Readiness Panel Directs GAO to Examine Savings Generated by Energy Efficiency Contracts

Due to questions as to whether energy savings performance contracts (ESPCs) deliver the savings promised installations, the House Armed Services’ Readiness Subcommittee directs the Government Accountability Office (GAO) to review the projects’ effectiveness, according to report language included in its portion of the fiscal 2017 defense authorization bill.

ESPCs, under which energy services companies finance infrastructure upgrades intended to reduce power consumption at defense facilities, have played a major role in helping installations conserve energy and shift their reliance to renewables. Installations repay the providers based on the cost savings attributable to the projects. For example, a naval air station obtained ground source heat pumps through an ESPC and an Army post obtained a wind turbine using a utility energy services contract.

In more than half of the projects reviewed by GAO, though, contractors overstated the savings generated by their upgrades, the panel states.

“The Government Accountability Office findings raise concerns about the financial performance of these projects and the extent of fiscal exposure the department is experiencing by using appropriated funds in their budgets to repay contractors on these alternative financing arrangements,” the panel states.

GAO’s review should answer the following questions:

  • what energy savings, efficiency or generating-capacity projects have been financed through alternative financing arrangements since 2012, and what is the estimated value of the projects?
  • to what extent have the estimated savings or efficiencies from these projects materialized?
  • how does DOD ensure the savings reported by the service providers accurately reflect the projects’ performance?
  • since 2012, what portion of installations’ utilities budgets have been dedicated to repaying contractors for ESPCs, utility energy services contracts or other alternatively financed projects, and what trends have occurred over that period?

The subcommittee marks up its portion of the annual policy bill today at 9:30 a.m. The subcommittee’s mark is available on the Armed Services Committee website.

Dan Cohen
Dan Cohen
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