Testimony

Alicia Collier, Honeywell Corporation

and

Federal Performance Contracting Coalition

Before the Senate Energy and Natural Resources Committee

April 23, 2007

Thank you for the opportunity to testify today. My name is Alicia
Collier and I am the Director of Global Energy Policy, National Energy
Solutions for Honeywell. I appear before you today on behalf of the
Federal Performance Contracting Coalition (FPCC), a group of Energy
Service Companies that perform 90% of the Energy Savings Performance
Contracting (ESPC) for the Federal government. Our members are Ameresco,
Chevron Energy Solution, Constellation Energy Projects and Services
Group, Honeywell, Johnson Controls, Noresco and Siemens Building
Technologies.

We are very pleased with the Federal energy provisions of S.1115 and are
encouraged to see the Committee's continued commitment to increasing the
energy efficiency of our government's own facilities. We are
particularly pleased with the Committee's interest in advancing Energy
Savings Performance Contracts. We believe that this underutilized
program is critical to meeting the Federal government's energy
efficiency and renewable goals. Many of the provisions in S.1115 will
help generate more ESPC projects and increase energy efficiency in
federal buildings.

Most of the Committee members are likely aware of ESPCs because of the
major effort in EPACT 2005 to reauthorize the program. The program works
as follows: Under ESPCs, the private sector installs new energy
efficient equipment in federal facilities at no upfront cost to the
government. (Examples of equipment include: new energy efficient
lighting, building controls, boilers, chillers and renewable energy
measures.)

Federal agencies pay off this investment over time with the funds saved
on utility costs. And, the private sector contractors guarantee the
energy savings. By law, the government never pays more than they would
have paid for utilities if it had not entered into the ESPC. In addition
to generating energy, water and dollar savings, years of deferred
maintenance at federal facilities are successfully addressed by the ESPC
program.

We are very supportive of the Federal energy efficiency provisions in
S.1115. In particular, we are encouraged by the following:

-   Section 504, which increases energy efficiency goals by requiring a
    30 percent reduction in energy consumption at Federal facilities by
    2015, codifying the new executive order 13423. Federal agencies will
    have to increasingly rely on ESPCs if they are expected to meet
    these new higher goals.

-   Section 502, which increases the requirement for the purchase of
    renewable energy for federal facilities. We encourage you to clarify
    that the installation of on-site generation of renewable energy
    should be the path forward, not merely the purchase of green power
    off the grid. On site power contributes to energy security and adds
    new renewable energy assets to the national mix.

-   Section 503 addresses ESPCs and is therefore of great interest to
    us.

    -   We support the retention of savings provisions that allow
        facilities to retain 100% of the savings on energy efficiency
        installation. Your elimination of old language from the code
        will eliminate the confusion in the federal government over the
        retention of savings.

    -   Financing Flexibility, which would allow agencies to mix
        appropriated and finance dollars under and ESPC, is critical to
        meeting the new efficiency and renewable energy goals. We
        support its inclusion because only with the ability to mix
        appropriated and private sector dollars will we be able to
        achieve the government's renewable energy goals. We continue to
        be concerned about agency adoption of this provision and
        encourage the Committee to reach out to other authorizing
        committees to ensure adoption of financing flexibility
        throughout all agencies of the Federal government.

    -   Eliminating the sunset provision is key. Thank you. This program
        was initially set up as a pilot program. It has been used very
        successfully by many of federal agencies for over 10 years. It
        has proven its value and should become a permanent program
        because ESPC has become the means by which most agencies are
        able to attain their efficiency goals.

    -   The Addition of cogeneration and renewable energy as allowable
        Energy Conservation Measures under ESPCs will be a great benefit
        to the government. The ability to sell the power generated is a
        significant new component that will allow for more renewable
        energy generation on federal facilities, thereby enhancing
        energy security, reducing energy use and greenhouse gas
        emissions.

    -   Clarification that water savings are included as allow energy
        conservation measures is also appreciated as this has been a
        point of confusion among some energy managers.

    -   We support the idea of ESPCs for non-building applications and
        feel that the study and the ability to include secondary savings
        is a good first step in identifying the potential to reduce
        energy in mobile applications through ESPCs. Secondary saving,
        such as worker productivity, could also be included in
        traditional, buildings ESPCs and would further encourage
        agencies to utilize the program by showing greater benefit.

-   Sec. 505 on Combined Heat and Power is helpful. CHP is an energy
    conservation measure with a long term payback and because of that,
    it lends itself well to being bundled with shorter payback
    conservation measures to create a viable ESPC.

-   Sec. 506 sets Federal Building Energy Efficiency Performance
    Standards, which we support because they push all building
    renovations to a higher energy efficiency level. Unless there are
    significant new appropriated dollars made available, we believe that
    ESPCs and other private financing will be the major means through
    which agencies comply with this section.

In addition to supporting these provisions of S.1115, the FPCC feels
that there are other areas where, we can focus on "more, better and
faster" when it comes to Energy Savings Performance Contracting. We have
been working with the Department of Energy in this area. It should come
as no surprise that we are very pleased with Assistant Secretary
Karsner's support of ESPCs and his willingness to focus agencies on
increasing the pace, size and scope of these types of contracts. We have
brainstormed both legislative and administrative ideas with the DOE.
Below are some thoughts from the Federal Performance Contracting
Coalition on potentially expanding S. 1115:

-   We advocate eliminating the Congressional Notification requirement
    for individual projects. This requirement was originally included in
    legislation because the program was a pilot project. Instead, we
    would like to see annual reporting to Congress on the number, size,
    energy conservation measures, and financial value on all ESPC
    contracts. Most of this information is already gathered by the
    Department of Energy's Federal Energy Management Program and would
    therefore not require new reporting mandates for Federal agencies.

-   We suggest language establishing a program fund to help offset the
    high cost of renewable energy measures in alternatively financed
    projects. Renewable Energy measures must be bundled with traditional
    energy efficiency measures to qualify under this proposed program.
    The effect would be to leverage appropriated dollars for on-site
    renewable energy projects, which could substantially increase the
    number of projects. This program administered by the Department of
    Energy's Office of Energy Efficiency and Renewable Energy. We would
    be happy to provide further information on how such a fund would be
    initiated and administered.

-   EPACT set up the ability for Federal agencies to count double their
    on site renewable energy production towards their renewable energy
    acquisition goals. In an effort to make renewables cost effective,
    many Federal agencies that install renewables on-site need to sell
    their commercial renewable energy credits (RECs) to help pay for the
    project. There is some confusion about whether selling those RECs
    means giving up credit towards the Federal renewable energy goal.
    Legislative language could clarify this ability.

> In conclusion, we are very pleased with the emphasis on Federal energy
> efficiency and the positive focus on ESPCs and other privately
> financed energy retrofit activities. Congress and the Administration
> have been working right along side our industry to knock down barriers
> to doing "more, better, and faster" ESPCs. We believe that the next
> step is to ensure that the agency personnel start to adopt ESPCs as a
> matter of course. As the members of the FPCC like to say, we want to
> make the "fear a inaction greater than the fear of action". Your
> committee could play a very important leadership role in urging
> oversight from all the authorizing and/or appropriating committees to
> ensure that energy efficiency and the implementation of renewable
> energy becomes or remains a front burner issue for all of the Federal
> government.
>
> Again, thank you for your continued interest and the opportunity to
> testify today.