Testimony: Energy Efficiency in the Federal Government

I am Jared O. Blum, President of the Polyisocyanurate Insulation Manufacturers Association (PIMA) and current Chair of the Alliance to Save Energy’s Federal Energy Productivity Task Force. Since 1995, the Task Force has brought together private-sector companies and organizations with an interest in cutting Federal government energy waste (list of members attending the past two Task Force meetings attached). The Task Force:

• monitors the status of DOE’s Federal Energy Management Program (FEMP);
• develops and articulates positions on Federal energy management policies;
• provides guidance and input to the FEMP program and the Federal Energy Management Advisory Committee (FEMAC), and
• encourages and Federal agencies to meet the energy reduction requirements set forth in Federal law, regulations, and executive orders.

In 1998, the Task Force and the Alliance published, Leading By Example, (copy enclosed) which discussed many of the current issues and problems related to Federal energy management and outlined a series of recommendations from the Task Force for improvements. As a direct result of these recommendations, Executive Order 13123 was issued, setting new goals for Federal agencies to reduce energy use. Over the past two years, our Task Force has worked with members of Congress and their staffs to develop legislation to revise the Federal government’s energy management objectives and to strengthen the ability of agencies to meet those goals.

We appreciate this opportunity to provide our views to the Committee as you gather input for developing comprehensive energy legislation. As the largest coalition of private-sector advocates for improved Federal energy management, and in recognition of the economic, environmental and energy security benefits of cutting Federal energy waste, we urge the Committee to include the provisions regarding Federal energy management that were agreed to during last year’s Conference Committee on H.R. 4. In addition, we urge the Committee to include language (draft attached) that would expand authority, on a pilot basis, for Federal agencies to enter into Energy Savings Performance Contracts to include non-building energy savings projects.

H.R. 4 Conference Committee agreement:

Last Fall, the House and Senate conferees on H.R. 4 agreed to a package of Federal energy management provisions that would have:

1. Updated agency energy reduction targets. Established each agency’s energy reduction goal at 2 percent per year from 2003 thru 2012, as compared to energy use in 2000; and required DOE to recommend, in 2011, the percentage reduction goals for 2013 thru 2022.
2. Extended and expanded Energy Savings Performance Contract (ESPC) authority. Repealed the October 1, 2003 “sunset” on ESPC authority. Expanded the definition of the benefits under an ESPC to include savings resulting from: improvements in operations and maintenance, increased use of cogeneration, a reduction in the cost of water, and replacement buildings. Required DOE, within 180 days, to review the ESPC program to identify obstacles that prevent Federal agencies from fully utilizing the program.
3. Required cost-effective metering. By 2010, all Federal buildings shall be metered or sub-metered and, to the maximum extent practicable, each agency shall use advanced meters. Within 180 days, DOE shall, in consultation with DOD, GSA, and representatives of the metering industry and others, issue metering guidelines based on cost-effectiveness criteria. Required agencies to submit a Metering Plan to DOE within 6 months of enactment.
4. Increased Federal building performance standards. Directed DOE to revise Federal building energy performance standards within 1 year to 30 percent below consumption in ASHRAE 90.1 for commercial buildings, or 30 percent below IECC for new residential buildings, if cost-effective. It further directed DOE to determine, within one year, whether amendments to these codes should trigger further revision of the Federal standards. Required that agencies, in their annual budget requests, .include lists of new buildings and a statement on whether they meet the revised standards.
5. Strengthened Federal procurement requirements. Required procurement of Energy Star or FEMP designated products unless they are not cost-effective or are not reasonably available. Required GSA and DLA to clearly display Energy Star and FEMP designated products in their catalogs and, after existing inventories are exhausted, shall only replace with Energy Star or FEMP designated products. Within 120 days, DOE shall designate electric motors of 1 to 500 horsepower for use by agencies.
6. Increased Federal fleet fuel economy requirements. Each agency shall determine its baseline fuel economy based on automobiles purchased in 1999 and shall manage procurement to increase average fuel economy by 1 mpg by September 30, 2003; and by 3 mpg by September 30, 2005.

While last year’s agreement does not represent anyone’s ideal legislative package, it is a strong and balanced set of provisions which deserves the consensus support it gained last year. Enactment of these provisions is vitally important to the continued, successful efforts of the FEMP program to reduce Federal energy use and save taxpayer dollars. For example, DOE would be better able to monitor agency progress toward energy savings targets and agencies would be less able to “game” the measurement of their performance if energy reduction targets are updated from the fiscal year 1985 to the fiscal year 2000 baseline. Federal procurement of energy consuming products and the construction of energy-efficient buildings will be strengthened by updating these Federal standards to reflect the most recent energy-efficient technologies, and the most recent industry and government consensus efficiency standards. Finally, advances in metering and a commitment to energy savings demands that the Federal government require metering where it is cost-effective. After all, how can agencies manage something they cannot measure?

Enactment of these provisions would revitalize a program that has a remarkable history of success. DOE’s most recent report to Congress on Federal energy management, dated January 11, 2001, stated that energy consumption per gross square foot in Federal buildings had declined 20.7 percent from Fiscal Year 1985 to Fiscal Year 1999. This reduction in energy intensity saves the Federal government on the order of $1 billion every year in reduced utility costs. Additional savings of this magnitude remain achievable if Congress enacts the provisions that were carefully negotiated last year. Enactment of these provisions would also demonstrate Congress’s continuing commitment to Federal energy savings, and would send a powerful message to government managers that cutting energy waste remains a national priority.

One essential factor in reducing Federal energy use is obtaining the funding needed to implement energy savings projects. This funding may be available from three sources: direct appropriations, through utility programs, and from private-sector sources under ESPCs. In recent years, ESPC funding has become increasingly important because less funding is available from direct appropriations and utility programs. Appropriations have been curtailed as a result of overall pressure on Federal spending, and utility funding has been reduced as a consequence of electricity market restructuring. The ESPC program has been extraordinarily successful in tapping private-sector funding and expertise to achieve energy savings. Since 1992, nearly $1.1 billion in private-sector capital has been invested in Federal energy improvement projects under ESPCs, resulting in hundreds of millions of dollars in permanent savings to the U.S. taxpayer -- and the creation of private-sector jobs.

With the “sunset” date of October 1 approaching, Federal agencies, and their potential private-sector partners, are beginning to lose the incentive to negotiate new ESPCs. If the authorization extending ESPC authority is not enacted before October 1st, then Federal agencies will lose the ability to tap into a stream of investment that currently averages over $200 million per year. We not only urge that you include this provision in the Committee’s energy bill, but that you remain open to working with us to explore other ways to enact this provision if it appears the bill cannot be enacted by the October 1, 2003 deadline.

ESPC expansion:

Given the tremendous success of ESPCs in attracting private-sector investment in energy efficiency projects in Federal buildings, it is now appropriate to determine whether ESPCs can be applied to non-building projects -- where most Federal energy consumption occurs.

33 percent of the Federal government’s energy consumption occurs in Federal buildings and 60 percent occurs in government vehicles such as cars, trucks, ships and aircraft (so-called “mobility” fuel use). The other 7 percent occurs in “energy intensive operations” such as irrigation, energy intensive government manufacturing operations, and research and development activities.

While no specific estimates are available of the potential energy savings from such “non-building” ESPC projects, a recent article by Amory Lovins, stated that the potential for DOD fuel savings alone are “upwards of ten billion dollars a year, because the few billion dollars of direct annual fuel savings can trigger far larger avoided fuel delivery costs.” He also states that, “The Army uses about $0.2 billion worth of fuel a year, but pays about 16 times as much, $3.2 billion a year, just to maintain 20,000 active and 40,000 reserve personnel to move that fuel.

A recent Department of Defense Science Board Task Force report found that “Ten years after the Cold war, over 70 percent of the tonnage required to position today’s U.S. Army into battle is fuel”; and that, “The Air Force...spends approximately 85 percent of its fuel budget to deliver, by airborne tankers, just 6 percent of its annual jet fuel usage.” The Task Force further found that “High pay-off, fuel-efficient technologies are available now,” and recommended that DOD, “specifically target fuel efficiency improvements…”

The expansion of ESPC authority we propose would create opportunities for private-sector investment in Federal energy efficiency projects, create jobs, reduce oil demand, save taxpayer dollars, and reduce pollution. As stated in the DOD report, increased fuel efficiency would “also improve military capability by reducing the size of the fuel logistics system, reducing the burden of high fuel consumption on agility, reducing costs and dampening the budget impact from volatile oil prices.”

There are uncertainties in how ESPC contracts would need to be modified to respond to the differences that exist between building and non-building energy efficiency projects. For example, there are differences in how energy savings would be measured and verified, and how payments to private-sector partners would be made. While most of these potential uncertainties appear resolvable, agencies and their potential energy service company partners cannot be expected to work-through these issues and negotiate ESPCs for non-building projects unless they can eventually enter into contracts. Accordingly, we urge the Committee to authorize a pilot program. Authorization for 10 pilot projects should be adequate to gauge the level of interest in such expanded authority by Federal agencies and the private sector, and for them to work-through contract modifications for a range of typical non-building projects. The results from those 10 projects could then be reported to the Congress along with recommendations on whether to extend the authority. Attached is draft language that would:

• authorize DOD and the heads of other Federal agencies to enter into up to ten non-building ESPC projects;
• require the Secretary of Energy, in consultation with the heads of Federal agencies, to select up to 10 ESPCs projects to demonstrate the applicability and benefit of energy savings performance contracting to a range of non-building energy efficiency improvement projects; and
• require the Secretary to report to Congress, by December 31, 2005, on the results of the pilot program, including the energy and cost savings resulting from the projects, their cost effectiveness, and recommendations as to whether the authority to enter into such contracts should be continued.

Energy efficiency has direct benefits for the Federal government. It reduces costs and environmental impact, saves taxpayer dollars and enhances energy security. As representatives of the private-sector, the Alliance’s Federal Energy Productivity Task Force supports improved Federal energy efficiency because it also creates jobs and opportunities for Federal/private-sector partnerships. While the Federal government uses only 1 percent of the nation’s energy, its’ actions have a substantial impact on the attitudes and behavior of others in recognizing and acting to gain the benefits of increased efficiency.

We urge you to include last year’s Conference Committee agreement on Federal energy management, and our proposal for a pilot program to expand ESPC authority to non-building projects, not only for the direct economic, environmental and security benefits to the Federal government, but also to demonstrate -- by example -- the continuing commitment of Congress and the Federal government to achieving the benefits that energy efficiency offers to the nation.

Thank you again for the opportunity to contribute to the Committee’s deliberations on national energy legislation.