson, Ranking
Member, Committee on Science, Space and Technology
I want to thank Chairman Broun and Chairwoman Lummis for holding
this hearing to evaluate energy savings performance contracts, and I
want to thank the witnesses on the panel as well.
Energy Savings Performance Contracts, or ESPCs, are tools capable
of providing substantial financial and environmental benefits to both
the Federal government and companies in the private sector. A study
conducted by Oak Ridge National Laboratory earlier this year found that
the actual cost savings of an ESPC project to the government are nearly
twice as great as the guaranteed savings.
Investments in energy efficiency improvements can reduce energy
costs as well as generate much needed jobs through the acquisition and
development of necessary infrastructure and equipment. Often the useful
life of the equipment extends well beyond the performance period of the
ESPC. Another key component of many ESPCs is the training and
implementation of sustainable energy practices.
I look forward to hearing from these witnesses on how we can
encourage the use of ESPCs to help make the Federal Government a leader
in energy efficient building technologies.
Chairman Broun. Thank you, Ms. Johnson.
If there are Members who wish to submit additional opening
statements, your statements will be added to the record at this
point.
At this time I would like to introduce our panel of
witnesses. Our first witness is Dr. Kathleen Hogan, Deputy
Assistant Secretary for Energy Efficiency at the U.S.
Department of Energy. Our second witness is Dr. Woodrow
Whitlow, Jr., Associate Administrator of the Mission Support
Directorate of the National Aeronautics and Space
Administration. Our third witness is Ms. Jennifer Schafer,
Executive Director of the Federal Performance Contracting
Coalition. And our final witness is Mr. Ron King, President
Advisor of the National Insulation Association.
As our witnesses should know, spoken testimony is limited
to five minutes each. And if you all would try to constrain
yourself to five minutes. After which the Members of Congress
will have five minutes each to ask questions. Your written
testimony will be included in the record of the hearing.
And it is the practice of the Subcommittee on Oversight to
receive testimony under oath. Now, if you would please stand.
Do any of you all have an objection to taking an oath?
Let the record show that all witnesses indicated by shaking
their head from side to side in the usual manner to indicate
they have no objections.
Now, if you would raise your right hand.
Do you solemnly swear or affirm to tell the whole truth and
nothing but the truth, so help you God?
Okay. You may be seated. Let the record reflect that all
the witnesses participating have taken the oath.
And before I recognize our first witness, let me say that I
am anxious to hear your testimony, Dr. Hogan. I was even more
anxious or eager to hear it 48 hours ago when it was due. I
understand and I hope that you are not directly responsible and
personally responsible for the tardiness in submitting your
testimony to this Committee, but I would like for you to pass
on this message to the appropriate person or persons that it is
inconsiderate to provide testimony 18-1/2 hours before a
hearing when the deadline is 48 hours. And we have seen this
problem before out of your Department.
When testimony is delivered this late, it does not provide
Members of this Committee sufficient time to review and prepare
to engage in an informative discussion with you about the
program. This is not the first time that the Department has
exhibited such irresponsible behavior before this Committee,
and it is a pattern that reflects very poorly on the Department
and the Administration by default.
Further, if you will please confirm that you will
personally ensure this Committee receives its responses to our
questions for the record following the hearing in a timely
manner that is closer to two weeks than two months? Would you
personally guarantee that, Dr. Hogan?
Dr. Hogan. Yes, we are committed to a timely response and
we also do apologize for the delay in the submittal of the
testimony.
Chairman Broun. Okay. Is that an affirmative that we will
get our responses to written questions for the record closer to
two weeks than two months?
Dr. Hogan. Yes, that is.
Chairman Broun. Thank you, ma'am. I appreciate that.
I thank everybody for your indulgence. And I now recognize
Dr. Hogan for five minutes.
TESTIMONY OF DR. KATHLEEN HOGAN,
DEPUTY ASSISTANT SECRETARY FOR
ENERGY EFFICIENCY,
U.S. DEPARTMENT OF ENERGY
Dr. Hogan. Thank you, Chairman Broun, Chairman Lummis,
Ranking Members Maffei and Swalwell, and Members of the
Subcommittee. And thank you for inviting me to testify today on
behalf of the Department of Energy regarding energy efficiency
and performance contracting.
We all know energy efficiency is a large, untapped resource
in the United States that can provide savings for consumers,
improve competitiveness, build jobs, and reduce reliance on
foreign oil. And as the Nation's largest energy consumer, the
Federal Government has a tremendous opportunity to reduce
energy use, save taxpayer money, and lead by example.
Consider, as we have already heard mentioned, that the
Federal Government operates a very large number of buildings
and other structures comprising more than three billion square
feet, operates a fleet of more than 600,000 civilian and non-
tactical military vehicles, and does pay approximately $25
billion for energy each year. This is approximately the same
energy use as the city of Hong Kong or of all of New Zealand.
The size of the government has prompted a number of Federal
energy management and sustainability goals to be established
through statute and Executive Orders, and the preliminary data
from Fiscal Year 2012 indicate that the Federal Government is
making steady progress in achieving its energy, water, and
greenhouse gas savings goals as outlined in my written
testimony.
We also know that performance contracting does play an
important role in helping the Federal Government unlock the
considerable energy efficiency potential embedded in our
Federal buildings as part of meeting these goals. Energy
Savings Performance Contracts, or ESPCs, are one kind of
performance-based contract. They are an arrangement between a
Federal agency and an energy service company, known as an ESCO,
who conducts a comprehensive audit for the Federal facility,
identifies energy and/or water conservation measures, and
implements those measures using their capital.
The ESCO also guarantees that the improvements will
generate cost savings sufficient to pay for the project over
the term of the contract, and therefore, these contracts allow
agencies to undertake energy savings projects without upfront
capital outlays.
ESPCs do have built in accountability. The ESCO is required
to conduct periodic measurement and verification to ensure that
the guaranteed savings are being realized. Once the contract is
complete, the agency and the U.S. taxpayer receive the full
benefit of the remaining energy efficiency savings.
Since the Department's ESPC program began in 1998, there
have been over 280 ESPC projects awarded through the Department
of Energy's contract vehicle in particular for a total
investment of about 2.7 billion and total guaranteed savings of
about 7.2 billion. And on top of that, we do have the
Presidential Performance Contracting challenge for the Federal
Government to enter into a minimum of 2 billion in performance
contracts by the end of this year, which is catalyzing
additional use of this mechanism.
As of June, the agencies have identified projects in the
pipeline or awarded with an estimated value of $2.3 billion in
investment, and so far, about 64 projects have been awarded
with an investment value of over $575 million. And clearly,
there are more projects in the pipeline.
In addition, the President's issued Climate Action Plan
this week did call for a number of actions to further
strengthen efforts to promote energy efficiency through
performance contracting.
At the Department of Energy, we do have the Federal Energy
Management Program, which helps all the Federal agencies
implement strong performance contracts, specifically that
provides tools, training, and expertise to the agencies to help
them achieve their statutory and Executive Order goals. This
technical assistance and guidance helps overcome some of the
barriers that we have seen such as limited agency contracting
and technical staff familiar with the ESPC process.
Technical support is available at each stage of the ESPC
process. That includes helping agencies determine whether an
ESPC project is feasible, guiding them through project
development and project acceptance, and also coordinating with
the agencies and ESCOs as we provide life-of-contract support.
FEMP also compiles best practices for the agencies and
continues to improve the program where possible.
So looking forward, we see continued opportunity. As of
March of this year, agencies have identified a potential for
over 700 million a year in annual energy savings for audits
they have already completed for energy and water savings. We
know that ESPCs will be critical in achieving much of these
savings and will provide multiple benefits to both the Federal
Government and the American people.
So again, I thank you for the opportunity to be here today
and look forward to our discussion and happy to answer any
questions you may have.
[The prepared statement of Dr. Hogan follows:]
[GRAPHIC] [TIFF OMITTED]
Chairman Broun. Thank you, Dr. Hogan. I now recognize our
next witness, Dr. Whitlow. Dr. Whitlow, you are recognized for
five minutes.
TESTIMONY OF DR. WOODROW WHITLOW, JR.,
ASSOCIATE ADMINISTRATOR,
MISSION SUPPORT DIRECTORATE,
NATIONAL AERONAUTICS
AND SPACE ADMINISTRATION
Dr. Whitlow. Chairman Broun and Lummis, Ranking Members
Maffei and Swalwell, and Members of the Subcommittees, thank
you for the opportunity to appear here today to discuss NASA's
use of the ESPCs.
NASA has established policies and procedures to improve
energy efficiency through the reduction of energy use and
implementation of sustainable energy practices. The use of
performance contracting vehicles such as ESPCs and UESCs
enables NASA to protect and leverage the value of its
appropriated facilities funding while providing a guaranteed
return on investment in conservation measures that help the
Agency to achieve Federal energy and water reduction and
renewable energy goals.
NASA's field centers actively consider and pursue the use
of energy savings contracts in order to repair and renew our
infrastructure. This is consistent with NASA's master planning
goals. ESPCs contribute to better facility operational
conditions while reducing our energy consumption. This reduced
utility consumption ultimately decreases energy and water risks
to NASA's missions.
NASA field centers have awarded over $174 million in ESP
contract value across 20 projects since we began using ESPCs in
1999. These projects resulted in annual energy consumption
reductions of approximately 495 billion BTUs and $8.5 million
in savings. NASA's ESPC projects contribute significantly to
the $2 billion Federal investment in energy savings projects
directed by President Barack Obama in December 2011. We pledged
to award $19.6 million of investment value in ESPCs and UESCs
before the end of this year. Our field centers awarded $28
million of investment value by November 2012, 24-1/2 million of
this via ESPCs, making us the first Federal agency to fulfill
its pledged investment amount.
Specifically, Goddard Space Flight Center's Wallops Flight
Facility in Virginia continues to conduct a particularly
noteworthy ESPC project with a total contract value of nearly
$36 million. The associated infrastructure energy efficiency
improvements resulted in significant reductions in Wallops'
energy and water intensities and in greenhouse gas emissions.
Virginia recognized the first phase of this project among the
Gold Medal winners of the 2012 Governor's Environmental
Excellence Award, and the Department of Energy featured this
project on an energy action campaign poster.
As mentioned, in April of this year, the NASA IG issued a
report on NASA's management of energy savings contracts, and
its review included an examination of our first use of ESPCs, a
DOE contract task order awarded by the Johnson Space Center in
1999. The IG identified shortcomings in the administration of
this first contract and provided recommendations for management
actions to reduce the risk of error in management of ongoing
and future ESPCs.
Accordingly, we have undertaken actions to ensure that
sound management practices are applied to the implementation of
ESPCs. We have issued interim direction for the immediate
implementation of these requirements as we finalize our
procedural requirements.
In conclusion, ESPCs represent an important tool that is
available to NASA field centers in the ongoing effort to repair
and renew agency facility and utility infrastructure in order
to improve energy and water efficiency and security. We expect
to continue to actively utilize this tool to support our
mission in the years ahead.
Again, thank you for the opportunity to appear here today.
[The prepared statement of Mr. Whitlow follows:]
[GRAPHIC] [TIFF OMITTED]
Chairman Broun. Thank you, Dr. Whitlow. I now recognize Ms.
Schafer for five minutes.
TESTIMONY OF MS. JENNIFER SCHAFER,
EXECUTIVE DIRECTOR,
FEDERAL PERFORMANCE CONTRACTING COALITION
Ms. Schafer. Good morning, Mr. Chairman and Members of the
Committee.
My name is Jennifer Schafer. I am the Executive Director of
the Federal Performance Contracting Coalition, which represents
many of the leading energy service companies that do work with
the Federal Government. Our members include--and I am going to
read them--Ameresco, Chevron Energy Services, Constellation
Energy, Honeywell, Johnson Controls, Lockheed Martin, NextEra
Energy Solutions, NORESCO, Schneider Electric, Siemens
Government Technologies, and Trane/Ingersoll-Rand.
This group of ESCOs performs about 90 percent of the work
with the Federal Government and has done so historically. These
companies have been improved through a very rigorous process to
pursue ESPCs with the Federal Government through an indefinite
delivery and indefinite quantity contract. Basically, that
contract prequalifies companies to pursue opportunities with
Federal facilities and individual sites.
The contract has been updated several times over the past
several years, particularly in the area of measurement and
verification and in operations and maintenance. In fact, the
most recent contract, which was initiated in 2009, has very
aggressive protocols to ensure that the government gets what it
pays for. Ranking Member Johnson mentioned the Oak Ridge
National Lab report that bears this out and says that Federal
ESPC-based projects save almost twice what is guaranteed by the
contractor.
ESPCs aren't just for saving energy and therefore saving
money; they also provide the government with critical
infrastructure, energy-related infrastructure, that they can't
afford to purchase right now; critical operations and
maintenance support, which we can't afford the staff right now;
and they also solve individual problems for facilities.
In 2011 when the U.S. Chamber of Commerce testified about
ESPCs before this Subcommittee--excuse me, full Committee--they
emphasized the expertise brought by the ESCOs, the jobs created
in the private sector, and the guarantee of energy savings.
There have been studies indicating that compared to
projects achieved with appropriated dollars or other ways to
get energy efficiency, comprehensive efficiency projects in the
Federal Government, ESPCs deliver a much better value overall
to the taxpayer even though they include financing costs. Right
now, those costs are very low.
A 2006 Oak Ridge study asserted that even at the higher
interest rates in 2006, ESPCs were a better deal for the
government because they ensure the performance of the
equipment. In a design-build project, operations and
maintenance are generally not as rigorous and efficiencies and
therefore dollars saved can erode very quickly.
Another major benefit of the ESPCs is that they are set up
to provide an abundance of information about performance, which
is not the case with other types of projects. There is no other
program in the Federal Government that requires this level of
measurement and verification, which may just be that
transparency--that is why they have been examined so frequently
over the years.
Questions or concerns about ESPCs typically revolve around
the fact that contracting for them is not business as usual.
Changes in personnel at agencies and elsewhere make education a
critical and ongoing effort. Often, delays in executing
projects stem from legal, contracting, or other personnel who
simply are unfamiliar with the contracting vehicle. The DOE has
done much to address this through training and other efforts.
Our group also constantly works on that same thing.
This program has evolved and improved over the years. It is
now time to take it to the next level, time to focus on shorter
contracting cycles, bigger project scopes, and frankly, just
more ESPCs. Even at the current enhanced run rates under the
President's initiative, the companies on the IDIQ contract have
excess capacity.
We would like to see a continued focus on ESPCs as,
thankfully, has been the case for the last three
Administrations. We now have a bipartisan caucus here in the
House that is chaired by Congressman Welsh and Congressman
Gardner that really works on reducing barriers to their use.
Citizens against Government Waste recently supported their
efforts in a June 7 commentary entitled ``ESPC Zone: Everybody
Scores with Energy Efficiency.''
Using private sector money and expertise to reduce energy
and infrastructure expenditures is a natural during this time
of constrained budgetary Federal budgets, so I appreciate the
opportunity to talk about the program and look forward to
answering questions. Thank you.
[The prepared statement of Ms. Schafer follows:]
[GRAPHIC] [TIFF OMITTED]
Chairman Broun. Thank you, Ms. Schafer.
I now recognize our final witness, Mr. Ron King.
TESTIMONY OF MR. RON KING,
PRESIDENT ADVISOR,
NATIONAL INSULATION ASSOCIATION
Mr. King. Chairman Broun, Chairwoman Lummis, and Ranking
Members Maffei and Swalwell and Members of the Oversight and
Energy Committee, thank you for the opportunity to participate
in this hearing and to discuss the importance of Energy Savings
Performance Contracts.
My name is Ron King. I am the President Advisor and a past
president of the National Insulation Association. Our industry,
the vast majority of which are small businesses, represent over
120,000 employees across the United States and have an
extensive track record of providing energy efficiency and
emission reduction initiatives in manufacturing facilities and
private and government buildings across the country.
I sit here today as a supporter of energy performance
contracts being employed by Federal agencies and to express to
you the value that mechanical insulation can provide to
achieving energy efficiency and financial return objectives.
Thermal insulation for piping, equipment, and other
mechanical devices, known as mechanical insulation, is a proven
energy efficiency and emission-reduction technology that can
create tens of thousands of jobs. It is also important to note
that 95 percent of the products utilized in this industry are
manufactured in the United States.
Unfortunately, the benefits of mechanical insulation are
often overlooked by all pipeline stakeholders in new
construction, in retrofit, and in maintenance opportunities.
The benefits of this technology are further reduced because
minimum requirements in new construction and retrofit
applications are seldom exceeded and maintenance opportunities
are completed in a non-timely and proper manner.
The National Insulation Association estimates that
implementing a comprehensive mechanical insulation maintenance
program in the commercial and industrial market segments would
lead to annual energy savings of 1.2 quads of primary energy or
savings of roughly $3.8 billion per year with a return of
investments ranging from 25 percent to over 100 percent while
reducing CO2 emissions by 105 million metric tons.
Even with a relatively slow implementation rate, these
numbers on a compounded basis over 10- or 20-year period would
yield tremendous savings and this does not include the
additional savings of going beyond minimum standards in new
construction and retrofit applications.
As you are aware, buildings are responsible for 40 percent
of the United States' energy demand and greenhouse gas
emissions, which makes efficiency gains in this area crucial if
we are to markedly reduce America's energy consumption. Energy
performance contracts can be and usually are comprehensive and
employ a wide array of cost-effective measures to achieve
energy savings. These measures often include the high-profile
energy efficiency measures such as lighting, heating and air-
conditioning, efficient motors, centralized energy management
systems. Mechanical insulation and potentially other less-known
and proven energy efficiency initiatives they or may not be
included.
Unfortunately, we have found that mechanical insulation is
easily and often overlooked. Mechanical insulation typically
yields a return on investment ranging from a few months to less
than seven years. As an example, a mechanical insulation energy
appraisal was conducted on low-pressure steam and domestic hot
water systems in a variety of State of Montana facilities.
Estimated energy savings represent roughly eight percent of the
total natural gas consumption with an annualized rate of return
of 24 percent.
The use of energy performance contracts by Federal agencies
is an excellent means to which to achieve high-performance
building objectives. These types of contracts have led the
effort to verify results rather than imperially rely on
estimates. Prescriptive measures like mechanical insulation are
well-suited, add value, and should be an integral part of
energy performance contracts and the resulting holistic savings
verification process.
As another example, one of our Members completed a
mechanical insulation energy appraisal of four different
operating systems at the National Institute of Health in
Bethesda, Maryland. They determined by insulating areas not
previously insulated and where insulation was missing, the
potential of annual savings of $400,000 with a simple payback
of 3.3 years and over 6 million pounds of CO2
emissions reduction was attainable.
Inclusive or independent of energy performance contracts,
the return on investment of implementing and maintaining a
proper and timely insulation maintenance program is compelling
and easy to implement without extensive engineering support,
and in many cases, any disruption of the workplace.
We are committed to working with Congress, the Department
of Energy and key stakeholder groups on energy performance
contracts that will lead to greater energy efficiency
nationwide, including working with the Department of Energy and
other agencies to bring together a coalition to develop,
implement, and provide mechanical insulation research,
education, and training programs. Mechanical insulation is a
simple, proven, prescriptive technology that can contribute to
successful execution of Energy Savings Performance Contracts.
Thank you for the opportunity to submit testimony in
support of a program that is critical to job creation, economic
growth, energy savings, and emissions reduction. I look forward
to answering any questions you may have. Thank you.
[The prepared statement of Mr. King follows:]
[GRAPHIC] [TIFF OMITTED]
Chairman Broun. Thank you, Mr. King. I now want to publicly
thank you for your very timely and efficient response to the
request from this Committee for information, and I thank you so
much. You are an example that every person who testifies before
any Committee in the Congress should be utilized as an example
of response for somebody whose testimony is requested. So thank
you so much.
I thank all the witnesses for their testimony. Reminding
Members that Committee rules limit questioning to five minutes,
the Chair at this time will start the first round of questions,
and I recognize myself for five minutes.
Dr. Hogan, given that the credibility of ESPCs rest on
strong measurement and verification of energy savings, who is
currently responsible for monitoring and verifying energy
savings?
Dr. Hogan. So each performance contract in the Federal
Government has a contracting officer that would reside in the
agency that is putting that contract in place. So that is where
the responsibility does reside. What our Federal Energy
Management Program does is provide guidance on how to do that
MTV well starting with sort of what the MTV plan should be at
the start of the contract that gets written into the upfront
contract as well as how to effectively do the ongoing
monitoring. So we provide assistance, but it is the contracting
officer in each agency who would be ultimately responsible.
Chairman Broun. During your testimony, you indicated that
you are monitoring these things, and during my opening
statement, I indicated that five couldn't even be scored and
numerous of them were in the red and yellow as far as their
energy scoring. This is intolerable as far as I am concerned.
Following up on that response, I would also like to ask Dr.
Whitlow and Ms. Schafer to answer this: considering that the
estimated savings directly relates to the financial payback of
the ESCOs, would you support regular, mandatory, third-party
measurement and verification of all projects over a certain
threshold? Dr. Whitlow?
Dr. Whitlow. Well, when we implement our projects, we have
our measurement verification, which we then use to verify
saving. If third parties were to come in and provide some
additional oversight of our savings, I think that would only
verify the savings that we report. So there would be no
objections to third party oversight.
Chairman Broun. So that is a yes?
Dr. Whitlow. That would be a yes.
Chairman Broun. Yes. Okay. Ms. Schafer?
Ms. Schafer. You know, my organization hasn't discussed
that as a group but--so I don't have really an official
position. I would think that, you know, the guaranteed savings,
the savings, they guarantee the savings. So if somebody is
watching over their shoulder, I am sure that is great. The
agencies do that already. DOE does that.
DOE has something called life-of-contract oversight, which
is really nice because every year they come in as a third party
and they look at what the agency is getting and then they can
say, oh, well, you know, agency actually didn't ask for--or you
didn't respond to this MTV or this piece doesn't look right.
How do we deal that? So some of that is being taken care of.
One thing is if you have a third-party come in, if it is a
government person who is a third party or a nongovernment
person who is a third-party, it is not part of the contract. So
again, we are going to have to find funding for that, which is
an ongoing problem with getting more efficient in the Federal
Government right now.
Chairman Broun. I am trying to figure out if your answer is
yes, no, or maybe.
Ms. Schafer. You know, I don't have an official position.
Chairman Broun. Okay.
Ms. Schafer. I can get one because we haven't discussed it,
but it seems to me as though we have that going on both with
the agency and with the Department of Energy doing that, the
labs actually doing that, on a yearly basis to verify that the
MTV is correct.
Chairman Broun. Okay. Dr. Hogan, what is your opinion about
this, having third-party assessment?
Dr. Hogan. So I think what we are interested in doing is
having a program of continuous improvement. We are interested
in looking at any number of ideas that can continue to deliver
value for the Federal Government and we would be happy to
engage in this conversation.
Chairman Broun. Okay, thank you.
Mr. King, comparatively speaking, what are some benefits of
mechanical insulation versus--as you mentioned in your
testimony, ``high-profile energy efficiency measures'' such as
high-efficiency lighting, high-efficiency heating and air-
conditioning?
Mr. King. Because mechanical insulation is dealing with the
installation of domestic hot water or steam systems and so
forth, the temperature differentials are much greater. Thus,
the energy savings on a per-dollar, per-capita basis is 10, 20,
50 times that of a lighting or air-conditioning primarily
driven by just the science of energy efficiency based on
thermal conductivity and what we are dealing with.
Chairman Broun. Very good. I hope our government will start
looking more at insulation as a process, and I am sure you
would be happy with that.
My time is about expired. I now recognize Mr. Maffei for
five minutes.
Mr. Maffei. I thank the Chairman and agree with him on that
last point about insulation.
My understanding--Dr. Hogan, my understanding is that there
is a current performance contract that involves energy
efficiency gains and a data center that OMB is holding up. Do
you have any idea why OMB's holding that up? I know that the
Energy Department is trying to do its best to administer it,
but you are not allowed to go forward, I suppose, until OMB
gives the go-ahead? So do you have any idea why they are
holding that up? This is the one involving Lockheed Martin and
the Department of Energy. It is a $70 million contract. Are you
aware of the one I am talking about?
Dr. Hogan. Yes, so this, of course, is a particular
contract that we are working on. It is under discussion and
review. We are working to get it resolved. And I can't really
speak to much more than that at this time other than we hope to
resolve it as soon as we can.
Mr. Maffei. All right. I respect that. Do you know who can
speak to it? Is it--does it have to be OMB to speak to it or--I
mean we do have oversight responsibility so I understand why
you and the Department may not be able to, but is it OMB that
has to address----
Dr. Hogan. Certainly, this is a Department of Energy
decision and the contract is under review at the Department of
Energy. We are happy to engage with you after the hearing today
to further figure out what we can talk about here.
Mr. Maffei. Yes. No, okay. I would like as close as you can
a specific answer as to why that is being delayed. And the
reason is, it is not just--I am not just trying to pick on this
one contract but I do think that with all the good things we
have been saying about these ESPCs, there is a chilling effect
if one of the major ones that is--has been presented that as
far as anybody can see is a good idea is being held up in this
way, it is a--it creates this perception that there is going to
be a lot of red tape. So I do think it is important not just
for this particular contract but for others.
Ms. Schafer, one of the issues that we face as we look at
the savings in this is the fact that the Congressional Budget
Office refuses to score the savings from these contracts. I
presume that your group disagrees with their position. Can you
enlighten us at all as to why CBO has that position and why it
is, you believe, incorrect?
Ms. Schafer. Yes, thank you. In 2002 or 2003 CBO started to
score ESPCs for the first time. That became apparent to us when
our 40 was about to expire. As we understand it--and this is
been the case for the past several years with the CBO, although
not the case with the OMB--they do not score it and haven't--
and it has been reaffirmed through three Administrations.
But they assume that in ESPC you enter into a mandatory
contract to pay back the contractor. So you are going to pay
them back over several years. You are going to get paid back
out of energy savings. So what you have now is a mandatory
expenditure on the books according to the CBO and discretionary
money--energy bills--that pay that back. We don't count energy
bills in the CBO sort of--they don't have a way to rectify
those things. They assume anything that is appropriated is
discretionary money. It could not be appropriated. You could
just not appropriate money for those energy bills. So it
doesn't count the same as the mandatory expenditure that is on
the books. So that is the large part of it.
The other part is some of the savings that accrue, accrue
outside of the ten-year scoring window. So----
Mr. Maffei. So does your organization--what do you say in
response to that? You have actually explained it very, very
well, I think, but what do you say in response to it?
Ms. Schafer. Well, we don't believe the score makes any
amount of sense, and I don't know how else to say it other
than, you know, there should be a way to find, you know, we
have got admissions from CBO in the past that are somewhat
different because there is a guarantee of savings. It is the
only thing where there is a guarantee of savings. It is the
only thing where OMB and CBO do not agree on how to score it.
And our point is--I mean, Chairman Nichols of the Budget
Committee, his line was ``ignore the score'' several years ago,
you know, tough to do these days.
Mr. Maffei. Well, yes, particularly since it is in the
Congressional rules that we can't ignore the score.
Dr. Whitlow, do you--have you seen the savings from this
that isn't scored by CBO in the contracts you have worked on?
Dr. Whitlow. I will have to go and----
Chairman Broun. Turn on the mike.
Mr. Maffei. You know, that is fine, and I am out of time
anyway----
Dr. Whitlow. Yeah.
Mr. Maffei. --but, yes, I am looking for specific instances
where clearly there has been savings. I--this is very
frustrating because it is one of those issues where I think all
of us--and I didn't even ask Mr. King; I am just presuming that
you would agree. I think all of us sort of see clear savings
here and yet, you know, there is all these sort of inside
baseball technical reasons or whatever. So I do want to look at
that further.
And, Mr. Chairman, I apologize for going over and I yield
to you.
Chairman Broun. Well, I thank you, Mr. Maffei. And I think
we all want answers to those questions because I think it is
critical for the taxpayers to have those answers because this
scoring problem is certainly something that we need to get to
the bottom of it.
Mr. Maffei. If the Chairman would yield, yes, absolutely.
It prevents us from doing something that is going to save the
taxpayers money if there is absolutely no way that we can
record that it is likely to save the taxpayers money. It just
doesn't make any sense. I thank you for your comments on that.
Chairman Broun. Absolutely. I agree. I now recognize Mr.
Hultgren for five minutes.
Mr. Hultgren. Thank you, Chairman. Thank you all for being
here.
With the President's budget continuing to slash funding for
discovery sciences in the Department of Energy in order to pay
for ever-expanding loan guarantee programs and energy
subsidies, I have seen personally how our labs must find
creative ways to reduce their cost so they can continue their
groundbreaking work.
In my district, I have Fermilab. And just Fermilab alone
has over 400 buildings on its site, as they talked about in
their last newsletter, and there is no question that we can
find energy savings with 400 buildings in our laboratories and
we need to do that.
First question, Dr. Hogan, if I can address it to you, can
you tell me how much energy consumption has been reduced at
agencies due to ESPC usage and how that figure can be verified?
Dr. Hogan. Yes, so as we have been talking about within the
energy performance contracts, there is guaranteed savings.
There are MTV plans that go with that guaranteed savings. In
the program that the Department of Energy runs--and keep in
mind that is just a piece of what goes on in the performance
contracting space--we have been able to report on $2.7 billion
of investment in energy efficiency projects and $7.2 billion in
savings that go with those contracts.
Mr. Hultgren. And how are those verified?
Dr. Hogan. So that is, as we have been discussing, through
ongoing monitoring and verification. There is an MTV plan that
is part of every contract in terms of what the pieces of
equipment need to do to perform to sort of meet the elements of
the contract and then the ongoing monitoring that shows indeed
that those pieces of equipment do perform that way.
Mr. Hultgren. Shifting or getting a little more specific,
in 2009, DOE awarded a 15-year ESPC at Fermilab for 1.4 million
in upfront cost projecting savings of 3.25 million over the
life of the contract. I wonder if you could tell me how
realistic these savings are looking and how quickly they are
coming into place?
Dr. Hogan. I certainly can go back and look specifically--
--
Dr. Hogan. --into that contract----
Mr. Hultgren. If you could and if you can respond maybe in
writing.
Dr. Hogan. Sure.
Mr. Hultgren. I will follow up with you on that.
Dr. Hogan. Absolutely.
Mr. Hultgren. And wonder if you can also respond how long
after the life of these contracts can we expect to see savings?
Dr. Hogan. So that is actually one of the topics that is
taken up in this Oak Ridge report that people are talking
about. You know, the average life of a contract has been on the
order of 17 years. Clearly, some of the measures that go into
these buildings, such as a chiller, can have a lifetime of 25
years. So indeed a fair amount of time there for additional
savings beyond the guaranteed savings in the contract.
Mr. Hultgren. Shifting over to Ms. Schafer, as interest
rates fluctuate, can ESPCs be renegotiated to take advantage of
lower financing rates that we have seen recently? If so, how
many FPCC companies have done this?
Ms. Schafer. Well, several FPCC companies have been working
with their agency customer and the financing community on
potential refinancing opportunities. That really is something
that the financial community has to do. We are sort of in the
middle of that. So some of them will agree to them. Often, they
will agree to a refinance if there is additional scope. And we
work to see if we can make that happen when it makes sense for
the site.
Mr. Hultgren. Okay. You had testified about the work at Oak
Ridge National Laboratory saving twice the guaranteed amount.
Is this common for these type of contracts and can you tell me
how that number was derived?
Ms. Schafer. I can tell you as much as I know because I am
not the technical guy at Oak Ridge, but what I understand is
that when we went under ESPC, an ESCO guarantees an amount of
savings over the life of the contracts. So say it is a 15-year
contract, and over that lifetime they will guarantee X dollars.
Generally, more occurs because they underestimated whatever it
might be, and that savings goes directly to the agency, to the
customer during the life of the contract. After the contract,
you get a lot more savings because then you don't pay back for
all the investment that the ESCO did. And so that is included,
too, and so it is those types of things that have really
increased the value of the ESPC.
The other thing that isn't counted is the fact that you get
things. So agencies generally enter into an ESPC because they
need something. My chiller is in bad shape, I have got to get a
new one. That is infrastructure expenditures that go away
upfront.
Mr. Hultgren. Right. Okay. I have only got 30 seconds left.
Real quickly, I wonder if you could again, Ms. Schafer,
staying with you, can you tell me of any of the downsides to
the Federal use of ESPCs?
Ms. Schafer. Well, I think that depends on who you are
talking to. I think some people feel that financing an ESPC,
financing energy projects is a bad idea, that it is cheaper to
do it with appropriated dollars. Oak Ridge in a 2006 report
said that is not the case, but if you just look at it flat out,
you say why should I pay financing charges if I don't have to?
That is a potential downside.
Some people may want to have the expertise in-house; we
can't really afford that right now, so for the time being, I
don't see a lot of downside to an ESPC.
Mr. Hultgren. Well, my time is expired so I do want to
yield back, but if any of you would have a response to that,
other thoughts of things we should be watching for, be
concerned about, potential downsides, and maybe if we can
follow up with some other questions, that would be great as
well.
So with that, I yield back. Thank you, Mr. Chairman.
Chairman Broun. Now the Chairman recognizes Mr. Swalwell
for five minutes.
Mr. Swalwell. Thank you, Mr. Chairman.
We have seen locally in the cities that I referred to,
Dublin and Livermore, that having these types of contracts not
only reduce the city's energy bill but the installation of the
different types of upgrades that take place and the maintenance
that is required thereafter creates new local jobs.
And so I am wondering, Ms. Schafer, if you can talk about
if there is a correlation between creating jobs and also
reducing the Federal Government's energy bill?
Ms. Schafer. Well, the nice thing about Energy Savings
Performance Contract or really any energy efficiency project is
it is local. You can't offshore efficiency upgrades to a
building that is here. We have estimated that we get about 10
jobs per million dollars of investment. So it does add up. The
Chamber testified to, you know, I think it was like 400,000
jobs or something from ESPCs already so----
Mr. Swalwell. And also, do you see a potential--and I would
also ask Dr. Hogan this question--do you see a potential to
increase the role that ESPCs play with respect to data centers?
And we know that data centers, you know, a growing trend to add
more and more data centers across the country or move
information into the cloud. I mean they really do consume a lot
of energy. Now, are there more opportunities out there to use
ESPCs for data centers? And I will start with Dr. Hogan.
Dr. Hogan. Well, I think that is a great question.
Certainly, there are some sort of data center configurations
that we can use ESPCs for now given the reliance on, you know,
intensive air-conditioning in data centers. But we do know that
there is interest in figuring out how to do more with these
ESPCs and we would be happy to respond to any proposals that
people might have in that space.
Mr. Swalwell. Great. And Ms. Schafer?
Ms. Schafer. We are very concerned about the data center
area. It--we feel it is completely in the authority of existing
ESPCs. There are--the government has definitely seen some
opportunity for data centers. They have put out notices of
opportunity to our ESCO community asking them to bid on
projects for data center consolidations. We have had selections
for those from NASA Glenn at GSA and in the Navy. We have also
had just NOOs that are some of them a little bit held up
because of this current holdup on the first one with the
Department of Transportation, the Air Force, and with the USDA.
So we do--the government definitely sees it as an
opportunity and so do our members.
Mr. Swalwell. Can you--ESPCs be applied to the Federal
vehicle fleet under existing law? And we saw Dr. Hogan refer
to, I think, 600,000 civilian vehicles. And I know there are
efforts underway, but what role can ESPCs play in upgrading our
vehicle fleet to hybrid or electric cars? And, Dr. Hogan, I
will start with you.
Dr. Hogan. So as the statute is currently written, it does
not allow us to use ESPCs for our fleets.
Mr. Swalwell. And, Ms. Schafer, is that--would that be a
positive change? Is there interest in industry to compete for
that if it was available?
Ms. Schafer. There definitely would be and we have seen
legislation, bipartisan legislation in the past trying to do
this. But it triggers a score from CBO because it is an
expansion of our authority. So scores are triggered both when
we try to expand the authority into things that are non-
building-related or non-plug-load-related, as well as when we
actually say from a Congressional angle, hey, get more
efficient if they might use us to--use an ESPC, then that also
scores. So it is back to the scoring.
Mr. Swalwell. I am glad the scoring has been brought up and
maybe this is an opportunity that the Chairman and I and
Ranking Member Maffei can work on to address and try and
correct this because it sounds like there is agreement among
the three of us that it is just a--kind of a mindless
approached to scoring and there are opportunities for further
savings that we could look into.
Chairman Broun. Mr. Swalwell, you are suggesting the
Federal Government is mindless?
Mr. Swalwell. Not too mindless, that you and I, Mr. Broun,
couldn't fix it.
Chairman Broun. Well, I will agree with that, Mr. Swalwell.
Mr. Swalwell. Well, thank you, and I yield back.
Chairman Broun. Thank you so much. Now, the Chairman will
recognize Mr. Cramer for five minutes.
Mr. Cramer. Thank you, Mr. Chairman, Ranking Members, for
this, and thank you to all of the witnesses.
I am still trying to get over the fact that the Federal
Government manages half-a-million buildings in the United
States, and that speaks to a whole other challenge, which I
think, frankly, is symptomatic of why Administration officials
and bureaucrats can come in here and give roundabout answers to
direct questions. The bureaucracy is too big.
That said, I want to expand this discussion on efficiency a
little bit because my personal belief is that efficiency ought
to be its own reward. It shouldn't be this complicated. I have
always found it frustrating that it requires a whole bunch of
people creating a whole bunch of jobs to screw in a light bulb
that will save money, and that ought to be fairly self-evident.
I know a little bit more about it, however, because I do
think, even as the largest landlord, largest energy user in the
country, we have a broader responsibility as well, and that is
to the rest of the ratepayers that are also affected in areas
where we may find efficiencies in our federally owned
buildings. I know there are a number of models that utilities
can use to determine the value of energy efficiency, and it
shouldn't be done in a vacuum. And it is not just the one
customer that uses an energy efficiency that has an impact in
my energy efficiency, especially in a down economy. There are
stranded costs in our plant, for example, that have to be paid
for by the number of ratepayers that there are in any given
service area.
And so I would like somebody to speak to me about the
various models and whether or not we consider other ratepayers
than simply the Federal Government, because the Federal
Government, while we can find efficiency in a particular
building or a particular agency, those savings are going to
be--the cost--there is still a cost somewhere else that
somebody else has to bear as a result of those savings in some
cases.
So do you know what kind of modeling is used to determine
whether there is a negative impact even of--and, by the way, I
support this kind of thing, just so you know. But even in a
savings to the Federal Government, do we measure the
possibility that that savings will be a cost of the ratepayers
not in their taxes but perhaps in their utility rates? If
somebody could speak to that if it makes sense to anybody.
Ms. Schafer. The only thing I can think of is if we get
more efficient anywhere on the grid----
Mr. Cramer. Um-hum.
Ms. Schafer. --everywhere would be better on the grid.
Then, you reduce the need to build new power plants, which cost
money to do and that gets rate-based and affects all taxpayers.
And I don't--but I am having--I don't think I understand
about----
Mr. Cramer. Okay. So let me ask you this----
Ms. Schafer. --the--if you get more efficient here, does it
make it more expensive over here? I don't think that is--I
don't understand that part. I apologize.
Mr. Cramer. That is--okay. Let me get Dr. Hogan and then I
will----
Dr. Hogan. But you were going in the right direction
because many utilities run energy efficiency programs. I think
if you look across the country, more than half the States have
policies in place where they are looking to procure energy
efficiency whenever the energy efficiency costs less than the
construction of the next power plant. And then they have
energy-saving goals so that they know they don't have to build
that next power plant.
And I think it is the programs that we are engaged with as
well that help feed into the utilities planning and their
ability to sort of avoid the construction of that next power
plant.
Mr. Cramer. Teed up perfectly. I think that is exactly
right. So then my question becomes what you have just described
is what I would call a total resource cost-and-benefit
analysis. But there is also a ratepayer impact model that I
think we are ignoring in this discussion because your
assumption, while usually true, I don't think is always true.
And when you consider in a down economy like we have today
where there is plant built--and there is a lot of plant in
certain areas that there isn't the next generation of plants to
be built unless, of course, we issue mandates that they have to
be closed down.
And, by the way, with regard to jobs creation, building new
power plants is pretty good jobs creation as well. So this bias
sort of against that, I think we need to put energy efficiency
in a broader context and that is to consider not just the
participants in an energy efficiency program but the
nonparticipants and their ``benefits'' as well because in many
utility situations that I am familiar, the cost to the
nonparticipant is quite high. And generally, the
nonparticipants are people that can't afford the new
refrigerator or the new lights or the new insulation at all
this other things.
So when we talk about energy efficiency, I don't think we
should talk about in the vacuum nor necessarily assume that the
next plant is a negative to either society or to the local
economy or to the ratepayer.
With that, my time is expired.
Chairman Broun. Thank you, Mr. Cramer. Now, Mr. Peters, you
are recognized for five minutes.
Mr. Peters. Thank you, Mr. Chairman. I want to first agree
with the comments about scoring. One of the things that has
been most surprising to me about the Federal Government is the
rigidity with which they observe this scoring that doesn't give
you any benefit for what you might spend today in terms of the
future. And this is not the way that any family or small
business or local government would make a decision.
And we would look--if we were ever to evaluate any
investment, you would look at what you get back in the future.
That is what distinguishes an investment from spending. And so,
again, we see that today and I just want to say that don't just
leave it at the three of you, Mr. Swalwell. I would like to
join up and be part of this conversation.
The question I had for you, though, and perhaps this is for
Dr. Hogan or Ms. Schafer, I love the idea of using these--it
reminds me of a power purchase agreement kind of plan that
would--it is a way to get significant savings for Federal
facilities with minimal cost implications, really if any, and I
think it is a great program.
But I am interested in the context because, as we think
about upgrading Federal facilities in general to be making
improvements, I wonder whether you might tell me whether this
model could assist in making Federal facilities more resilient
to the kind of big weather events we have been seeing lately.
That can be enhancing structural activity, the building
envelope, moving infrastructure to where it is less vulnerable
to floods or earthquake or wind, and also maybe improving the
strength of glass in the window. Have you given any thought to
that and how might the big weather be accounted for in this
kind of program where we are going to be making these
improvements? And I would be interested in hearing your answer
to that.
Dr. Hogan. Well, I think we do have to start with an
understanding that the performance contract is helping the
government put in place things without having the upfront
capital that can get paid back with a saving stream. So within
that construct, we can look at, you know, what can fit into
that type of contract.
I guess one area I would pull out in particular that we
have been doing a lot of work in right now is with combined
heat and power, right, which many people also believe is a
resiliency measure that provides for some amount of power
activity on a base or in a facility during an extreme weather
event. But we are happy to look at what can be built into the
construct of a performance contract in that space.
Mr. Peters. Ms. Schafer?
Ms. Schafer. Our members are very excited about the
resiliency and the security--we do a lot of defense
facilities--possibilities. We do do a lot of onsite generation,
distributed generation, whether it be with renewables or with
natural gas, CHP, whatever it is, and we are looking to do
more.
Mr. Peters. Okay. I would just ask you it just makes sense
if we are going to be making these improvements to think about
some of these new realities we are facing.
Thank you, Mr. Chairman. I yield back.
Chairman Broun. Thank you, Mr. Peters.
I next recognize Mr. Schweikert for five minutes.
Mr. Schweikert. Thank you, Mr. Chairman.
You know, this is one of those where you have a dozen sort
of questions and you are hoping none of them make you actually
look--what is the term--oh, yes, stupid. But mechanically,
first--and is it Ms. Hogan or Dr.--how many spots do we have
where we have entered into these types of agreements and it
happens to be in a state or a regulated area where there is a
purchase buyback? So you are doing distributed generation and
we have had a contract, we have put solar panels on the
building, and certain times of the day we are generating more,
we turn the meter backwards, and the municipal or private power
producer has to buy that power. Do you know of that existing in
any of these contracts?
Dr. Hogan. Yes, I certainly don't have those numbers off
the top of my head. We can collect that information for you.
Mr. Schweikert. Ms. Schafer--is it Schafer-Soderman?
Ms. Schafer. Schafer. We generally do small-scale
renewables or small-scale generation that is used within the
fence. So there isn't a lot of selling back to the grid. There
have been a few projects in the past. Currently, the
Administration is--has different ways that they would like to
do power purchase agreements. They don't really want to put
them within an ESPC so we sort of don't do a lot of that at
this point.
Mr. Schweikert. Okay. I know that is becoming actually
quite an issue in California, Arizona, and others where the
distributive generation is actually creating some fascinating
curve on adoption and sort of transfer pricing.
But that is--walk me through--if I were actually describing
this to my constituents--the benefit of using sort of a private
financing mechanic as we do here compared to an appropriated
one?
Ms. Schafer. So you get a couple of benefits and you--it is
a different construct but what happens is you go into--you
select a contractor based on maybe some preliminary audits and
that type of thing, and then you work with them very
collectively. It is a very cooperative program between the
government customer and the ESCO deciding what all do we want
in here? Here is our immediate problem. What else can we do to
help pay for that? What else--what other beneficial things do
you want? And it is a back and forth, back and forth, back and
forth. It is very different than a design-build type of
contract. You actually don't sign a contract with the Energy
Service Company until you get all of that done.
Mr. Schweikert. Okay. We are a little off.
Ms. Schafer. Okay. I am sorry.
Mr. Schweikert. But--okay. Let me box it in.
Ms. Schafer. Okay.
Mr. Schweikert. Will the benefit of the contract change
much if interest rates, cap rates, the costs change?
Ms. Schafer. It is locked in so whatever you lock in at the
time of----
Mr. Schweikert. But that is in the contract that is signed
today?
Ms. Schafer. The contract signed today.
Mr. Schweikert. How about into the future if we are sitting
here and a year from now we are back at historically normal
interest rates, do you think the value of these contracts----
Ms. Schafer. Well, you have locked in it really good
rates----
Mr. Schweikert. No, one more time----
Ms. Schafer. --you did it today----
Mr. Schweikert. New contract----
Ms. Schafer. Oh, okay, new contract----
Mr. Schweikert. --a year in the future under current----
Ms. Schafer. Okay.
Mr. Schweikert. --more normalized interest rate
environment.
Ms. Schafer. So in 2006, as Oak Ridge report said, that
even if the interest rates then, which were significantly
higher than they are today, they were still a very good deal, a
better deal than a project done with appropriated dollars
straight up.
Mr. Schweikert. Okay. That----
Ms. Schafer. And that----
Mr. Schweikert. Is it Dr. Whitlow? And let's see if I can
come up with the proper way to build this box and this
question.
I have a government facility. I have infrastructure needs.
I need a new chiller, I need a new air conditioner, I--it is
time for new windows. Does this become an alternative way to
finance capital costs, as well as being able to talk about the
energy savings? And I am sort of curious what ultimately--on
occasion does--do I have multiple motivators here of this is a
way to sort of strip certain capital costs off my budget and
find another way to finance them?
Dr. Whitlow. Right. It is a way to finance the project
without using the appropriated funds, and then the big
advantage is when we enter into these projects, it is the
guaranteed savings that we get.
Mr. Schweikert. Well, but in that case, if I am financing
these improvements, it would have been in my capital budget. Do
I have any sort of movement of what those appropriated dollars
would be? So, you know, a budget is built, we have a capital
value, we are going to build a new chiller, all of this, and I
enter into one of these agreements. I get my chiller. Do those
dollars end up being fungible and move somewhere else?
Dr. Whitlow. Well, what we will not do if, when we enter
into these agreements, our appropriated dollars don't come into
play because when we use this alternative--this--well----
Mr. Schweikert. They wouldn't come into play but you have
actually--is the term subrogation? I have covered my costs here
so I still have that dollar in my budget line items. I am not
saying it is bad or evil; I am just trying to understand. Is it
something we should look more to when we are building budgets
saying, hey, there is an ESPC possibility on this facility;
therefore, certain capital cost shouldn't be in their line
items?
Dr. Whitlow. Well, I certainly think it would be an
advantage to us to look at that mechanism----
Mr. Schweikert. Okay.
Dr. Whitlow. --because it allows us to use our appropriated
dollars, as you say, use our appropriated dollars other places
and not have to use them to do these capital improvements,
which result in these energy segments.
Mr. Schweikert. I am over my time. Thank you, Doctor.
Mr. Chairman, thank you for your patience.
Chairman Broun. Thank you, Mr. Schweikert.
Now, Mr. Veasey, you are recognized for five minutes.
Mr. Veasey. Thank you, Mr. Chairman. And I wanted to ask
Dr. Hogan specifically about the ESPCs and other options. Are
there other options that are available besides the ESPCs and
direct funding that agencies can consider to pay for energy-
saving projects?
Dr. Hogan. Yes, we talked about performance contracting
generally with Energy Savings Performance Contracts being one
mechanism. We have also talked about appropriated dollars being
available to the extent that agencies have those dollars in
their facility budgets. And then I think we also talked a
little bit today about the service contracts that utilities can
provide, UESCs, which are also an important mechanism that many
agencies have availed themselves of but again are different
than the federally administered contract mechanisms.
Mr. Veasey. Let me move over to Energy Independence and
Security Act of 2007. Of course, that authorized the use of any
appropriated funds for upfront ESPC financing. And I wanted to
ask Dr. Whitlow about NASA.
I was really curious what effect that would be on NASA and
other Federal agencies if the ability to use other funds were
removed?
Dr. Whitlow. Well, if we remove that ability, what it does,
it gives us more flexibility in meeting our energy and water
reduction goals because we have found that just the use of the
tools that we have available such as ESPCs have provided us
great benefit and great savings not only in our energy usage,
our water usage, and has resulted in significant dollars
savings annually as well. So additional tools would benefit the
agency.
Mr. Veasey. Dr. Schafer, do you want to add anything?
Ms. Schafer. I guess I was trying to understand--okay. So
in 2007 I think there was language that said something about
you can mix money so you could use appropriated dollars in with
an ESPC. This doesn't mean you are suddenly replacing it
necessarily. What it means is if you have got some really
expensive widget that you want to install along with a bunch of
energy conservation measures and you want to use some money up
front that you have so you do have appropriated dollars for
efficiency, you could put that in, too, and shorten your
timeline of payback. Some agencies have done this in the past;
other agencies are--don't do it and still don't do it. I don't
think the language really had any impact at all on whether and
which agencies.
Mr. Veasey. Thank you, Mr. Chairman. I yield back my time.
Chairman Broun. Thank you, Mr. Veasey. I now recognize Mr.
Weber for five minutes.
Mr. Weber. Thank you, Mr. Chairman.
Dr. Hogan, among the dozens of actions the President
announced on Tuesday as part of his Climate Action Plan, was a
commitment to complete numerous new energy efficiency
regulations for appliances. I understand those regulations are
promulgated under your supervision, is that right?
I have the list of current active rulemakings. They include
virtually every appliance you can either do what we call
hardwire or plug into an outlet. That would be ceiling fans,
air conditioners, heat pumps, furnaces, boilers, refrigerators,
and on and on and on--heaters included and on and on and on.
And executing the President's directive under your supervision,
which rulemakings do you expect to finalize first and how soon
should we expect to see these?
Dr. Hogan. We can certainly provide you with a list of the
rule actions that are currently in play. I think it is great to
think about the amount of energy savings that these appliance
standards have brought forth to the American consumer. You
know, just the ones that have been put in place over the last
four years are helping save something close to $400 billion
through 2030. So they are a great way to help consumers and
businesses save energy.
Mr. Weber. Well, let me--I will just editorialize for a
second. The government's role is to protect us from our
enemies. When it decides it has to protect us from ourselves,
we have a problem. And my concern with these rules beyond the
principle that the Federal Government should not be in the
business of designing appliances--and I own an air-conditioning
company----
Dr. Hogan. Um-hum.
Mr. Weber. --is that they limit consumer choice. They will
raise the purchase price of these appliances, actually reduce
the sales for manufacturers because as--and I have witnessed
that in my own company--as units get more and more efficient,
people cannot afford to purchase them. And they actually have
the old one repaired. Now, what does that say about higher
efficient standards or reducing the energy cost? And many
manufacturers have actually filed comments with DOE along those
lines.
And just one example, remanufacturing comments on the DOE's
rule for residential furnace fans say that the rule would
result in--and, of course, I am reading from their comments and
I can attest to them in my own business--higher initial cost,
which would lead to consumers switching to less-efficient
products. They literally will buy a less-efficient air-
conditioning system because the price is higher or because in
many ways the rules promulgated, what manufacturers have to do.
Higher initial cost, as I stated earlier, will push consumers
to repair rather than replace their units. And I can go on and
on and on. Window units might be used as opposed to buying a
whole complete central system, which we have experienced in our
business.
Let me just ask you, when is the last time you bought an
air conditioner or furnace?
Dr. Hogan. Certainly within the last 10 years.
Mr. Weber. Within the last ten years. And then I would--let
me just go down the panel.
And Dr. Whitlow, when is the last time you bought one? And,
by the way, yours is inefficient now. You need to replace it.
Go ahead.
Dr. Hogan. It was efficient when I bought it.
Mr. Weber. Well, I understand. And as often as we have
these meetings and change the rules, there--you know, there--
you are going to be replacing it more often.
Go ahead, Dr. Whitlow.
Dr. Whitlow. The last air-conditioning and furnace I bought
was in 2000 when I purchased my home.
Mr. Weber. Okay.
Ms. Schafer. 2007.
Mr. Weber. Okay.
Mr. King. 2009.
Mr. Weber. Well, Mr. King, there is hope for yours for at
least a couple more years. Gosh, I got lots of questions.
You talk about increasing energy efficiency and power on
the grid but you don't--did you--Dr. Hogan, do we weigh the
impact, lost opportunity--investment opportunity when you don't
build that new power plant? Those investors don't get a return
on their money, for example, number one. Number two, new power
plants are a lot more efficient than the older power plants, so
we can actually bring them online, less emissions. Do we
measure the amount of money that will be spent on trying to get
carbon pollution out of the air or do we just say we want to
reduce energy usage so that new plants are not built and we
keep driving the old '60 model Chevy Caprice?
Dr. Hogan. I think the premise behind energy efficiency--
and we sort of talk loosely about avoiding the construction of
the next power plant. I mean I think what we are all interested
in is providing the services that people want and to be doing
it as efficiently as possible because efficiency aligns with
lower cost----
Mr. Weber. Okay. But I am----
Dr. Hogan. --to the consumer.
Mr. Weber. --running out of time so bear with me for one
second. That is a private decision. If a company wants to
invest in a power plant and they can produce energy at a more
reasonable rate and do it more environmentally friendly, why
would we want to deter that?
Dr. Hogan. I think you are sort of putting me now in the
position of being a state regulatory commissioner, right, who
is responsible for overseeing these types of decisions for our
regulated electricity industry, but I think generally, people
are looking for solutions that deliver the least-cost energy to
the American customer.
Mr. Weber. Well, and I am sorry. Forgive me. As we seek to
justify higher and higher efficiency ratings that we impose on
manufacturers, in essence, we are stepping in between state
regulatory agencies and we are saying, look, you are going to
have to build more efficient units that use less electricity.
And the net result may be that we actually defer the building
of more efficient, more environmentally friendly plants. And I
think that cost needs to be taken into account.
Mr. Chairman, thank you for your indulgence. I yield back.
Chairman Broun. Thank you, Mr. Weber.
Now, the Chairman recognizes Mr. Lipinski for five minutes.
Mr. Lipinski. I thank you, Chairman Broun. I unfortunately
had another hearing at the same time so I apologize for not
being here to hear the--your spoken testimony.
But in going through the written testimony, I know, Mr.
King, you highlighted the amount of energy savings from
mechanical insulation and it seems like it could be very
helpful for manufacturers and industries who are trying to
boost their competitiveness. I wanted to ask not only Mr. King
but the entire panel. Do you see a greater potential role for
things like mechanical insulation in Energy Savings Performance
Contracts or in other ways--other use by the Federal
Government? So let's start with Mr. King.
Mr. King. We would certainly hope so. One of the biggest
hurdles I would say, barriers today with mechanical insulation
in existing buildings is when they are looking at existing
buildings outside of a major performance contract, it is
basically referred to as a maintenance expense. And whether it
is government or private business, people are cutting expenses
and not completing things that are energy efficiency that do in
fact have a tremendous return on investment from an efficiency
standpoint. And, as a result of that, it is--nothing is being
done because of budgetary restraints. They are looking at it as
an operating expense as opposed to an energy efficiency
investment.
So it is the fact that the energy performance contracts,
when you look at it holistically, if they would look at the
proven prescriptive items like mechanical insulation--and there
are others--to be included in that, all inclusive in that, it
actually helps the implementation of those types of measures.
Mr. Lipinski. Thank you. And anyone else want to--Ms.
Schafer?
Ms. Schafer. We definitely use insulation and--when we do
mechanical work when we replace chillers, decentralized
boilers, all those things. So it is used. We are getting in to
deeper and deeper retrofits in Federal buildings, working on
Net Zero with the Department of the Army right now, and there
will be even more opportunities for insulation.
Another place that we really see a role for both ESPCs and
an increase used in mechanical insulation is in the industrial
markets, which we don't have a lot in the Federal Government,
but it is a huge opportunity to save energy at very low cost.
Mr. Lipinski. Thank you. Dr. Whitlow?
Dr. Whitlow. When we work with the DOE to identify
potential projects and the task orders that we would do to
improve our energy efficiency, if there is a role for
insulation in meeting our goals and then certainly we would use
insulation as appropriate.
Mr. Lipinski. Thank you. Dr. Hogan, anything to add?
Dr. Hogan. Certainly, as we give guidance out to the
Federal agencies around the types of measures that are
appropriate for use in performance contracting, you know, we
include a complete slate of those measures and certainly
insulation will be part of that.
Mr. Lipinski. Great. Thank you. With that, I will yield
back.
Chairman Broun. Thank you, Mr. Lipinski.
And I think we have exhausted our numbers of Members that
wanted to ask questions, and so our first round is over.
And I want to thank the witnesses for your valuable
testimony and Members for their questions. Members may have
additional questions. In fact, I will promise you we do. And I
thank you, Dr. Hogan, for your promise to get the responses
back for these questions for the record back in a very
expeditious manner, within two weeks. I hope.
So Members--the record will remain open for two additional
weeks for additional comments and for the questions that are
being provided to the panel.
I thank you all for your being here today and for your
excellent testimony and very interesting testimony. We have got
a lot of things that we need to be doing to try to promote more
energy efficiency and savings to the taxpayer, particularly in
these hard times economically for the government and for
everybody. The witnesses are excused and the hearing is now
adjourned.
[Whereupon, at 11:35 a.m., the Subcommittees were
adjourned.]
Appendix I
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Answers to Post-Hearing Questions
Answers to Post-Hearing Questions
Responses by Dr. Kathleen Hogan
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Responses by Dr. Woodrow Whitlow, Jr.
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Responses by Ms. Jennifer Schafer
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Responses by Mr. Ron King
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Appendix II
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Additional Material for the Record
Submitted letter for the record by Representative Eric Swalwell
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