[Senate Report 116-116]
[From the U.S. Government Publishing Office]


                                                     Calendar No. 219
116th Congress      }                                  {       Report
                                 SENATE
 1st Session        }                                  {      116-116

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



 
     ENERGY SAVINGS THROUGH PUBLIC-PRIVATE PARTNERSHIPS ACT OF 2019

                                _______
                                

               September 24, 2019.--Ordered to be printed

                                _______
                                

  Ms. Murkowski, from the Committee on Energy and Natural Resources, 
                        submitted the following

                              R E P O R T

                         [To accompany S. 1706]

    The Committee on Energy and Natural Resources, to which was 
referred the bill (S. 1706) to amend the National Energy 
Conservation Policy Act to encourage the increased use of 
performance contracting in Federal facilities, and for other 
purposes, having considered the same, reports favorably thereon 
without amendment and recommends that the bill do pass.

                                Purpose

    The purpose of S. 1706 is to amend the National Energy 
Conservation Policy Act (NECPA, Public Law 95-619) to encourage 
the increased use of performance contracting in Federal 
facilities.

                          Background and Need

    The Committee on Energy and Natural Resources has long 
recognized the significant benefits of energy efficiency 
efforts in conserving domestic resources, saving American 
consumers money, strengthening economic competitiveness, and 
reducing environmental impacts. The energy efficiency 
``resource'' plays an increasingly important role in the 
nation's energy strategy. The advancement of cost-effective 
efficiency programs and technologies can contribute to the 
nation's goal of energy independence by reducing demand and 
using supplies in a more effective manner. S. 1706 seeks to 
increase energy efficiency and water conservation measures in 
the Federal Government.
    According to the Energy Information Administration (EIA), 
the Federal Government is the single largest energy consumer in 
the nation. The Federal Government spends over $6 billion 
annually in energy costs. Congress therefore expects the 
Government to pursue its own energy efficiency efforts 
vigorously--not only to conserve energy resources and taxpayer 
dollars, but to lead by example. To that end, S. 1706 further 
encourages the federal agencies to enter into energy savings 
performance contracts (ESPCs) and utility energy service 
contracts (UESCs).
    ESPCs and UESCs are proven methods 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 is paid back through utility bill 
savings 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 contract. By using an ESPC or UESC, 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 650 performance contracts worth $8 billion have 
been awarded throughout 25 Federal agencies and in all 50 
States. These projects have resulted in energy savings valued 
at nearly $15 billion, of which approximately $11 billion went 
to repay project investments, accruing a net savings of $4 
billion to the Federal Government. The energy efficiency 
industry estimates that there is over $20 billion in savings 
available to the Federal Government through the use of 
performance contracting.
    Greater use 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. S. 1706 
seeks to eliminate administrative roadblocks by clarifying 
certain provisions of the law to reduce confusion resulting 
from statutory ambiguities such as excluding the applicability 
of performance contracting at Federal hydroelectric generation 
facilities. In addition, the legislation requires additional 
reporting requirements, thus ensuring improved transparency.

                          Legislative History

    S. 1706 was introduced by Senators Gardner and Coons on 
June 4, 2019. Senator Shaheen was added as a cosponsor on June 
10.
    H.R. 3079, identical legislation, was introduced in the 
House of Representatives by Representatives Welch and Kinzinger 
on June 4, 2019, and referred to the Committee on Energy and 
Commerce.
    In the 115th Congress, a similar bill, S. 239, was 
introduced by Senators Gardner, Coons, Portman, and Shaheen on 
January 30, 2017. The Committee on Energy and Natural Resources 
met in an open business session on March 30, 2017, and ordered 
S. 239 favorably reported (S. Rept. 115-79).
    Companion legislation, H.R. 723, was introduced in the 
House by Representatives Kinzinger, Cartwright, Cole, Grijalva, 
Love, Perlmutter, and Welch on January 30, 2017, and referred 
to the Energy and Commerce Committee. The House Energy and 
Commerce Committee ordered H.R. 723 reported on February 23, 
2018 (H. Rept. 115-575).
    In the 114th Congress, a similar bill, S. 858, was 
introduced by Senators Gardner, Coons, Portman, and Shaheen on 
March 25, 2015. The Committee on Energy and Natural Resources 
held a hearing on S. 858 on April 30, 2015 (S. Hrg. 114-166). 
The measure was included in Amendment No. 2970, which the 
Senate agreed to on February 1, 2016, as an amendment to S. 
2012, the Energy Policy Modernization Act of 2016, which the 
Senate passed, as amended, on April 20, 2016.
    Companion legislation, H.R. 1629, was introduced in the 
House by Representatives Kinzinger, Peters, Valadao, and Welch 
on March 25, 2015, and referred to the Energy and Commerce 
Committee.
    In the 113th Congress, a similar bill, S. 1308, was 
introduced by Senator Coons on July 16, 2013. Companion 
legislation, H.R. 2689, was introduced in the House of 
Representatives by Representative Gardner and 55 cosponsors on 
July 16, 2013. The Committee on Energy and Commerce favorably 
reported H.R. 2689, as amended, on November 19, 2014 (H. Rept. 
113-627).
    The Committee on Energy and Natural Resources met in open 
business session on July 16, 2019, and ordered S. 1706 
favorably reported.

                        Committee Recommendation

    The Committee on Energy and Natural Resources, in open 
business session on July 16, 2019, by a majority voice vote of 
a quorum present, recommends that the Senate pass S. 1706.

                      Section-by-Section Analysis


Section 1. Short title

    Section 1 provides a short title.

Sec. 2. Use of energy and water efficiency measures in federal 
        buildings

    Section 2(a) amends section 543(f)(4) of NECPA to revise 
requirements for ESPCs and UESCs. It further requires Federal 
agencies to implement cost-effective measures to increase 
energy and water efficiency in Federal facilities.
    Subsection (b) amends section 548(b) of NECPA to require 
the Department of Energy to report to the President and 
Congress on each agency's performance contracts, including 
their investment value, their guaranteed compared to actual 
energy savings from the previous year, the plan for entering 
into new contracts in the coming year, and information 
explaining why any previously submitted plans for contracts 
were not implemented.
    Subsection (c) amends section 551(4) of NECPA to expand the 
definition of energy conservation measures that may be 
contained in performance contracts to include those involving 
energy consuming devices and required support structures.
    Subsection (d) amends section 801(a)(2)(F) of NECPA to 
state that agencies may not limit the recognition of operations 
and maintenance savings associated with energy systems that 
were modernized or replaced with energy and water conservation 
measures.
    Subsection (e) amends section 801 of NECPA to allow 
agencies to accept, retain, sell or transfer energy savings and 
apply the proceeds to fund a performance contract under this 
title. It excludes contracts for work performed at Federal 
hydropower facilities that provide power marketed by a Power 
Marketing Administration or facilities owned and operated by 
the Tennessee Valley Authority.
    Subsection (f) amends section 802 of NECPA to expand the 
category of funds a Federal agency can use to make payments 
pursuant to any contract entered into to include funds made 
available for the payment of related operation and maintenance 
expenses.
    Subsection (g) amends section 804(2) of NECPA to expand the 
definition of energy savings that may be contained in 
performance contracts to include the use, sale, or transfer of 
energy and water incentives, rebates, grid services, or 
credits, and any revenue generated from a reduction in energy 
or water use, more efficient waste recycling, or additional 
energy generated from more efficient equipment.

                   Cost and Budgetary Considerations

    The Congressional Budget Office estimate of the costs of 
this measure has been requested but was not received at the 
time the report was filed. When the Congressional Budget Office 
completes its cost estimate, it will be posted on the internet 
at www.cbo.gov.

                      Regulatory Impact Evaluation

    In compliance with paragraph 11(b) of rule XXVI of the 
Standing Rules of the Senate, the Committee makes the following 
evaluation of the regulatory impact which would be incurred in 
carrying out S. 1706. The bill is not a regulatory measure in 
the sense of imposing Government-established standards or 
significant economic responsibilities on private individuals 
and businesses.
    No personal information would be collected in administering 
the program. Therefore, there would be no impact on personal 
privacy.
    Little, if any, additional paperwork would result from the 
enactment of S. 1706, as ordered reported.

                   Congressionally Directed Spending

    S. 1706, as ordered reported, does not contain any 
congressionally directed spending items, limited tax benefits, 
or limited tariff benefits as defined in rule XLIV of the 
Standing Rules of the Senate.

                        Executive Communications

    Executive views on S. 1706 were not requested by the 
Committee.

                         Changes in Existing Law

    In compliance with paragraph 12 of rule XXVI of the 
Standing Rules of the Senate, the changes in existing law made 
by the original 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

Public Law 95-619, as Amended

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TITLE V--FEDERAL ENERGY INITIATIVES

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PART 3--FEDERAL ENERGY MANAGEMENT

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SEC. 543. ENERGY MANAGEMENT REQUIREMENTS.

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

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          (4) Implementation of identified energy and water 
        efficiency measures--[Not later]
                  (A) In general._Not later than 2 years after 
                the completion of each evaluation under 
                paragraph (3), each energy manager [may
                  (A) implement any energy- or water-saving 
                measure that the Federal] shall implement any 
                energy- or water-saving measure that--
                          (i) the Federal agency identified in 
                        the evaluation conducted under 
                        [paragraph (3) that is] paragraph (3); 
                        and
                          (ii) is life cycle cost-effective, as 
                        determined by evaluating an individual 
                        measure or a bundle of measures with 
                        varying paybacks.[; and]
                  [(B) bundle individual measures of varying 
                paybacks together into combined projects.]
                  (B) Performance Contracting._Each Federal 
                agency shall use performance contracting to 
                address at least \1/2\ of the measures 
                identified under subparagraph (A)(i).
          (5) Follow-up on implemented measures--For each 
        measure implemented under paragraph (4), each energy 
        manager shall ensure that--

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SEC. 548. REPORTS.

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    (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 November 5, 1988, to the 
President and Congress--
          (1) on all activities carried out under this part and 
        on the progress made toward achievement of the 
        objectives of this part, including--
                  (A) a copy of the list of the exclusions made 
                under sections 8253(a)(2) and 8253(c)(3);
                  (B) the information required under section 
                8253(b)(2); and
                  (C) a statement detailing the amount of funds 
                awarded to each agency under section 8256(b), 
                the energy and water conservation measures 
                installed with such funds, the projected energy 
                and water savings to be realized from installed 
                measures, and, for each installed measure for 
                which the projected energy and water savings 
                reported in the previous year were not 
                realized, the percentage of such projected 
                savings that was not realized, the reasons such 
                savings were not realized, and proposals for, 
                and projected costs of, achieving such 
                projected savings in the future; and
          (2) the number of contracts entered into by all 
        agencies under title VIII of this chapter, the 
        difficulties (if any) encountered in attempting to 
        enter into such contracts, and proposed solutions to 
        those difficulties;
          (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 
        8262g(d)[.]; and
          (5)(A) the status of the energy savings performance 
        contracts and utility energy service contracts of each 
        agency, to the extent that the information is not 
        duplicative of information provided to the Secretary 
        under a separate authority;
                  (B) the quantity and investment value of the 
                contracts for the previous year;
                  (C) the guaranteed energy savings, or for 
                contracts without a guarantee, the estimated 
                energy savings, for the previous year, as 
                comparted to the measured energy savings for 
                the previous year;
                  (D) a forecast of the estimated quantity and 
                investment value of contracts anticipated in 
                the following year for each agency; and
                  (E) (i) a comparison of the information 
                described in subparagraph (B) and the forecast 
                described in subparagraph (D) in the report of 
                the previous year; and
                          (ii) if applicable, the reasons for 
                        any differences in the data compared 
                        under clause (i).
    (c) Other Report.--The Secretary, in consultation with the 
Administrator of General Services, shall--
          (1) conduct a study and evaluate legal, 
        institutional, and other constraints to connecting 
        buildings owned or leased by the Federal Government to 
        district heating and district cooling systems; and
          (2) not later than 18 months after the date of the 
        enactment of this subsection, transmit to the Congress 
        a report containing the findings and conclusions of 
        such study, including recommendations for the 
        development of streamlined processes for the 
        consideration of connecting buildings owned or leased 
        by the Federal Government to district heating and 
        cooling systems.

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SEC. 551. DEFINITIONS.

    For the purposes of this part--
          (1) the term ``agency'' has the meaning given it in 
        section 551(1) of title 5;
          (2) the term ``construction'' means new construction 
        or substantial rehabilitation of existing structures;
          (3) the term ``cogeneration facilities'' has the same 
        meaning given such term in section 3(18)(A) of the 
        Federal Power Act (16 U.S.C. 796(18)(A));
          (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.
          (5) the term ``energy survey'' means a procedure used 
        to determine energy and cost savings likely to result 
        from the use of appropriate energy related maintenance 
        and operating procedures and modifications, including 
        the purchase and installation of particular energy-
        related equipment and the use of renewable energy 
        sources;
          (6) the term ``Federal building'' means any building, 
        structure, or facility, or part thereof, including the 
        associated energy consuming support systems, which is 
        constructed, renovated, leased, or purchased in whole 
        or in part for use by the Federal Government and which 
        consumes energy; such term also means a collection of 
        such buildings, structures, or facilities and the 
        energy consuming support systems for such collection;
          (7) the term ``life cycle cost'' means the total 
        costs of owning, operating, and maintaining a building 
        over its useful life (including such costs as fuel, 
        energy, labor, and replacement components) determined 
        on the basis of a systematic evaluation and comparison 
        of alternative building systems, except that in the 
        case of leased buildings, the life cycle costs shall be 
        calculated over the effective remaining term of the 
        lease;
          (8) the term ``renewable energy sources'' includes, 
        but is not limited to, sources such as agriculture and 
        urban waste, geothermal energy, solar energy, and wind 
        energy; and
          (9) the term ``Secretary'' means the Secretary of 
        Energy.

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            TITLE VIII--ENERGY SAVINGS PERFORMANCE CONTRACTS

SEC. 801. AUTHORITY TO ENTER INTO CONTRACTS.

    (a) In General.--(1) The head of a Federal agency may enter 
into contracts under this subchapter solely for the purpose of 
achieving energy savings and benefits ancillary to that 
purpose. Each such contract may, notwithstanding any other 
provision of law, be for a period not to exceed 25 years. Such 
contract shall provide that the contractor shall incur costs of 
implementing energy savings measures, including at least the 
costs (if any) incurred in making energy audits, acquiring and 
installing equipment, and training personnel, in exchange for a 
share of any energy savings directly resulting from 
implementation of such measures during the term of the 
contract.
          (2)(A) Contracts under this subchapter shall be 
        energy savings performance contracts and shall require 
        an annual energy audit and specify the terms and 
        conditions of any Government payments and performance 
        guarantees. Any such performance guarantee shall 
        provide that the contractor is responsible for 
        maintenance and repair services for any energy related 
        equipment, including computer software systems.
          (B) Aggregate annual payments by an agency to both 
        utilities and energy savings performance contractors, 
        under an energy savings performance contract, may not 
        exceed the amount that the agency would have paid for 
        utilities without an energy savings performance 
        contract (as estimated through the procedures developed 
        pursuant to this section) during contract years. The 
        contract shall provide for a guarantee of savings to 
        the agency, and shall establish payment schedules 
        reflecting such guarantee, taking into account any 
        capital costs under the contract.
          (C) Federal agencies may incur obligations pursuant 
        to such contracts to finance energy conservation 
        measures provided guaranteed savings exceed the debt 
        service requirements.
          (D) A Federal agency may enter into a multiyear 
        contract under this subchapter for a period not to 
        exceed 25 years beginning on the date of the delivery 
        order, without funding of cancellation charges before 
        cancellation, if--
                  (i) such contract was awarded in a 
                competitive manner pursuant to subsection 
                (b)(2), using procedures and methods 
                established under this subchapter;
                  (ii) funds are available and adequate for 
                payment of the costs of such contract for the 
                first fiscal year; and
                  (iii) such contract is governed by part 17.1 
                of the Federal Acquisition Regulation 
                promulgated under section 1303 of title 41 or 
                the applicable rules promulgated under this 
                subchapter.
          (E) Funding options.--In carrying out a contract 
        under this subchapter, a Federal agency may use any 
        combination of--
                  (i) appropriated funds; and
                  (ii) private financing under an energy 
                savings performance contract.
          (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 combination of 
                energy conservation measures and water 
                conservation measures.
          (G) Measurement and verification requirements for 
        private financing.--
                  (i) In general.--In the case of energy 
                savings performance contracts, the evaluations 
                and savings measurement and verification 
                required under paragraphs (2) and (4) of 
                section 8253(f) shall be used by a Federal 
                agency to meet the requirements for the need 
                for energy audits, calculation of energy 
                savings, and any other evaluation of costs and 
                savings needed to implement the guarantee of 
                savings under this section.
                  (ii) Modification of existing contracts.--Not 
                later than 18 months December 19, 2007, each 
                Federal agency shall, to the maximum extent 
                practicable, modify any indefinite delivery and 
                indefinite quantity energy savings performance 
                contracts, and other indefinite delivery and 
                indefinite quantity contracts using private 
                financing, to conform to the amendments made by 
                subtitle B of title V of the Energy 
                Independence and Security Act of 2007.
          (H) Miscellaneous authority._Notwithstanding subtitle 
        I of title 40, United States Code, a Federal agency may 
        accept, retain, sell, or transfer, and apply the 
        proceeds of the sale or transfer of, any energy and 
        water incentive, rebate, grid services revenue, or 
        credit (including a renewable energy certificate) to 
        fund a contract under this title.
          (I) Excluded contracts._A contract entered into under 
        this title may not be for work performed--
                  (i) at a Federal hydroelectric facility that 
                provides power marketed by a Power Marketing 
                Administration; or
                  (ii) at a hydroelectric facility owned and 
                operated by the Tennessee Valley Authority 
                established under the Tennessee Valley 
                Authority Act of 1933 ( 16 U.S.C. 831 et seq.).
    (b) Implementation.--(1)(A) The Secretary, with the 
concurrence of the Federal Acquisition Regulatory Council 
established under section 1302(a) of title 41, not later than 
180 days after October 24, 1992, shall, by rule, establish 
appropriate procedures and methods for use by Federal agencies 
to select, monitor, and terminate contracts with energy service 
contractors in accordance with laws governing Federal 
procurement that will achieve the intent of this section in a 
cost-effective manner. In developing such procedures and 
methods, the Secretary, with the concurrence of the Federal 
Acquisition Regulatory Council, shall determine which existing 
regulations are inconsistent with the intent of this section 
and shall formulate substitute regulations consistent with laws 
governing Federal procurement.

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SEC. 802. PAYMENT OF COSTS.

    Any amount paid by a Federal agency pursuant to any 
contract entered into under this subchapter 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) The term ``Federal agency'' means each authority 
        of the Government of the United States, whether or not 
        it is within or subject to review by another agency.
          (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) as a result of--
                          (i) the lease or purchase of 
                        operating equipment, improvements, 
                        altered operation and maintenance, or 
                        technical services;
                          (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); or
                          (iii) the increased efficient use of 
                        existing water sources in either 
                        interior or exterior applications;
                  (B) the increased efficient use of an 
                existing energy source by cogeneration or heat 
                recovery;
                  (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 and 
                water incentive, rebate, or grid services 
                revenue, or credit (including a renewable 
                energy certificate); 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.
          (3) The terms ``energy savings contract'' and 
        ``energy savings performance contract'' mean a contract 
        that provides for the performance of services for the 
        design, acquisition, installation, testing, and, where 
        appropriate, operation, maintenance, and repair, of an 
        identified energy or water conservation measure or 
        series of measures at 1 or more locations. Such 
        contracts shall, with respect to an agency facility 
        that is a public building (as such term is defined in 
        section 3301 of title 40), be in compliance with the 
        prospectus requirements and procedures of section 3307 
        of title 40.
          (4) The term ``energy or water conservation measure'' 
        means--
                  (A) an energy conservation measure, as 
                defined in section 8259 of this title; or
                  (B) a water conservation measure that 
                improves the efficiency of water use, is life-
                cycle cost-effective, and involves water 
                conservation, water recycling or reuse, more 
                efficient treatment of wastewater or 
                stormwater, improvements in operation or 
                maintenance efficiencies, retrofit activities, 
                or other related activities, not at a Federal 
                hydroelectric facility.

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