[Weekly Compilation of Presidential Documents Volume 34, Number 31 (Monday, August 3, 1998)]
[Pages 1485-1487]
[Online from the Government Publishing Office, www.gpo.gov]

<R04>
Memorandum on Cutting Greenhouse Gases Through Energy Saving Performance 
Contracts

July 25, 1998

Memorandum For The Heads of Executive Departments and Agencies

Subject: Cutting Greenhouse Gases through Energy Savings Performance 
Contracts

    My Administration has made addressing the threat of global climate 
change one of our top environmental priorities. As the Nation's largest 
consumer of the fossil fuels that scientists believe are driving global 
warming, the Federal Government has a special responsibility to lead in 
developing clean energy solutions and in reducing Federal energy 
consumption. While Government-wide energy saving activities over the 
last several years have resulted in significant achievements, we can and 
should do more.
    On March 9, 1994, I issued Executive Order 12902, Energy Efficiency 
and Water Conservation at Federal Facilities, which directed all 
executive agencies to reduce energy consumption 30 percent below 1985 
levels by the year 2005. We have made significant strides, but in order 
to achieve this goal we must make better use of a critical energy 
management tool. Energy Saving Performance Contracts (ESPCs), which are 
authorized under the National Energy Conservation Policy Act, as 
modified by the Energy Policy Act of 1992, provide significant 
opportunities for making Federal buildings more energy efficient at 
little or no cost to taxpayers. Under ESPC authority, agencies can 
contract with private energy service companies to retrofit Federal 
buildings with no up-front payments by the Government. These companies 
recover their costs from a negotiated share of the energy cost savings, 
with the remaining savings being returned to the contracting agency and 
to taxpayers. The Federal Government must make more use of these highly 
cost-effective contracts.
    I therefore direct all Federal agencies to maximize use of this 
authority by the year

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2000, when the authority expires. I also direct the Department of Energy 
(DOE) to lead an interagency effort to develop a legislative proposal 
extending ESPC authority past the year 2000. As part of this effort, I 
direct all agencies to identify and propose areas for expansion of ESPC 
authority--for instance, as appropriate, to some leased buildings, 
mobility, and other Federal assets. In addition, I direct agencies to 
propose ways to procure electricity produced using cost-effective 
renewable sources.
    While ESPC authority has existed for some time, I have encouraged 
significant steps to streamline and promote greater use of this tool. To 
this end, the DOE and the Department of Defense (DOD) have negotiated 
contracts with energy service companies over most regions of the 
country. These ESPCs currently allow up to $5 billion worth of projects 
at Federal facilities within these regions. The DOE and the DOD 
anticipate that by the end of this year they will negotiate contracts 
allowing an additional $2.7 billion worth of such work in

specific regions. The combined $7.7 billion provides, in effect, the total 
dollar amount of retrofit projects that Federal agencies can complete at 
their facilities using ESPCs. In addition, the DOE anticipates negotiating 
over $1 billion for ESPCs to finance the installation of renewable energy 
and other efficient technology systems in the near future.

    To further compliance with this directive, I have asked the Office 
of Management and Budget to provide new guidance to agencies that will 
help remove barriers and provide more incentives for using ESPCs. This 
guidance will change the budgetary treatment of these contracts to be 
consistent with the unique statutory authority for ESPCs. Specifically, 
the full amount of budget authority for the contract will no longer be 
needed up front, but can be made available over a number of years. In 
addition, this guidance will encourage agencies to permit up to 50 
percent of the energy savings from ESPCs to remain at the facility or 
site where they occur. Both of these policies will help motivate Federal 
energy managers to make greater use of ESPCs and reduce agency operating 
costs.
    To make use of this authority, Federal facilities need to contact 
the DOE or the DOD to engage contractors already pre-approved to 
complete ESPC work. Agencies can also consider using direct 
appropriations or contract with their local utilities. I also direct 
Federal agencies to maximize efforts to earn an ENERGY STAR label, 
demonstrating to the public that they rank in the top 25 percent for 
building energy efficiency. Combining energy savings contracting 
authority with utility programs and agency funded efforts can save 
taxpayers as much as one billion dollars a year in energy costs over the 
next 15 years, and can reduce greenhouse gas emissions by up to 3 
million metric tons of carbon annually.
    To ensure the full use and benefits of ESPC authority, I further 
direct each executive agency to submit to me, in the next 90 days, a 
memorandum detailing:
1.          Your agency's accomplishments in reducing energy consumption 
            since 1985, and your plans to reduce energy consumption 30 
            percent below 1985 levels by 2005, in compliance with 
            Executive Order 12902;
2.          Your agency's plan to use ESPCs and other tools, as well as 
            your plans to achieve ENERGY STAR labels for your 
            facilities, as part of your increased attention to saving 
            money through energy efficiency and renewable energy;
3.          Your proposals on how to expand the Federal Government's use 
            of these tools, for inclusion in our request to the Congress 
            for extending ESPC authority beyond the year 2000; and
4.          Your strategy for encouraging use of ESPCs and other 
            financing mechanisms to install renewable energy production 
            systems--such as those called for in the Million Solar Roofs 
            Initiative.
                                            William J. Clinton

Note: This memorandum was embargoed for release until 10:06 a.m.

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