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113th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 2d Session                                                     113-627

======================================================================



 
     ENERGY SAVINGS THROUGH PUBLIC-PRIVATE PARTNERSHIPS ACT OF 2014

                                _______
                                

 November 19, 2014.--Committed to the Committee of the Whole House on 
            the State of the Union and ordered to be printed

                                _______
                                

  Mr. Upton, from the Committee on Energy and Commerce, submitted the 
                               following

                              R E P O R T

                        [To accompany H.R. 2689]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Energy and Commerce, to whom was referred 
the bill (H.R. 2689) to amend the National Energy Conservation 
Policy Act to encourage the increased use of performance 
contracting in Federal facilities, having considered the same, 
report favorably thereon with an amendment and recommend that 
the bill as amended do pass.

                                CONTENTS

                                                                   Page
Purpose and Summary..............................................     3
Background and Need for Legislation..............................     3
Hearings.........................................................     4
Committee Consideration..........................................     4
Committee Votes..................................................     5
Committee Oversight Findings.....................................     5
Statement of General Performance Goals and Objectives............     5
New Budget Authority, Entitlement Authority, and Tax Expenditures     5
Earmark, Limited Tax Benefits, and Limited Tariff Benefits.......     5
Committee Cost Estimate..........................................     5
Congressional Budget Office Estimate.............................     5
Federal Mandates Statement.......................................    11
Duplication of Federal Programs..................................    11
Disclosure of Directed Rule Makings..............................    11
Advisory Committee Statement.....................................    11
Applicability to Legislative Branch..............................    11
Section-by-Section Analysis of the Legislation...................    12
Changes in Existing Law Made by the Bill, as Reported............    13

    The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Energy Savings Through Public-Private 
Partnerships Act of 2014''.

SEC. 2. FINDINGS.

  Congress finds the following:
          (1) Private sector funding and expertise can help address the 
        energy efficiency challenges facing the United States.
          (2) The Federal Government spends more than $6 billion 
        annually in energy costs.
          (3) Reducing Federal energy costs can help save money, create 
        jobs, and reduce waste.
          (4) Energy savings performance contracts and utility energy 
        service contracts are tools for utilizing private sector 
        investment to upgrade Federal facilities without any up-front 
        cost to the taxpayer.
          (5) Performance contracting is a way to retrofit Federal 
        buildings using private sector investment in the absence of 
        appropriated dollars.
          (6) Retrofits that reduce energy use also improve 
        infrastructure, protect national security, and cut facility 
        operations and maintenance costs.

SEC. 3. USE OF ENERGY AND WATER EFFICIENCY MEASURES IN FEDERAL 
                    BUILDINGS.

  (a) Energy Management Requirements.--Section 543(f)(4) of the 
National Energy Conservation Policy Act (42 U.S.C. 8253(f)(4)) is 
amended--
          (1) by redesignating subparagraphs (A) and (B) as clauses (i) 
        and (ii), respectively and by moving the margins 2 ems to the 
        right;
          (2) by striking ``Not later than'' and inserting the 
        following:
                  ``(A) In general.--Not later than''; and
          (3) by adding at the end the following new subparagraph:
                  ``(B) Measures not implemented.--Each energy manager, 
                as part of the certification system under paragraph (7) 
                and using guidelines developed by the Secretary, shall 
                provide an explanation regarding any life-cycle cost-
                effective measures described in subparagraph (A)(i) 
                that have not been implemented.''.
  (b) Reports.--Section 548(b) of the National Energy Conservation 
Policy Act (42 U.S.C. 8258(b)) is amended--
          (1) in paragraph (3), by striking ``and'' at the end;
          (2) in paragraph (4), by striking the period at the end and 
        inserting ``; and''; and
          (3) by adding at the end the following new paragraph:
          ``(5) the status of each agency's energy savings performance 
        contracts and utility energy service contracts, the investment 
        value of such contracts, the guaranteed energy savings for the 
        previous year as compared to the actual energy savings for the 
        previous year, the plan for entering into such contracts in the 
        coming year, and information explaining why any previously 
        submitted plans for such contracts were not implemented.''.
  (c) Federal Energy Management Definitions.--Section 551(4) of the 
National Energy Conservation Policy Act (42 U.S.C. 8259(4)) is amended 
by striking ``or retrofit activities'' and inserting ``retrofit 
activities, or energy consuming devices and required support 
structures''.
  (d) Authority to Enter Into Contracts.--Section 801(a)(2)(F) of the 
National Energy Conservation Policy Act (42 U.S.C. 8287(a)(2)(F)) is 
amended--
          (1) in clause (i), by striking ``or'' at the end;
          (2) in clause (ii), by striking the period at the end and 
        inserting ``; or''; and
          (3) by adding at the end the following new clause:
                          ``(iii) limit the recognition of operation 
                        and maintenance savings associated with systems 
                        modernized or replaced with the implementation 
                        of energy conservation measures, water 
                        conservation measures, or any series of energy 
                        conservation measures and water conservation 
                        measures.''.
  (e) Miscellaneous Authority.--Section 801(a)(2) of the National 
Energy Conservation Policy Act (42 U.S.C. 8287(a)) is amended by adding 
at the end the following:
                  ``(H) Miscellaneous authority.--Notwithstanding any 
                other provision of law, a Federal agency may sell or 
                transfer energy savings and apply the proceeds of such 
                sale or transfer to fund a contract under this 
                title.''.
  (f) Payment of Costs.--Section 802 of the National Energy 
Conservation Policy Act (42 U.S.C. 8287a) is amended by striking ``(and 
related operation and maintenance expenses)'' and inserting ``, 
including related operations and maintenance expenses''.
  (g) Energy Savings Performance Contracts Definitions.--Section 804(2) 
of the National Energy Conservation Policy Act (42 U.S.C. 8287c(2)) is 
amended--
          (1) in subparagraph (A), by striking ``federally owned 
        building or buildings or other federally owned facilities'' and 
        inserting ``Federal building (as defined in section 551 (42 
        U.S.C. 8259))'' each place it appears;
          (2) in subparagraph (C) , by striking ``; and'' and inserting 
        a semicolon;
          (3) in subparagraph (D), by striking the period at the end 
        and inserting a semicolon; and
          (4) by adding at the end the following new subparagraphs:
                  ``(E) the use, sale, or transfer of energy 
                incentives, rebates, or credits (including renewable 
                energy credits) from Federal, State, or local 
                governments or utilities; and
                  ``(F) any revenue generated from a reduction in 
                energy or water use, more efficient waste recycling, or 
                additional energy generated from more efficient 
                equipment.''.

                          Purpose and Summary

    H.R. 2689, the ``Energy Savings Through Public-Private 
Partnerships Act of 2013,'' was introduced by Representatives 
Gardner (R-CO) and Welch (D-VT) on July 16, 2013. The 
legislation facilitates the use of energy savings performance 
contracts (ESPCs) and utility energy service contracts (UESCs) 
to utilize private sector investment to upgrade the energy and 
water efficiency of Federal facilities without any up-front 
cost to taxpayers. The bill helps to reduce Federal energy 
costs, while saving money, creating jobs, and reducing waste.

                  Background and Need for Legislation

    As the nation's single largest energy consumer, the Federal 
government spends more than $7 billion annually on its energy 
costs.\1\ Energy efficiency improvements can reduce this 
expenditure, as well as help agencies acquire necessary 
infrastructure and equipment. In 2007, the Energy Independence 
and Security Act required Federal agencies to perform energy 
audits of their facilities.\2\ To date, with 77 percent of 
covered facilities audited, almost $11 billion worth of 
potential life-cycle cost-effective energy conservation 
measures have been identified.\3\
---------------------------------------------------------------------------
    \1\Dr. Timothy D. Unruh, Program Director, U.S. Department of 
Energy, Federal Energy Management Program, `` NAESCO: Meeting Enhanced 
Energy Consumption Reduction and Performance Objectives at Federal 
Facilities through Strategic Use of ESPCs and UESCs,'' (Mar. 18, 2014).
    \2\Energy Independence and Security Act of 2007, Pub. L. No. 110-
140, 432 (2007).
    \3\U.S. Department of Energy, Federal Energy Management Program, 
``EISA Compliance Tracking System Reports and Data.''
---------------------------------------------------------------------------
    ESPCs and UESCs are a proven method by which Federal 
agencies can increase efficiency, thereby reducing energy 
costs. In both cases, an approved contractor designs and 
installs systems and equipment to reduce the energy consumption 
of a Federal facility and gets paid back through savings on 
utility bills that result from the project over a stipulated 
period of time. By law, and on a negotiated basis, the 
government never pays more than it would have paid for 
utilities if it had not entered into the ESPC. Using an ESPC or 
UESC in the Federal government eliminates the need for 
appropriated dollars for equipment replacement and for 
operations and maintenance of such energy consuming equipment.
    For over 20 years, performance-based contracts for energy 
savings have provided upgrades to Federal buildings, including 
the House and Senate Office Buildings and the U.S. Capitol. 
According to the Federal Energy Management Program, 
approximately 600 performance contracts worth $5.3 billion have 
been awarded throughout 25 Federal agencies and in 49 States. 
These projects have resulted in energy savings valued at $13.1 
billion, of which, approximately $10.1 billion went to repay 
project investments, accruing a net savings of $3 billion to 
the Federal government.\4\ Further, a June 2013 Oak Ridge 
National Laboratory study found that under an ESPC, Federal 
agencies are saving an average of almost twice as much energy 
as is guaranteed by the contractor.\5\ In addition to 
generating energy and dollar savings, years of deferred 
maintenance at Federal facilities are successfully addressed by 
ESPC retrofits at no additional cost to taxpayers.
---------------------------------------------------------------------------
    \4\U.S. Department of Energy, Federal Energy Management Program, 
``Awarded ESPC Projects.''
    \5\Oak Ridge National Laboratory, ``Beyond Guaranteed Savings: 
Additional Cost Savings Associated With ESPC Projects,'' (Mar. 2013).
---------------------------------------------------------------------------
    ESPCs also are used in State and municipal buildings, as 
well as in schools, hospitals and universities. All 50 States 
have statutes authorizing energy savings performance 
contracting. While utilization varies across each State, the 
U.S. Energy Services Company (ESCO) market--which is 
principally comprised of ESPC activity--exceeds $5 billion 
annually.\6\ In the past twenty years, U.S. ESCOs delivered 
about $45 billion in projects paid from savings, $50 billion in 
energy and maintenance savings--guaranteed and verified, 
400,000 person-years of direct employment, $30 billion of 
infrastructure improvements in public facilities, and 450 
million tons of CO2 savings at no additional cost.\7\
---------------------------------------------------------------------------
    \6\U.S. Department of Energy, Weatherization and Intergovernmental 
Programs Office, ``Current Size and Remaining Market Potential of U.S. 
ESCO Industry,'' (Sept. 2013).
    \7\National Association of Energy Service Companies, ``The ESCO 
Story.''
---------------------------------------------------------------------------
    Greater utilization of ESPCs has been impaired by 
administrative delay and process issues within Federal 
agencies, some of which are the result of ambiguity in the 
underlying law. H.R. 2689 seeks to eliminate administrative 
roadblocks by clarifying certain provisions of the law to 
reduce confusion resulting from statutory ambiguities. In 
addition, the legislation requires additional reporting 
requirements, thus ensuring improved transparency.
            Supporters of the Legislation
    The following entities have provided letters in support of 
H.R. 2689: Federal Performance Contracting Coalition, National 
Association of Manufacturers, U.S. Chamber of Commerce, and 
U.S. Green Building Council.

                                Hearings

    The Committee on Energy and Commerce has not held hearings 
on the legislation.

                        Committee Consideration

    On April 29 and 30, 2014, the Committee on Energy and 
Commerce met in open markup session. During the markup, an 
amendment in the nature of a substitute was offered and adopted 
by a voice vote. The Committee ordered H.R. 2689 favorably 
reported to the House of Representatives, as amended, by a 
voice vote.

                            Committee Votes

    Clause 3(b) of rule XIII of the Rules of the House of 
Representatives requires the Committee to list the record votes 
on the motion to report legislation and amendments thereto. 
There were no record votes taken in connection with ordering 
H.R. 2689 reported. A motion by Mr. Upton to order H.R. 2689 
reported to the House, as amended, was agreed to by a voice 
vote.

                      Committee Oversight Findings

    Pursuant to clause 3(c)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee made findings that are 
reflected in this report.

         Statement of General Performance Goals and Objectives

    H.R. 2689 facilitates the use of energy savings performance 
contracts (ESPCs) and utility energy service contracts (UESCs) 
to utilize private sector investment to upgrade the energy and 
water efficiency of Federal facilities without any up-front 
cost to taxpayers. The bill helps to reduce Federal energy 
costs while saving money, creating jobs, and reducing waste.

   New Budget Authority, Entitlement Authority, and Tax Expenditures

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee finds that H.R. 
2689, would result in no new or increased budget authority, 
entitlement authority, or tax expenditures or revenues.

       Earmark, Limited Tax Benefits, and Limited Tariff Benefits

    In compliance with clause 9(e), 9(f), and 9(g) of rule XXI 
of the Rules of the House of Representatives, the Committee 
finds that H.R. 2689 contains no earmarks, limited tax 
benefits, or limited tariff benefits.

                        Committee Cost Estimate

    The Committee adopts as its own the cost estimate prepared 
by the Director of the Congressional Budget Office pursuant to 
section 402 of the Congressional Budget Act of 1974.

                  Congressional Budget Office Estimate

    Pursuant to clause 3(c)(3) of rule XIII of the Rules of the 
House of Representatives, the following is the cost estimate 
provided by the Congressional Budget Office pursuant to section 
402 of the Congressional Budget Act of 1974:

                                     U.S. Congress,
                               Congressional Budget Office,
                                Washington, DC, September 24, 2014.
Hon. Fred Upton, 
Chairman, Committee on Energy and Commerce,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 2689, the Energy 
Savings Through Public-Private Partnerships Act of 2014.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Megan 
Carroll.
            Sincerely,
                                              Douglas W. Elmendorf.
    Enclosure.

H.R. 2689--Energy Savings Through Public-Private Partnerships Act of 
        2014

    Summary: H.R. 2689 would modify agencies' authority to 
enter into energy savings performance contracts (ESPCs), a 
specific type of long-term contract used to procure equipment 
and services to conserve energy in federal buildings. The bill 
also would specify new energy-related reporting requirements 
for federal agencies.
    CBO estimates that enacting H.R. 2689 would increase direct 
spending; therefore, pay-as-you-go procedures apply. Over the 
2015-2024 period, we estimate that direct spending for 
contractual commitments to pay nonfederal vendors for energy 
conservation measures implemented pursuant to this bill would 
amount to $450 million. CBO also estimates that reductions in 
Federal agencies' energy costs attributable to investments in 
energy-related services and equipment procured through 
contracts authorized under H.R. 2689 would total $210 million 
over the next 10 years (and additional amounts in subsequent 
years). In addition, CBO estimates that discretionary spending 
for certain services related to those contracts would total $10 
million over the next five years. Enacting H.R. 2689 would not 
affect revenues.
    CBO believes that allowing agencies to enter into ESPCs 
without appropriations in advance to cover the costs of the 
acquired equipment or services creates direct spending 
authority. However, the Administration does not treat ESPCs 
that way in the budget. Rather, agencies record payments to the 
vendors as coming from annual appropriations, usually spread 
out over many years. In the budget, those costs are offset, at 
least in part, by whatever reductions in annual energy costs 
are generated by the investments. Under that budgetary 
treatment, because it usually takes many years before the 
annual costs of the equipment or services fall below the annual 
savings, the federal government generally does not realize 
significant amounts of net savings in appropriations until 
after the 10-year period covered by CBO's cost estimates.
    H.R. 2689 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act (UMRA).
    Estimated cost to the Federal Government: The estimated 
budgetary effects of H.R. 2689 are shown in the following 
table. The costs of this legislation fall primarily within 
budget functions 050 (defense), 270 (energy), and 800 (general 
government).

------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                           By fiscal year, in millions of dollars--
                                                             -----------------------------------------------------------------------------------------------------------------------------------
                                                                 2015       2016       2017       2018       2019       2020       2021       2022       2023       2024    2015-2019  2015-2024
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                   CHANGES IN DIRECT SPENDING
 
Federal Obligations Under ESPCs:
    Estimated Budget Authority..............................         50         50         50         50         50         50         50         50         50         50        250        500
    Estimated Outlays.......................................         15         35         50         50         50         50         50         50         50         50        200        450
 
                                                                          CHANGES IN SPENDING SUBJECT TO APPROPRIATION
Reductions in Energy and Energy-Related Costs Attributable
 to ESPCs:
    Estimated Authorization Level...........................         -1         -4         -9        -13        -18        -23        -28        -33        -38        -43        -45       -210
    Estimated Outlays.......................................         -1         -4         -9        -13        -18        -23        -28        -33        -38        -43        -45       -210
Appropriations for ESPC-Related Services:
    Estimated Authorization Level...........................          *          1          2          3          4          5          6          7          8          9         10         45
    Estimated Outlays.......................................          *          1          2          3          4          5          6          7          8          9         10        45
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Notes: ESPCs = Energy savings performance contracts; * = Less than $500,000.
The estimates presented in this table reflect CBO's view of how cash flows related to ESPCs should be reflected in the federal budget. Since ESPCs were first implemented in 1998, however, the
  Administration has not recorded the full extent of federal obligations under ESPCs upfront when contracts were signed. Instead, the Administration records ongoing contract payments to
  vendors under ESPCs on a year-by-year basis as appropriations for such payments are provided. If the Administration was to continue following that practice for executing ESPCs under H.R.
  2689, agencies' total energy-related costs would be largely unchanged during the contract period, when savings from reduced energy costs would go toward making contractual payments to
  vendors. As a result, CBO estimates that there would be no significant reduction in appropriations from implementing H.R. 2689 in the 10-year period covered by this estimate. If expected
  reductions in energy use continued beyond the contract period, budgetary savings would accrue to the federal government if annual appropriations for agencies' energy-related spending were
  reduced accordingly.

    Basis of estimate: For this estimate, CBO assumes that H.R. 
2689 will be enacted near the start of fiscal year 2015. CBO 
estimates that amending agencies' authority to enter into ESPCs 
would increase direct spending by $450 million over the next 10 
years. That upfront increase in ESPC-related spending would 
lead to a reduction in agencies' energy-related costs, which 
are generally paid from discretionary appropriations, as well 
as some additional discretionary spending for certain services 
related to those contracts.

Budgetary treatment of ESPCs

    ESPCs are a form of third-party financing, in which private 
parties pay for the design, acquisition, installation, and in 
some cases, the operation and maintenance of energy 
conservation equipment (generally referred to as energy 
conservation measures) in federal buildings.\1\ Because the 
government does not pay for the equipment at the time it is 
acquired, the vendor borrows money from a nonfederal lender to 
finance the investment on behalf of the federal agency. With 
such private financing, agencies can pay for energy 
conservation measures and related financing costs over time on 
the basis of the anticipated and realized reductions in energy 
costs. Upon entering into an ESPC, the government effectively 
commits to make payments to a vendor in future years to cover 
the costs of equipment and services as well as interest costs 
on the vendor's borrowing to finance upfront costs. (Since the 
vendor faces higher borrowing costs than the U.S. Treasury, 
total interest payments for an ESPC will be higher than they 
would be if the government financed the acquisition directly 
with appropriated funds.)
---------------------------------------------------------------------------
    \1\For more on third-party financing, see Congressional Budget 
Office, Third-Party Financing of Federal Projects (June 1, 2005).
---------------------------------------------------------------------------
    Entering into such legally binding agreements constitutes a 
commitment of government resources without appropriations to 
cover all of the resulting costs. Thus, in CBO's view, the 
authority to enter into contractual agreements for third-party 
financing of energy conservation measures is a form of direct 
spending.\2\ Consistent with long-standing practice, CBO's cost 
estimates for legislation providing such authority show budget 
authority in the year or years when commitments are expected to 
be made in the amount of the estimated net present value of 
those contractual commitments. Estimated outlays stemming from 
such commitments are spread across the period during which the 
vendor is expected to construct, manufacture, or purchase the 
asset on behalf of the federal government.
---------------------------------------------------------------------------
    \2\For further details on the principles that govern CBO's analyses 
of long-term contracts such as ESPCs, see Congressional Budget Office, 
letter to the Honorable Fred Upton on the budgetary impact of energy 
savings performance contracts (July 1, 2011).
---------------------------------------------------------------------------
    Agencies, however, generally do not follow the procedures 
that CBO views as appropriate for recording an ESPC in the 
budget and that are the basis for this cost estimate. In agency 
budgets, the initial commitment of governmental resources is 
not shown as an obligation requiring upfront budget authority. 
Rather, the payments to the vendor, which are usually spread 
out over many years, come from annual appropriations and are 
recorded as outlays over the full duration of the contract, 
offset, at least in part, by whatever annual savings are 
generated by the investments.

Direct spending

    H.R. 2689 would make a variety of changes to the ESPC 
statute. In particular, the bill would:
           Permit agencies to use, sell, or transfer 
        energy incentives, rebates, or credits (such as 
        renewable energy certificates) as a means of making 
        payments to vendors under ESPCs;\3\
---------------------------------------------------------------------------
    \3\Renewable energy certificates represent the rights to the 
nonpower renewable and environmental attributes of electricity 
generated from renewable resources. Such certificates, and other 
similar incentives and rebates, can be sold separately from the 
underlying units of physical electricity.
---------------------------------------------------------------------------
           Expand the definition of ``energy 
        conservation measure'' to include the acquisition of 
        energy-consuming devices and support structures (such 
        as appliances located within federal buildings); and
           Require federal agencies to include, in 
        estimating energy savings attributable to an ESPC, 
        anticipated forgone operation and maintenance expenses 
        related to energy conservation measures financed under 
        the contract.
    Taken together, CBO expects that the proposed changes would 
result in an increase in the use of ESPCs to finance energy-
related investments. In particular, we expect that authorizing 
agencies to use incentives such as renewable energy 
certificates to finance contract payments would increase the 
use of ESPCs for projects involving renewable energy 
technologies. Under current law, agencies' authority to use 
such incentives to pay for contract costs is uncertain in light 
of a 2013 decision by a federal contract appeals board.\4\ As a 
result of that decision, CBO expects that under current law 
federal agencies are unlikely to pursue ESPCs that involve 
renewable energy technologies as a significant component. In 
addition, CBO expects that other definitional changes in H.R. 
2689 would result in additional projects going forward that 
would not be undertaken under current law.
---------------------------------------------------------------------------
    \4\Honeywell International Inc., Armed Services Board of Contract 
Appeals No. 57779 (August 7, 2013).
---------------------------------------------------------------------------
    Based on information from the Department of Energy (DOE), 
particularly related to the potential magnitude of renewable 
energy projects that are likely to be pursued through ESPCs if 
agencies were explicitly permitted to use incentives such as 
renewable energy certificates to fund contracts, CBO estimates 
that incremental increases in direct spending under H.R. 2689 
would total $450 million over the 2015-2024 period. On average, 
CBO expects that agencies would use ESPCs to acquire new energy 
conservation measures at an upfront cost of about $50 million a 
year, with most of that amount supporting investments in 
renewable energy technologies.
    CBO's estimate of direct spending reflects an amount equal 
to the cost of energy conservation measures as installed (about 
$35 million a year), plus the net present value of the portion 
of borrowing costs attributable to contract interest rates that 
would exceed U.S. Treasury interest rates (about $15 million). 
(Borrowing costs equivalent to the amount of Treasury interest 
that would be paid if the equipment was financed with 
appropriated funds are not included in our estimate because, 
for the enforcement of Congressional budget rules, changes in 
Treasury interest costs are not counted as a cost or savings 
related to any particular legislative provision.) CBO's 
estimate of outlays reflects its judgment as to when equipment 
or services would be provided--for equipment, typically over a 
three-year period.

Spending subject to appropriation

    ESPCs permit federal agencies to pay vendors for energy 
conservation measures and related financing costs over time on 
the basis of anticipated and realized reductions in energy 
costs, which are generally paid from annual appropriations. 
Typically, an ESPC vendor develops a baseline estimate of 
energy consumption that would occur in the absence of energy 
conservation measures and estimates the reductions in energy 
consumption and energy costs that would result from an ESPC-
funded project. Such reductions in energy-related costs are 
used to set the annual payments to the vendor for the services 
and equipment provided under the ESPC. According to DOE, the 
average term of those repayments under an ESPC is 17 years--
that is, it takes about 17 years, on average, for the 
government to realize sufficient savings to cover the 
contractual payments due to the vendor.\5\
---------------------------------------------------------------------------
    \5\Information provided to the Congressional Budget Office by the 
U.S. Department of Energy, Federal Energy Management Program, June 
2014.
---------------------------------------------------------------------------
    CBO anticipates that ESPC-funded projects under H.R. 2689 
would, on average, have payback periods in line with that 
historical experience. On that basis, we estimate that 
reductions in energy-related federal costs attributable to such 
contracts would total $210 million over the next 10 years.
    In addition to contractual commitments through ESPCs that 
CBO categorizes as direct spending, CBO estimates that 
discretionary spending for certain services related to ESPCs 
under H.R. 2689 would total $10 million over the next five 
years. Typically, when using an ESPC, an agency agrees to make 
payments for services related to the operation and maintenance 
of newly installed equipment. Such agreements include 
measurement and verification activities to confirm that the 
equipment produces savings as guaranteed by the contract. 
Because the government can opt out of those services at any 
time, such contract costs are discretionary. For this estimate, 
CBO assumes that the cost of such services would total about 
2.5 percent of the value of the overall contract. Assuming 
appropriation of the necessary amounts, CBO estimates that 
discretionary spending for optional ESPC-related services would 
total less than $500,000 in 2015 but would gradually increase 
as new contracts are entered into each year and payments on 
older contracts continue.
    If the funding for ESPCs was recorded as direct spending 
(as shown in the above table), any reductions in energy and 
related costs could be used to reduce discretionary spending by 
the affected agencies. However, because agencies do not record 
commitments under ESPCs upfront and instead record the payments 
to vendors as discretionary spending over the course of the 
contracts, we expect that savings from reduced energy costs 
over the first 17 years would be roughly offset by the costs of 
contract payments to vendors.
    Pay-As-You-Go considerations: The Statutory Pay-As-You-Go 
Act of 2010 establishes budget-reporting and enforcement 
procedures for legislation affecting direct spending or 
revenues. The net changes in outlays that are subject to those 
pay-as-you-go procedures are shown in the following table.

        CBO ESTIMATE OF PAY-AS-YOU-GO EFFECTS FOR H.R. 2689, AS ORDERED REPORTED BY THE HOUSE COMMITTEE ON ENERGY AND COMMERCE ON APRIL 30, 2014
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                               By fiscal year, in millions of dollars--
                                             -----------------------------------------------------------------------------------------------------------
                                               2014   2015   2016    2017    2018    2019    2020    2021    2022    2023    2024   2014-2019  2014-2024
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                       NET INCREASE OR DECREASE (-) IN THE DEFICIT
 
Statutory Pay-As-You-Go Impact..............      0     15      35      50      50      50      50      50      50      50      50       200        450
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Intergovernmental and private-sector impact: H.R. 2689 
contains no intergovernmental or private-sector mandates as 
defined in UMRA and would impose no costs on state, local, or 
tribal governments.
    Estimate prepared by: Federal costs: Megan Carroll and 
David Newman; Impact on state, local, and tribal governments: 
J'nell L. Blanco; Impact on the private sector: Amy Petz.
    Estimate approved by: Theresa Gullo, Deputy Assistant 
Director for Budget Analysis.

                       Federal Mandates Statement

    The Committee adopts as its own the estimate of Federal 
mandates prepared by the Director of the Congressional Budget 
Office pursuant to section 423 of the Unfunded Mandates Reform 
Act.

                    Duplication of Federal Programs

    No provision of H.R. 2689 establishes or reauthorizes a 
program of the Federal Government known to be duplicative of 
another Federal program, a program that was included in any 
report from the Government Accountability Office to Congress 
pursuant to section 21 of Public Law 111-139, or a program 
related to a program identified in the most recent Catalog of 
Federal Domestic Assistance.

                  Disclosure of Directed Rule Makings

    The Committee estimates that enacting H.R. 2689 
specifically directs no rule makings within the meaning of 5 
U.S.C. 551 to be completed.

                      Advisory Committee Statement

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

                  Applicability to Legislative Branch

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of section 
102(b)(3) of the Congressional Accountability Act.

             Section-by-Section Analysis of the Legislation


Section 1. Short title

    This section provides the short title of the ``Energy 
Savings Through Public-Private Partnerships Act of 2014.''

Section 2. Findings

    This section sets forth various findings regarding the use 
of energy savings performance contracts and utility energy 
service contracts to reduce Federal energy costs.

Section 3. Use of energy and water efficiency measures in Federal 
        buildings

    Section 3(a) amends Section 543(f)(4) of the National 
Energy Conservation Policy Act (NECPA) by adding a new section 
requiring Federal energy managers to provide, as part of their 
compliance certifications, an explanation regarding any life-
cycle cost-effective energy-saving or water-saving measures 
that have not been implemented.
    Section 3(b) amends Section 548(b) of NECPA by adding a new 
Department of Energy (DOE) reporting requirement on the status 
of each Federal agency's energy savings performance contracts 
and utility energy service contracts, the investment value of 
such contracts, the guaranteed energy savings for the previous 
year as compared to the actual energy savings for the previous 
year, the plan for entering into such contracts in the coming 
year, and information explaining why any previously submitted 
plans for such contracts were not implemented.
    Section 3(c) amends Section 551(4) of NECPA by revising the 
term ``energy conservation measures'' to include energy 
consuming devices and required support structures.
    Section 3(d) amends Section 801(a)(2)(F) of NECPA by 
prohibiting Federal agencies from limiting the recognition of 
operation and maintenance savings associated with systems 
modernized or replaced with the implementation of energy 
conservation measures, water conservation measures, or any 
series of energy conservation measures and water conservation 
measures.
    Section 3(e) amends Section 801(a) of NECPA by adding a new 
subsection (H) to permit the sale of renewable energy credits, 
rebates and other similar incentives to fund energy savings 
performance contracts.
    Section 3(f) amends Section 802 of NECPA to further clarify 
that reduced operation and maintenance expenses resulting from 
energy or water conversation measures implemented through an 
ESPC shall be treated as energy or water savings for purposes 
of ESPC financing.
    Section 3(g) amends Section 804(2) of NECPA by revising the 
definition of ``energy savings'' to reference Federal buildings 
as defined in Section 551 of NECPA. This section also amends 
the definition of ``energy savings'' to include (1) the use, 
sale, or transfer of energy incentives, rebates, or credits 
(including renewable energy credits) from governments or 
utilities; and (2) any revenue generated from a reduction in 
energy or water use, more efficient waste recycling, or 
additional energy generated from more efficient equipment.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

NATIONAL ENERGY CONSERVATION POLICY ACT

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TITLE V--FEDERAL ENERGY INITIATIVE

           *       *       *       *       *       *       *


PART 3--FEDERAL ENERGY MANAGEMENT

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SEC. 543. ENERGY MANAGEMENT REQUIREMENTS.

  (a) * * *

           *       *       *       *       *       *       *

  (f) Use of Energy and Water Efficiency Measures in Federal 
Buildings.--
          (1) * * *

           *       *       *       *       *       *       *

          (4) Implementation of identified energy and water 
        efficiency measures.-- [Not later than]
                  (A) In general._Not later than 2 years after 
                the completion of each evaluation under 
                paragraph (3), each energy manager may--
                          [(A)] (i) implement any energy- or 
                        water-saving measure that the Federal 
                        agency identified in the evaluation 
                        conducted under paragraph (3) that is 
                        life cycle cost-effective; and
                          [(B)] (ii) bundle individual measures 
                        of varying paybacks together into 
                        combined projects.
                  (B) Measures not implemented.--Each energy 
                manager, as part of the certification system 
                under paragraph (7) and using guidelines 
                developed by the Secretary, shall provide an 
                explanation regarding any life-cycle cost-
                effective measures described in subparagraph 
                (A)(i) that have not been implemented.

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SEC. 548. REPORTS.

  (a) * * *
  (b) Reports to the President and Congress.--The Secretary 
shall report, not later than April 2 of each year, with respect 
to each fiscal year beginning after the date of the enactment 
of this subsection, to the President and Congress--
          (1) * * *

           *       *       *       *       *       *       *

          (3) the extent and nature of interagency exchange of 
        information concerning the conservation and efficient 
        utilization of energy; [and]
          (4) the information required under section 161(d) of 
        the Energy Policy Act of 1992[.]; and

           *       *       *       *       *       *       *

          (5) the status of each agency's energy savings 
        performance contracts and utility energy service 
        contracts, the investment value of such contracts, the 
        guaranteed energy savings for the previous year as 
        compared to the actual energy savings for the previous 
        year, the plan for entering into such contracts in the 
        coming year, and information explaining why any 
        previously submitted plans for such contracts were not 
        implemented.

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SEC. 551. DEFINITIONS.

   For the purposes of this part--
          (1) * * *

           *       *       *       *       *       *       *

          (4) the term ``energy conservation measures'' means 
        measures that are applied to a Federal building that 
        improve energy efficiency and are life cycle cost 
        effective and that involve energy conservation, 
        cogeneration facilities, renewable energy sources, 
        improvements in operations and maintenance 
        efficiencies, [or retrofit activities] retrofit 
        activities, or energy consuming devices and required 
        support structures;

           *       *       *       *       *       *       *


            TITLE VIII--ENERGY SAVINGS PERFORMANCE CONTRACTS

SEC. 801. AUTHORITY TO ENTER INTO CONTRACTS.

  (a) In General.--(1) * * *
  (2)(A) * * *

           *       *       *       *       *       *       *

          (F) Promotion of contracts.--In carrying out this 
        section, a Federal agency shall not--
                  (i) establish a Federal agency policy that 
                limits the maximum contract term under 
                subparagraph (D) to a period shorter than 25 
                years; [or]
                  (ii) limit the total amount of obligations 
                under energy savings performance contracts or 
                other private financing of energy savings 
                measures[.]; or

           *       *       *       *       *       *       *

                  (iii) limit the recognition of operation and 
                maintenance savings associated with systems 
                modernized or replaced with the implementation 
                of energy conservation measures, water 
                conservation measures, or any series of energy 
                conservation measures and water conservation 
                measures.

           *       *       *       *       *       *       *

                  (H) Miscellaneous Authority.--Notwithstanding 
                any other provision of law, a Federal agency 
                may sell or transfer energy savings and apply 
                the proceeds of such sale or transfer to fund a 
                contract under this title.

           *       *       *       *       *       *       *


SEC. 802. PAYMENT OF COSTS.

  Any amount paid by a Federal agency pursuant to any contract 
entered into under this title may be paid only from funds 
appropriated or otherwise made available to the agency for 
fiscal year 1986 or any fiscal year thereafter for the payment 
of energy, water, or wastewater treatment expenses [(and 
related operation and maintenance expenses)], including related 
operations and maintenance expenses.

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SEC. 804. DEFINITIONS.

   For purposes of this title, the following definitions apply:
          (1) * * *
          (2) The term ``energy savings'' means--
                  (A) a reduction in the cost of energy, water, 
                or wastewater treatment, from a base cost 
                established through a methodology set forth in 
                the contract, used in an existing [federally 
                owned building or buildings or other federally 
                owned facilities] Federal building (as defined 
                in section 551 (42 U.S.C. 8259)) as a result 
                of--
                          (i) * * *
                          (ii) the increased efficient use of 
                        existing energy sources by cogeneration 
                        or heat recovery, excluding any 
                        cogeneration process for other than a 
                        [federally owned building or buildings 
                        or other federally owned facilities] 
                        Federal building (as defined in section 
                        551 (42 U.S.C. 8259)); or

           *       *       *       *       *       *       *

                  (C) if otherwise authorized by Federal or 
                State law (including regulations), the sale or 
                transfer of electrical or thermal energy 
                generated on-site from renewable energy sources 
                or cogeneration, but in excess of Federal 
                needs, to utilities or non-Federal energy 
                users[; and];
                  (D) the increased efficient use of existing 
                water sources in interior or exterior 
                applications[.];
                  (E) the use, sale, or transfer of energy 
                incentives, rebates, or credits (including 
                renewable energy credits) from Federal, State, 
                or local governments or utilities; and
                  (F) any revenue generated from a reduction in 
                energy or water use, more efficient waste 
                recycling, or additional energy generated from 
                more efficient equipment.

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