Issues related to share-in-savings contract authorities of the National Energy Conservation Policy Act and the Clinger-Cohen Act, B-287488, June 19, 2001

B-287488 Jun 19, 2001 Jump To VIEW DECISION RELATED PAGES GAO CONTACTS Highlights Because the answers to your first two questions are interrelated. We have combined these questions and answer them together. Allows agencies to keep a share of the savings under the contract and whether there are restrictions on the use of that money. Because it was a provision of an appropriations act. This amount is available for specified energy and water conservation projects until expended. The expectation is that the energy conservation measures implemented by the contractor will lower the agency's utility bills. The "savings" is reflected in the increased availability of the agency's appropriations for obligations and expenditures other than energy costs (i.e. The amount of savings realized is important for two reasons-(1) the amount of the agency's payment to the contractor is tied to that amount. View Decision Issues related to share-in-savings contract authorities of the National Energy Conservation Policy Act and the Clinger-Cohen Act, B-287488, June 19, 2001 The Honorable Joseph I. Lieberman Chairman, Committee on Governmental Affairs United States Senate Dear Mr. Chairman: This responds to your letter dated April 26, 2001, requesting our legal opinion on issues related to share-in-savings contract authorities of the National Energy Conservation Policy Act and the Clinger-Cohen Act. You asked five questions. Because the answers to your first two questions are interrelated, we have combined these questions and answer them together. We answer the remaining three questions in turn. You ask whether 42 U.S.C. Sec. 8287 et seq., the National Energy Conservation Policy Act authority for entering into Energy Savings Performance Contracts (ESPC), allows agencies to keep a share of the savings under the contract and whether there are restrictions on the use of that money. You also ask whether section 625 of Public Law 104-52, the Treasury, Postal Service, and General Government Appropriations Act for Fiscal Year 1996, remains in effect, or if, because it was a provision of an appropriations act, it expired at the end of the fiscal year covered by that appropriations act. As explained below, section 8287, together with section 625, permits an agency contracting under authority of section 8287 to retain an amount equal to 50 percent of the agency's measured energy savings realized from an ESPC (after paying the ESPC contractor), for credit to appropriations that fund energy and water conservation activities at the agency's facilities. This amount is available for specified energy and water conservation projects until expended. The agency must transfer to the General Fund of the Treasury an amount equal to the remaining 50 percent of the agency's savings. Section 8287 authorizes agencies to enter into contracts for as many as 25 years for the purpose of achieving energy savings and benefits. It requires that the contractor bear the costs of implementing energy savings measures, including energy audits, acquisition and installation of equipment, and training of personnel, and that the contractor guarantee performance and savings. 42 U.S.C. Sec. 8287(a)(1). It authorizes agencies, in exchange, to guarantee payment to the contractor of an amount equal to a share of any savings directly resulting from the implementation of the contractor's energy savings measures. Id. Section 8287c defines "energy savings" as a reduction in the agency's cost of energy as compared to a base cost established through a methodology set forth in the contract. The expectation is that the energy conservation measures implemented by the contractor will lower the agency's utility bills, meaning that the agency spends less of its appropriated funds on utilities after the contract than it did before the contract. The "savings" is reflected in the increased availability of the agency's appropriations for obligations and expenditures other than energy costs (i.e., utility bills). In other words, the savings achieved as a result of the contract activity "free up" the appropriation realizing the savings for other uses. The amount of savings realized is important for two reasons-(1) the amount of the agency's payment to the contractor is tied to that amount; and (2) section 625 defines the future availability to the agency of the remaining amount of savings realized, after paying the contractor. Section 8287 requires the agency to include in an ESPC a payment schedule reflecting the savings to the agency that the contractor has guaranteed. 42 U.S.C. Sec. 8287(a)(1)(B). /1/ While the amount paid the contractor is tied to the amount of savings the agency realizes, section 8287a designates the source of funds the agency may use to pay the contractor, requiring the agency to pay the contractor "from funds appropriated or otherwise made available to the agency . . .