U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

For sale by the Superintendent of Documents, U.S. Government Printing Office

Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800

Fax: (202) 512–2104 Mail: Stop IDCC, Washington, DC 20402–0001

81–728PDF 2013

GREEN BUILDINGS—AN EVALUATION OF 

ENERGY SAVINGS PERFORMANCE CONTRACTS 

JOINT HEARING 

BEFORE THE

SUBCOMMITTEE ON OVERSIGHT & 

SUBCOMMITTEE ON ENERGY 

COMMITTEE ON SCIENCE, SPACE, AND 

TECHNOLOGY 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED THIRTEENTH CONGRESS 

FIRST SESSION 

THURSDAY, JUNE 27, 2013 

Serial No. 113–39 

Printed for the use of the Committee on Science, Space, and Technology 

( 

Available via the World Wide Web: http://science.house.gov 
(II) 

COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY 

HON. LAMAR S. SMITH, Texas, Chair 

DANA ROHRABACHER, California 

RALPH M. HALL, Texas 

F. JAMES SENSENBRENNER, JR., 

Wisconsin 

FRANK D. LUCAS, Oklahoma 

RANDY NEUGEBAUER, Texas 

MICHAEL T. MCCAUL, Texas 

PAUL C. BROUN, Georgia 

STEVEN M. PALAZZO, Mississippi 

MO BROOKS, Alabama 

RANDY HULTGREN, Illinois 

LARRY BUCSHON, Indiana 

STEVE STOCKMAN, Texas 

BILL POSEY, Florida 

CYNTHIA LUMMIS, Wyoming 

DAVID SCHWEIKERT, Arizona 

THOMAS MASSIE, Kentucky 

KEVIN CRAMER, North Dakota 

JIM BRIDENSTINE, Oklahoma 

RANDY WEBER, Texas 

CHRIS STEWART, Utah 

VACANCY 

EDDIE BERNICE JOHNSON, Texas 

ZOE LOFGREN, California 

DANIEL LIPINSKI, Illinois 

DONNA F. EDWARDS, Maryland 

FREDERICA S. WILSON, Florida 

SUZANNE BONAMICI, Oregon 

ERIC SWALWELL, California 

DAN MAFFEI, New York 

ALAN GRAYSON, Florida 

JOSEPH KENNEDY III, Massachusetts 

SCOTT PETERS, California 

DEREK KILMER, Washington 

AMI BERA, California 

ELIZABETH ESTY, Connecticut 

MARC VEASEY, Texas 

JULIA BROWNLEY, California 

MARK TAKANO, California 

ROBIN KELLY, Illinois 

SUBCOMMITTEE ON OVERSIGHT

HON. PAUL C. BROUN, Georgia, Chair 

F. JAMES SENSENBRENNER, JR., 

Wisconsin 

BILL POSEY, Florida 

DAVID SCHWEIKERT, Arizona 

KEVIN CRAMER, North Dakota 

LAMAR S. SMITH, Texas 

DAN MAFFEI, New York 

ERIC SWALWELL, California 

SCOTT PETERS, California 

EDDIE BERNICE JOHNSON, Texas 

SUBCOMMITTEE ON ENERGY

HON. CYNTHIA LUMMIS, Wyoming, Chair 

RALPH M. HALL, Texas 

FRANK D. LUCAS, Oklahoma 

RANDY NEUGEBAUER, Texas 

MICHAEL T. MCCAUL, Texas 

RANDY HULTGREN, Illinois 

THOMAS MASSIE, Kentucky 

KEVIN CRAMER, North Dakota 

RANDY WEBER, Texas 

LAMAR S. SMITH, Texas 

ERIC SWALWELL, California 

ALAN GRAYSON, Florida 

JOSEPH KENNEDY III, Massachusetts 

MARC VEASEY, Texas 

MARK TAKANO, California 

ZOE LOFGREN, California 

DANIEL LIPINSKI, Illinois 

EDDIE BERNICE JOHNSON, Texas 
(III) 

C O N T E N T S 

Thursday, June 27, 2013 

Page 

Witness List ............................................................................................................. 2 

Hearing Charter ...................................................................................................... 3 

Opening Statements 

Statement by Representative Paul C. Broun, Chairman, Subcommittee on 

Oversight, Committee on Science, Space, and Technology, U.S. House of 

Representatives .................................................................................................... 8 

Written Statement ............................................................................................ 9 

Statement by Representative Dan Maffei, Ranking Minority Member, Subcommittee on Oversight, Committee on Science, Space, and Technology, 

U.S. House of Representatives ............................................................................ 10 

Written Statement ............................................................................................ 10 

Statement by Representative Cynthia Lummis, Chairwoman, Subcommittee 

on Energy, Committee on Science, Space, and Technology, U.S. House of 

Representatives .................................................................................................... 11 

Written Statement ............................................................................................ 12 

Statement by Representative Eric Swalwell, Ranking Minority Member, Subcommittee on Energy, Committee on Science, Space, and Technology, U.S. 

House of Representatives .................................................................................... 13 

Written Statement ............................................................................................ 14 

Statement by Representative Eddie Bernice Johnson, Ranking Member, Committee on Science, Space, and Technology, U.S. House of Representatives .... 15 

Written Statement ............................................................................................ 15 

Witnesses: 

Dr. Kathleen Hogan, Deputy Assistant Secretary for Energy Efficiency, U.S. 

Department of Energy 

Oral Statement ................................................................................................. 17 

Written Statement ............................................................................................ 19 

Dr. Woodrow Whitlow, Jr., Associate Administrator, Mission Support Directorate, National Aeronautics and Space Administration 

Oral Statement ................................................................................................. 27 

Written Statement ............................................................................................ 29 

Ms. Jennifer Schafer, Executive Director, Federal Performance Contracting 

Coalition 

Oral Statement ................................................................................................. 34 

Written Statement ............................................................................................ 36 

Mr. Ron King, President Advisor, National Insulation Association 

Oral Statement ................................................................................................. 42 

Written Statement ............................................................................................ 44 

Discussion ................................................................................................................. 60 

Appendix I: Answers to Post-Hearing Questions 

Dr. Kathleen Hogan, Deputy Assistant Secretary for Energy Efficiency, U.S. 

Department of Energy ......................................................................................... 78 

Dr. Woodrow Whitlow, Jr., Associate Administrator, Mission Support Directorate, National Aeronautics and Space Administration .................................. 111 
Page

IV 

Ms. Jennifer Schafer, Executive Director, Federal Performance Contracting 

Coalition ................................................................................................................ 115 

Mr. Ron King, President Advisor, National Insulation Association .................... 122 

Appendix II: Additional Material for the Record 

Letter submitted by Representative Eric Swalwell, Ranking Minority Member, Subcommittee on Energy, Committee on Science, Space, and Technology, U.S. House of Representatives ............................................................... 130 
(1) 

GREEN BUILDINGS—AN EVALUATION OF 

ENERGY SAVINGS PERFORMANCE 

CONTRACTS 

THURSDAY, JUNE 27, 2013 

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON OVERSIGHT & 

SUBCOMMITTEE ON ENERGY

COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY, Washington, D.C. 

The Subcommittees met, pursuant to call, at 10:04 a.m., in Room 

2318 of the Rayburn House Office Building, Hon. Paul Broun 

[Chairman of the Subcommittee on Oversight] presiding. 
2 
3 
4 
5 
6 
7 
8 

Chairman BROUN. Good morning. This joint hearing of the Subcommittee on Oversight and the Subcommittee on Energy will 

come to order. 

Good morning and welcome to today’s joint hearing. In front of 

you are packets containing the written testimony, the biographies, 

and truth-in-testimony disclosures for today’s witnesses. Before we 

get started, since this is a joint hearing involving two Subcommittees, I want to explain how we will operate procedurally so all 

Members will understand how the question-and-answer period will 

be handled. As always, we will alternate between the majority and 

the minority Members. We will recognize those Members present at 

the gavel in order of seniority on the full Committee, and those 

coming in after the gavel will be recognized in the order of their 

arrival. 

I now recognize myself for five minutes for an opening statement. 

Today’s hearing is titled, ‘‘Green Buildings—An Evaluation of 

Energy Savings Performance Contracts.’’ Energy Savings Performance Contracts, also known as ESPCs, are a unique mechanism by 

which the private sector pays for energy conservation measures at 

Federal facilities, and are reimbursed for their work out of the resulting savings in utility cost. Each contract creates jobs in the private sector while the Federal Government benefits from valuable 

upgrades without putting taxpayers on the line. 

That last part is what makes this program particularly appealing, because during these constrained economic times, it is imperative that we manage our limited funds as best we can and be creative about accomplishing our goals while maximizing our strained 

resources. 

However, as I have realized in my experience as a Member of 

Congress, when it comes to government programs, no matter how 

effective and efficient, they can all be improved. A couple of reports 

on ESPCs have raised some legitimate concerns about the complexity of these contracts. A 2005 GAO report, the most recent one 

on the subject, questioned whether agencies were getting the best 

deal possible from energy service companies in part based on the 

limited number of financiers available to the private sector for such 

projects. 

A NASA IG report from earlier this year raised specific questions 

about an early contract involving Johnson Space Center. The report 

questioned if NASA employees were sufficiently trained in handling ESPCs because the Johnson contract did not require annual 

reports to verify the energy conservation measures were generating 

savings. 

I realize the GAO report is dated and that the NASA IG report 

focused on an early contract, but they raise important questions. 

The most important features of these contracts are their flexibility 

in not relying on taxpayer dollars for the services provided and the 

ability to categorically identify and measure savings. To be assured 

of the success and effectiveness of ESPCs, we need meaningful 

transparency, accountability, and oversight during the length of all 

contract terms. 

Additionally, despite a 2011 memo from the President encouraging agencies to engage in $2 billion worth of performance-based 

contracting by the end of this year, Federal agencies continue to 
9 

encounter challenges in their efforts to ‘‘green’’ their buildings. The 

White House Council on Environmental Quality and the Office of 

Management and Budget recently released their annual agency energy and sustainability scorecards. Ironically, the green buildings 

category was notably problematic because out of 19 agencies that 

provided timely information, 10 scored in the red and yellow categories, while 5 others could not even be scored. 

Perhaps instead of continuing to announce new broad and sweeping policies related to global warming, the President could focus on 

his current costly regulations that are already in the books. Perhaps instead of bypassing Congress to implement a plan by Executive Order that launches a ‘‘war on coal’’—as well as a war on 

jobs—this Administration could work with Congress on an all-ofthe-above energy approach that includes coal, energy efficiency, 

and everything in between. 

While my Democratic colleagues and I don’t always see eye-toeye on the issues that we review in this hearing room, I do believe 

we agree on the value and benefit of ESPCs, and I look forward 

to hearing from our witnesses on how we can improve the program. 

[The prepared statement of Mr. Broun follows:] 

PREPARED STATEMENT OF REPRESENTATIVE PAUL C. BROUN, CHAIRMAN, SUBCOMMITTEE ON OVERSIGHT

Today’s hearing is titled ‘‘Green Buildings—An Evaluation of Energy Savings Performance Contracts.’’ 

Energy Savings Performance Contracts, also known as ESPCs, are a unique 

mechanism by which the private sector pays for energy conservation measures at 

federal facilities, and are reimbursed for their work out of the resulting savings in 

utility costs. Each contract creates jobs in the private sector while the federal government benefits from valuable upgrades without putting taxpayers on the line. 

That last part is what makes the program particularly appealing, because during 

these constrained economic times, it is imperative we manage our limited funds as 

best we can, and be creative about accomplishing our goals while maximizing our 

strained resources. 

However, as I have realized in my experience as a Member of Congress, when it 

comes to government programs, no matter how effective and efficient, they can all 

be improved. A couple of reports on ESPCs have raised some legitimate concerns 

about the complexity of these contracts. A 2005 GAO report, the most recent one 

on the subject, questioned whether agencies were getting the best deal possible from 

energy service companies in part based on the limited number of financiers available to the private sector for such projects. A NASA IG report from earlier this year 

raised specific concerns about an early contract involving Johnson Space Center. 

The report questioned if NASA employees were sufficiently trained in handling 

ESPCs because the Johnson contract did not require annual reports to verify that 

the energy conservation measures were generating savings. 

I realize the GAO report is dated and that the NASA IG report focused on an 

early contract, but they raise important questions. The most important features of 

these contracts are their flexibility in not relying on taxpayer dollars for the services 

provided, and the ability to categorically identify and measure savings. To be assured of the success and effectiveness of ESPCs, we need meaningful transparency, 

accountability and oversight during the length of all contract terms. 

Additionally, despite a 2011 memo from the President encouraging agencies to engage in $2 billion worth of performance-based contracting by the end of this year, 

federal agencies continue to encounter challenges in their efforts to ‘‘green’’ their 

buildings. The White House Council on Environmental Quality and the Office of 

Management and Budget recently released their annual agency energy and sustainability scorecards. Ironically, the green buildings category was notably problematic 

because out of 19 agencies that provided timely information, ten scored in the red 

and yellow categories, while five others could not even be scored. 

Perhaps instead of continuing to announce new broad and sweeping policies related to global warming, the President could focus on his current costly regulations 

already in the books. Perhaps instead of bypassing Congress to implement a plan 
10 

by executive order that launches a ‘‘war on coal’’—as well as a war on jobs—this 

Administration could work with Congress on an ‘‘all of the above’’ energy approach 

that includes coal, energy efficiency, and everything in-between. 

While my Democratic colleagues and I don’t always see eye-to-eye on the issues 

we review in this hearing room, I do believe we agree on the value and benefit of 

ESPCs, and I look forward to hearing from our witnesses on how we can help improve the program. 

Chairman BROUN. Now, I will recognize the Ranking Member, 

my good friend and gentleman from New York, Mr. Maffei, for his 

opening statement. 

Mr. MAFFEI. I thank you, Mr. Chair. And I do want to thank 

both you and Chairwoman Lummis for holding this hearing today, 

and indeed all of the Members. And we are also honored to be 

joined by the distinguished Ranking Member of the full Committee, 

Ms. Bernice Johnson—Eddie Bernice Johnson from Texas. I am always honored to be in the same room with her. 

And I do want to concur with the statements of the Chairman 

in terms of Energy Savings Performance Contracts. I will submit 

my full statement to the record, but these are—at a time when all 

Federal agencies are fiscally challenged, these are an idea worth 

pursuing. ESPCs are widely seen as a good idea with potential 

large savings to the Federal Government and the U.S. taxpayer. 

Like any government program, they need to be properly managed 

and carefully overseen. They have been implemented so far primarily through the Department of Energy’s Federal Emergency— 

I am sorry—Federal Energy Management Program. And since 

1998, the program has awarded ESPC projects through 25 separate 

Federal agencies for a total estimated savings of $7.2 billion. And 

most of these projects have occurred without any indication of 

abuse. 

However, a recent audit of NASA Energy Savings Contracts by 

the NASA Inspector General found that that is not always the case. 

And while the NASA IG documented a case of poor government 

oversight, I believe if properly managed, Energy Savings Performance Contracts, our partnership between the Federal Government 

and the business community that can well serve the U.S. taxpayers 

and help conserve and protect our natural resources. 

So I do look forward to hearing from the witnesses today about 

how to properly manage and oversight these contracts that improve 

the energy efficiency while reaping potential large Federal cost savings. 

And I do again want to thank the Chairman for holding this 

hearing. I do note this is particularly well-timed with the President’s speech on Tuesday. I don’t know if you are coordinating that 

on purpose. But I do appreciate you doing this because I do think 

that these—this is a really good idea potentially, very—offering 

very much savings as long as we execute it correctly, and Congressional oversight is an important component of that. 

I yield back. 

[The prepared statement of Mr. Maffei follows:] 

PREPARED STATEMENT OF REPRESENTATIVE DAN MAFFEI, RANKING MINORITY

MEMBER, SUBCOMMITTEE ON OVERSIGHT

Thank you Chairman Broun and Chairwoman Lummis for holding this hearing 

today. 
11 

Energy Savings Performance Contracts or E-S-P-Cs are contracting vehicles that 

have permitted federal agencies to meet energy efficiency, renewable energy, water 

conservation and emissions reduction goals since they were first established by Congress in 1986. They allow federal agencies to implement energy efficient projects 

with limited up-front costs and significant long-term savings in unique public-private partnerships. 

As part of these arrangements private sector Energy Service Companies (ESCOs) 

conduct comprehensive energy audits of federal facilities and identify long-term energy savings that will pay for the cost of the project over the term of the contract 

with the federal agency. The private contractor is responsible for paying for the 

building or facility’s modifications up front and once the contract ends the cost savings accrue to the federal agency. 

E-S-P-Cs have been implemented primarily through the Department of Energy’s 

Federal Energy Management Program (FEMP) and since 1998 the program has 

awarded ESPC projects through 25 separate federal agencies for a total estimated 

savings of $7.2 billion dollars. 

At a time when all Federal agencies are fiscally constrained I believe ESPCs are 

an idea worth pursuing. ESPCs are widely seen as a good idea with potential large 

savings to the federal government and U.S. taxpayer. But like any government program they need to be properly managed and carefully overseen. A recent audit of 

NASA’s Energy Savings Contracts by the NASA Inspector General found that is not 

always the case. 

While the NASA IG documented a case of poor government oversight, but I believe if properly managed Energy Savings Performance Contracts (ESPCs) are a 

win-win for the federal government, American taxpayer and U.S. business community. 

I look forward to hearing from our witnesses today about how to ensure proper 

management and oversight of these contracts that improve federal energy efficiency 

while reaping potentially large federal cost savings. 

Chairman BROUN. Thank you, Mr. Maffei. 

The Chair now recognizes the Chairman of the Subcommittee on 

Energy, Mrs. Lummis, for her opening statement. You are recognized. 

Mrs. LUMMIS. Thank you very much, Mr. Chairman. And welcome, all, to this morning’s hearing on Energy Savings Performance Contracts. 

Improved energy efficiency can be a commonsense, market-oriented solution to lower energy bills. Just as consumers may choose 

to purchase more efficient vehicles to save on fuel costs and homeowners install insulation to reduce energy bills, the Federal Government should take similar steps when they make economic sense. 

ESPCs are a mechanism to do that. ESPCs provide for a publicprivate partnership to increase the energy efficiency of federally 

owned facilities. The private sector assumes the upfront costs while 

sharing the rewards of reduced energy costs with American taxpayers. The Federal Government owns or leases almost 400,000 

buildings, so even minor improvements to individual facilities can 

accumulate into major savings. 

As with all government initiatives, it is important that ESPCs 

are implemented with maximum effectiveness. ESPC projects must 

be monitored for quality control and energy savings must be 

verified. Federal agencies should look at the overall impacts of a 

project. I look forward to hearing from the witnesses today on exploring opportunities and challenges associated with the use of 

ESPCs. 

While ESPCs represent a mutually beneficial, market-based approach to reducing energy costs, they contrast sharply with the regulatory onslaught that President Obama announced on Tuesday. 

The President is again pushing an agenda that will punish hard- 
12 

working American families. His approach consists of policies already rejected by Congress in a bipartisan fashion. He wants expensive energy mandates, job-killing regulations, and hidden energy taxes. 

These increased energy costs and burdensome regulations will 

punish our economy, especially for my State of Wyoming; it is the 

Nation’s second-leading energy producer. Even more concerning are 

the direct consequences of higher energy costs on American households living paycheck to paycheck. And we have new information 

that shows how many people are living paycheck to paycheck. As 

household energy costs soar, moms’ and dads’ economic security 

slips away. As American families struggle to pay the Obama electricity tax, they will have less for their children’s college fund, less 

for emergencies like unexpected illnesses or job loss, less to provide 

care for their aging parents, less for day-to-day expenses just to 

make ends meet. And why? So the President can impose more regulation, more mandates, and more taxes, chasing carbon reductions 

that are already occurring under current law. 

While increasing the cost of energy might make the most privileged among us gleeful, you will forgive the millions of underprivileged Americans and the billions of poor around the world living 

in the literal dark for not supporting this elitist regime. 

President Obama’s efforts to threaten family energy security 

stand in stark contrast to my views and those of my colleagues on 

the Republican side of the aisle, pro-family energy strategies that 

take full advantage of America’s abundant domestic energy supply, 

including natural gas, coal, oil, nuclear, renewables, and energy efficiency, which we will be discussing here today. I hope the President takes notice. We don’t need carbon policy dictated from the 

White House. We need to work together to produce real results. 

Thank you for the time, Mr. Chairman. I yield back. 

[The prepared statement of Mrs. Lummis follows:] 

PREPARED STATEMENT OF REPRESENTATIVE CYNTHIA LUMMIS, CHAIRWOMAN, 

SUBCOMMITTEE ON ENERGY

Chairman Lummis: Improving energy efficiency can be a commonsense, marketoriented solution to lower energy bills. Just as consumers may choose to purchase 

more energy efficient vehicles to save on fuel costs, and just as homeowners install 

insulation to reduce electric bills, the Federal government should take similar steps 

when they make economic sense. Energy Savings Performance Contracts, or ESPCs, 

are a mechanism to do just that. 

ESPCs provide for a public-private partnership to increase the energy efficiency 

of federally owned facilities. In doing so, the private sector assumes the upfront 

costs, while sharing the rewards of reduced energy costs with American taxpayers. 

The Federal government owns or leases almost 400,000 buildings, so even minor improvements to individual facilities can accumulate into major savings. 

However, as with all government initiatives, it is important that ESPCs are implemented with maximum effectiveness. For example, ESPC projects must be monitored for quality control and energy savings must be verified. Federal agencies 

should look at the overall impact of a project, not solely at the dollar value attached 

to it. I look forward to hearing from the witnesses today and exploring opportunities 

and challenges associated with the use of ESPCs. It is important to note that, while 

ESPCs represent a mutually, beneficial, market-based approach to reducing energy 

costs, they contrast sharply with the heavy-handed regulatory onslaught that President Obama announced on Tuesday. 

The President is again pushing an extremist environmental agenda, the costs of 

which will fall most harshly on hard-working American families. His approach consists of worn policies already rejected by Congress in a bipartisan fashion, and dou-
13 

bles down on his preferred approach of expensive energy mandates, job-killing regulations, and hidden energy taxes. 

These increased energy costs and burdensome regulations will throttle our economy, especially for my state of Wyoming, the nation’s leading energy producer. Even 

more concerning are the direct consequences of higher energy costs on American 

households, living paycheck to paycheck. 

As household energy costs soar, moms and dads will be left grasping as their economic security slips away. They will have less for their children’s college fund. They 

will have less for an emergency, such as an unexpected illness or job loss. They will 

have less to provide care for their aging parents. They will have less for day-to-day 

expenses, all so the President can have more regulation, more mandates, and more 

taxes. 

President Obama’s policies stand in stark contrast to House Republicans’ ‘‘all of 

the above’’ energy strategy. This strategy takes full advantage of America’s abundant domestic energy supply, including coal, oil, nuclear, natural gas and energy efficiency, as we will discuss here today.Thank you for the time and I yield back. 

Chairman BROUN. Thank you, Mrs. Lummis. 

The Chair now recognizes Mr. Swalwell for his opening statement. You are recognized for five minutes. 

Mr. SWALWELL. Thank you, Chairman Broun, Chairman 

Lummis, also Ranking Member Maffei, and of course our Committee Ranking Member, Ms. Bernice Johnson. I look forward to 

having this hearing today. 

Energy Savings Performance Contracts, also known as ESPCs, 

are truly a win-win-win tool for the Federal Government and the 

U.S. taxpayer. The Federal Government is the largest energy customer in the country with over 1.2 million buildings that it is responsible for and hundreds of thousands of acres that it is also responsible for. ESPCs save money, improve energy efficiency, and 

reduce carbon pollution all with little to no upfront cost required. 

As I am sure we will hear about more from this panel today, 

ESPCs, as well as Utility Energy Service Contracts, or UESCs, 

have a proven track record of saving the government billions of dollars and hundreds of trillions of BTUs so far. 

I know these contracts work well because when I served as a city 

councilmember in the City of Dublin, California, I worked to implement our own local equivalent of an Energy Savings Performance 

Contract, and when I served on the Council, we saw a savings of 

approximately $100,000 per year over the life of the lease that we 

signed. 

The City of Livermore, our neighbor in Dublin, also enjoys an annual savings of $74,000 a year over the life of their lease. Of 

course, these improvements will last longer than the 15 years it 

will take to repay the lease, and in year 16, each city anticipates 

a savings of roughly $675,000 a year. 

They will also tell you that, in addition to the savings, the real 

advantages of the program are the ability to move forward with 

these energy-saving improvements with very little risk and the access it gives communities like Livermore and Dublin to expertise 

that they wouldn’t be able to otherwise afford. 

One example we should be particularly proud of is the NASA 

Ames Research Center project. Thanks to the partnership between 

NASA and Pacific Gas and Electric, also known as PG&E, they 

were able to craft a plan that will exceed their energy efficiency 

and renewable energy goals. The UESC will result in an annual 

energy savings of 159 million BTUs, which will provide an 11 percent reduction in overall energy intensity. In short, these contracts 
14 

are not only good for local economic budgets, for the Federal budget, they are also good to make our Earth healthier. 

PG&E also has a UESC project with the Veterans Administration in California. This project includes five separate medical center projects throughout California and over two million square feet. 

The project will save 15.7 million gallons of water, 1.3 million 

burns of natural gas, 9 gigawatt hours of electricity, and $1.6 million annually in water and energy costs. Federal energy programs 

not only benefit the government entities that realize the savings 

from these improvements, but they also enjoy broad support from 

private industry. 

To that end, I would like to submit to the record with permission 

from the Chair a letter from a number of groups and businesses, 

including the Chamber of Commerce and the Business Roundtable 

applauding the Obama Administration for their focus on energy efficiency and encouraging continuation and expansion of these activities. 

I look forward to discussing how this unique authority might be 

improved upon and used for a wider range of applications such as 

the Federal vehicle fleet at our Nation’s array of energy-hungry 

data centers. I expect that our national laboratories—we also have 

two of those in my Congressional District, Sandia and Lawrence 

Livermore—would be able to make great use of such improvements 

as well. 

Thank you again, Mr. Chair, and I yield back the balance of my 

time. 

[The prepared statement of Mr. Swalwell follows:] 

PREPARED STATEMENT OF REPRESENTATIVE ERIC SWALWELL, RANKING MINORITY

MEMBER, SUBCOMMITTEE ON ENERGY

Thank you Chairman Broun and Chairman Lummis for holding this hearing 

today, and I also want to thank the witnesses for being here. 

Energy Savings Performance Contracts, or ESPCs, are truly a win-win-win tool 

for the federal government and the U.S. taxpayer. The federal government is the 

largest energy customer in the country and ESPCs save money, improve energy efficiency, and reduce carbon pollution, all with little-to-no upfront cost required. As I’m 

sure we’ll hear more about from this panel, ESPCs, as well as Utility Energy Services Contracts, or UESCs, have a proven track record of saving the federal government billions of dollars and hundreds of trillions of BTUs so far. 

I know these Contracts work because I have seen them work in my own district. 

In Dublin, California where I served on the City Council, we have seen a savings 

of approximately $100,000 annually over the life of the lease. 

The city of Livermore, California will enjoy an annual savings of $74,000 a year 

over the life of their lease. Of course these improvements will last longer than the 

15 years it will take to repay the lease and in year 16, they anticipate a savings 

of approximately $675,000 a year. They will also tell you that, in addition to the 

savings, the real advantages of this program are the ability to move forward with 

these energy-saving improvements with very little risk and the access it gives communities like Livermore and Dublin to expertise that they otherwise couldn’t afford. 

One example we should be particularly proud of is the NASA Ames Research Center Project. Thanks to the partnership between NASA and Pacific Gas & Electric, 

they were able to craft a plan that will exceed their energy efficiency and renewable 

energy goals. This UESC will result in an annual energy savings of 159,909 million 

BTUs, which will provide an 11 percent reduction in overall energy intensity. 

PG&E also has a UESC project with the Veterans Administration in California. 

This project includes five separate medical centers throughout California and over 

two million square feet. The project will save: 15.7 million gallons of water; 1.3 million therms of natural gas; 9 gigawatt-hours of electricity; and $1.6 million annually 

in water and energy costs. 
15 

Federal energy efficiency programs not only benefit the government entities that 

realize savings from these improvements, but they enjoy broad support from private 

industry. To that end, I would like to submit for the record a letter from a number 

of groups and businesses, including the Chamber of Commerce and the Business 

Roundtable, applauding the Obama Administration for their focus on energy efficiency and encouraging continuation and expansion of these activities. 

I look forward to discussing how this unique authority might be improved upon 

and used for a wider range of applications, such as the federal vehicle fleet or our 

nation’s array of energy hungry data centers. I expect that our national laboratories, 

like Lawrence Livermore and Sandia, would be able to make great use out of such 

improvements. 

Chairman BROUN. Mr. Swalwell, did I hear unanimous consent 

request to enter that letter into the record? 

Mr. SWALWELL. Yes, please, Mr. Chair. 

Chairman BROUN. We have a unanimous consent request. Hearing no objections, so ordered. 

[The information follows:] 

Chairman BROUN. I now recognize the Ranking Member of the 

full Committee, my dear friend from Texas, Ms. Eddie Bernice 

Johnson. Ms. Johnson, you are recognized for five minutes. 

Ms. JOHNSON. Thank you very much, Mr. Chairman. 

And I want to thank you for holding this hearing along with 

Chairwoman Lummis to evaluate Energy Savings Performance 

Contracts. And I want to thank the witnesses as well for being 

here today. 

Energy Savings Performance Contracts, or the ESPCs, are tools 

capable of providing substantial financial and environmental benefits to both the Federal Government and companies in the private 

sector. A study conducted by the Oak Ridge National Laboratory 

earlier this year found that the extra cost savings of an ESPC 

project to the government are nearly twice as great as the guaranteed savings. 

Investments in energy efficiency improvements can reduce energy costs, as well as generate much-needed jobs through the acquisition and development of necessary infrastructure and equipment. Often, the useful life of the equipment extends well beyond 

the performance period of the ESPCs. 

Another key component of many ESPCs is the training and implementation of sustainable energy practices. I look forward to 

hearing from these witnesses on how we encourage the use of 

ESPCs to help make the Federal Government a leader and a leader 

in energy efficient building technology. 

And I thank you and I yield back the balance of my time. 

[The prepared statement of Ms. Johnson follows:] 

PREPARED STATEMENT OF REPRESENTATIVE EDDIE BERNICE JOHNSON, RANKING

MEMBER, COMMITTEE ON SCIENCE, SPACE AND TECHNOLOGY

I want to thank Chairman Broun and Chairwoman Lummis for holding this hearing to evaluate energy savings performance contracts, and I want to thank the witnesses on the panel as well. 

Energy Savings Performance Contracts, or ESPCs, are tools capable of providing 

substantial financial and environmental benefits to both the Federal government 

and companies in the private sector. A study conducted by Oak Ridge National Laboratory earlier this year found that the actual cost savings of an ESPC project to 

the government are nearly twice as great as the guaranteed savings. 

Investments in energy efficiency improvements can reduce energy costs as well as 

generate much needed jobs through the acquisition and development of necessary 

infrastructure and equipment. Often the useful life of the equipment extends well 
16 

beyond the performance period of the ESPC. Another key component of many 

ESPCs is the training and implementation of sustainable energy practices. 

I look forward to hearing from these witnesses on how we can encourage the use 

of ESPCs to help make the Federal Government a leader in energy efficient building 

technologies. 

Chairman BROUN. Thank you, Ms. Johnson. 

If there are Members who wish to submit additional opening 

statements, your statements will be added to the record at this 

point. 

At this time I would like to introduce our panel of witnesses. Our 

first witness is Dr. Kathleen Hogan, Deputy Assistant Secretary for 

Energy Efficiency at the U.S. Department of Energy. Our second 

witness is Dr. Woodrow Whitlow, Jr., Associate Administrator of 

the Mission Support Directorate of the National Aeronautics and 

Space Administration. Our third witness is Ms. Jennifer Schafer, 

Executive Director of the Federal Performance Contracting Coalition. And our final witness is Mr. Ron King, President Advisor of 

the National Insulation Association. 

As our witnesses should know, spoken testimony is limited to 

five minutes each. And if you all would try to constrain yourself to 

five minutes. After which the Members of Congress will have five 

minutes each to ask questions. Your written testimony will be included in the record of the hearing. 

And it is the practice of the Subcommittee on Oversight to receive testimony under oath. Now, if you would please stand. 

Do any of you all have an objection to taking an oath? 

Let the record show that all witnesses indicated by shaking their 

head from side to side in the usual manner to indicate they have 

no objections. 

Now, if you would raise your right hand. 

Do you solemnly swear or affirm to tell the whole truth and 

nothing but the truth, so help you God? 

Okay. You may be seated. Let the record reflect that all the witnesses participating have taken the oath. 

And before I recognize our first witness, let me say that I am 

anxious to hear your testimony, Dr. Hogan. I was even more anxious or eager to hear it 48 hours ago when it was due. I understand 

and I hope that you are not directly responsible and personally responsible for the tardiness in submitting your testimony to this 

Committee, but I would like for you to pass on this message to the 

appropriate person or persons that it is inconsiderate to provide 

testimony 18–1/2 hours before a hearing when the deadline is 48 

hours. And we have seen this problem before out of your Department. 

When testimony is delivered this late, it does not provide Members of this Committee sufficient time to review and prepare to engage in an informative discussion with you about the program. This 

is not the first time that the Department has exhibited such irresponsible behavior before this Committee, and it is a pattern that 

reflects very poorly on the Department and the Administration by 

default. 

Further, if you will please confirm that you will personally ensure this Committee receives its responses to our questions for the 

record following the hearing in a timely manner that is closer to 
17 

two weeks than two months? Would you personally guarantee that, 

Dr. Hogan? 

Dr. HOGAN. Yes, we are committed to a timely response and we 

also do apologize for the delay in the submittal of the testimony. 

Chairman BROUN. Okay. Is that an affirmative that we will get 

our responses to written questions for the record closer to two 

weeks than two months? 

Dr. HOGAN. Yes, that is. 

Chairman BROUN. Thank you, ma’am. I appreciate that. 

I thank everybody for your indulgence. And I now recognize Dr. 

Hogan for five minutes. 

TESTIMONY OF DR. KATHLEEN HOGAN, 

DEPUTY ASSISTANT SECRETARY FOR 

ENERGY EFFICIENCY, 

U.S. DEPARTMENT OF ENERGY 

Dr. HOGAN. Thank you, Chairman Broun, Chairman Lummis, 

Ranking Members Maffei and Swalwell, and Members of the Subcommittee. And thank you for inviting me to testify today on behalf 

of the Department of Energy regarding energy efficiency and performance contracting. 

We all know energy efficiency is a large, untapped resource in 

the United States that can provide savings for consumers, improve 

competitiveness, build jobs, and reduce reliance on foreign oil. And 

as the Nation’s largest energy consumer, the Federal Government 

has a tremendous opportunity to reduce energy use, save taxpayer 

money, and lead by example. 

Consider, as we have already heard mentioned, that the Federal 

Government operates a very large number of buildings and other 

structures comprising more than three billion square feet, operates 

a fleet of more than 600,000 civilian and non-tactical military vehicles, and does pay approximately $25 billion for energy each year. 

This is approximately the same energy use as the city of Hong 

Kong or of all of New Zealand. 

The size of the government has prompted a number of Federal 

energy management and sustainability goals to be established 

through statute and Executive Orders, and the preliminary data 

from Fiscal Year 2012 indicate that the Federal Government is 

making steady progress in achieving its energy, water, and greenhouse gas savings goals as outlined in my written testimony. 

We also know that performance contracting does play an important role in helping the Federal Government unlock the considerable energy efficiency potential embedded in our Federal buildings 

as part of meeting these goals. Energy Savings Performance Contracts, or ESPCs, are one kind of performance-based contract. They 

are an arrangement between a Federal agency and an energy service company, known as an ESCO, who conducts a comprehensive 

audit for the Federal facility, identifies energy and/or water conservation measures, and implements those measures using their 

capital. 

The ESCO also guarantees that the improvements will generate 

cost savings sufficient to pay for the project over the term of the 
18 

contract, and therefore, these contracts allow agencies to undertake 

energy savings projects without upfront capital outlays. 

ESPCs do have built in accountability. The ESCO is required to 

conduct periodic measurement and verification to ensure that the 

guaranteed savings are being realized. Once the contract is complete, the agency and the U.S. taxpayer receive the full benefit of 

the remaining energy efficiency savings. 

Since the Department’s ESPC program began in 1998, there have 

been over 280 ESPC projects awarded through the Department of 

Energy’s contract vehicle in particular for a total investment of 

about 2.7 billion and total guaranteed savings of about 7.2 billion. 

And on top of that, we do have the Presidential Performance Contracting challenge for the Federal Government to enter into a minimum of 2 billion in performance contracts by the end of this year, 

which is catalyzing additional use of this mechanism. 

As of June, the agencies have identified projects in the pipeline or awarded with an estimated value of $2.3 billion in investment, 

and so far, about 64 projects have been awarded with an investment value of over $575 million. And clearly, there are more 

projects in the pipeline. 

In addition, the President’s issued Climate Action Plan this week 

did call for a number of actions to further strengthen efforts to promote energy efficiency through performance contracting. 

At the Department of Energy, we do have the Federal Energy 

Management Program, which helps all the Federal agencies implement strong performance contracts, specifically that provides tools, 

training, and expertise to the agencies to help them achieve their 

statutory and Executive Order goals. This technical assistance and 

guidance helps overcome some of the barriers that we have seen 

such as limited agency contracting and technical staff familiar with 

the ESPC process. 

Technical support is available at each stage of the ESPC process. 

That includes helping agencies determine whether an ESPC project 

is feasible, guiding them through project development and project 

acceptance, and also coordinating with the agencies and ESCOs as 

we provide life-of-contract support. FEMP also compiles best practices for the agencies and continues to improve the program where 

possible. 

So looking forward, we see continued opportunity. As of March 

of this year, agencies have identified a potential for over 700 million a year in annual energy savings for audits they have already 

completed for energy and water savings. We know that ESPCs will 

be critical in achieving much of these savings and will provide multiple benefits to both the Federal Government and the American 

people. 

So again, I thank you for the opportunity to be here today and 

look forward to our discussion and happy to answer any questions 

you may have. 

[The prepared statement of Dr. Hogan follows:] 
19 
20 
21 
22 
23 
24 
25 
26 
27 

Chairman BROUN. Thank you, Dr. Hogan. I now recognize our 

next witness, Dr. Whitlow. Dr. Whitlow, you are recognized for five 

minutes. 

TESTIMONY OF DR. WOODROW WHITLOW, JR., 

ASSOCIATE ADMINISTRATOR, 

MISSION SUPPORT DIRECTORATE, 

NATIONAL AERONAUTICS 

AND SPACE ADMINISTRATION 

Dr. WHITLOW. Chairman Broun and Lummis, Ranking Members 

Maffei and Swalwell, and Members of the Subcommittees, thank 

you for the opportunity to appear here today to discuss NASA’s use 

of the ESPCs. 

NASA has established policies and procedures to improve energy 

efficiency through the reduction of energy use and implementation 

of sustainable energy practices. The use of performance contracting 

vehicles such as ESPCs and UESCs enables NASA to protect and 

leverage the value of its appropriated facilities funding while providing a guaranteed return on investment in conservation measures that help the Agency to achieve Federal energy and water reduction and renewable energy goals. 

NASA’s field centers actively consider and pursue the use of energy savings contracts in order to repair and renew our infrastructure. This is consistent with NASA’s master planning goals. ESPCs 

contribute to better facility operational conditions while reducing 

our energy consumption. This reduced utility consumption ultimately decreases energy and water risks to NASA’s missions. NASA field centers have awarded over $174 million in ESP contract value across 20 projects since we began using ESPCs in 1999. 

These projects resulted in annual energy consumption reductions of 

approximately 495 billion BTUs and $8.5 million in savings. 

NASA’s ESPC projects contribute significantly to the $2 billion 

Federal investment in energy savings projects directed by President Barack Obama in December 2011. We pledged to award $19.6 

million of investment value in ESPCs and UESCs before the end 

of this year. Our field centers awarded $28 million of investment 

value by November 2012, 24–1/2 million of this via ESPCs, making 

us the first Federal agency to fulfill its pledged investment amount. 

Specifically, Goddard Space Flight Center’s Wallops Flight Facility in Virginia continues to conduct a particularly noteworthy 

ESPC project with a total contract value of nearly $36 million. The 

associated infrastructure energy efficiency improvements resulted 

in significant reductions in Wallops’ energy and water intensities 

and in greenhouse gas emissions. Virginia recognized the first 

phase of this project among the Gold Medal winners of the 2012 

Governor’s Environmental Excellence Award, and the Department 

of Energy featured this project on an energy action campaign poster. 

As mentioned, in April of this year, the NASA IG issued a report 

on NASA’s management of energy savings contracts, and its review 

included an examination of our first use of ESPCs, a DOE contract 

task order awarded by the Johnson Space Center in 1999. The IG 

identified shortcomings in the administration of this first contract 
28 

and provided recommendations for management actions to reduce 

the risk of error in management of ongoing and future ESPCs. 

Accordingly, we have undertaken actions to ensure that sound 

management practices are applied to the implementation of ESPCs. 

We have issued interim direction for the immediate implementation of these requirements as we finalize our procedural requirements. 

In conclusion, ESPCs represent an important tool that is available to NASA field centers in the ongoing effort to repair and 

renew agency facility and utility infrastructure in order to improve 

energy and water efficiency and security. We expect to continue to 

actively utilize this tool to support our mission in the years ahead. 

Again, thank you for the opportunity to appear here today. 

[The prepared statement of Mr. Whitlow follows:] 
29 
30 
31 
32 
33 
34 

Chairman BROUN. Thank you, Dr. Whitlow. I now recognize Ms. 

Schafer for five minutes. 

TESTIMONY OF MS. JENNIFER SCHAFER, 

EXECUTIVE DIRECTOR, 

FEDERAL PERFORMANCE CONTRACTING COALITION 

Ms. SCHAFER. Good morning, Mr. Chairman and Members of the 

Committee. 

My name is Jennifer Schafer. I am the Executive Director of the 

Federal Performance Contracting Coalition, which represents many 

of the leading energy service companies that do work with the Federal Government. Our members include—and I am going to read 

them—Ameresco, Chevron Energy Services, Constellation Energy, 

Honeywell, Johnson Controls, Lockheed Martin, NextEra Energy 

Solutions, NORESCO, Schneider Electric, Siemens Government 

Technologies, and Trane/Ingersoll-Rand. 

This group of ESCOs performs about 90 percent of the work with 

the Federal Government and has done so historically. These companies have been improved through a very rigorous process to pursue ESPCs with the Federal Government through an indefinite delivery and indefinite quantity contract. Basically, that contract 

prequalifies companies to pursue opportunities with Federal facilities and individual sites. 

The contract has been updated several times over the past several years, particularly in the area of measurement and verification 

and in operations and maintenance. In fact, the most recent contract, which was initiated in 2009, has very aggressive protocols to 

ensure that the government gets what it pays for. Ranking Member 

Johnson mentioned the Oak Ridge National Lab report that bears 

this out and says that Federal ESPC-based projects save almost 

twice what is guaranteed by the contractor. 

ESPCs aren’t just for saving energy and therefore saving money; 

they also provide the government with critical infrastructure, energy-related infrastructure, that they can’t afford to purchase right 

now; critical operations and maintenance support, which we can’t 

afford the staff right now; and they also solve individual problems 

for facilities. 

In 2011 when the U.S. Chamber of Commerce testified about 

ESPCs before this Subcommittee—excuse me, full Committee— 

they emphasized the expertise brought by the ESCOs, the jobs created in the private sector, and the guarantee of energy savings. 

There have been studies indicating that compared to projects 

achieved with appropriated dollars or other ways to get energy efficiency, comprehensive efficiency projects in the Federal Government, ESPCs deliver a much better value overall to the taxpayer 

even though they include financing costs. Right now, those costs 

are very low. 

A 2006 Oak Ridge study asserted that even at the higher interest 

rates in 2006, ESPCs were a better deal for the government because they ensure the performance of the equipment. In a designbuild project, operations and maintenance are generally not as rigorous and efficiencies and therefore dollars saved can erode very 

quickly. 
35 

Another major benefit of the ESPCs is that they are set up to 

provide an abundance of information about performance, which is 

not the case with other types of projects. There is no other program 

in the Federal Government that requires this level of measurement 

and verification, which may just be that transparency—that is why 

they have been examined so frequently over the years. 

Questions or concerns about ESPCs typically revolve around the 

fact that contracting for them is not business as usual. Changes in 

personnel at agencies and elsewhere make education a critical and 

ongoing effort. Often, delays in executing projects stem from legal, 

contracting, or other personnel who simply are unfamiliar with the 

contracting vehicle. The DOE has done much to address this 

through training and other efforts. Our group also constantly works 

on that same thing. 

This program has evolved and improved over the years. It is now 

time to take it to the next level, time to focus on shorter contracting cycles, bigger project scopes, and frankly, just more 

ESPCs. Even at the current enhanced run rates under the President’s initiative, the companies on the IDIQ contract have excess 

capacity. 

We would like to see a continued focus on ESPCs as, thankfully, 

has been the case for the last three Administrations. We now have 

a bipartisan caucus here in the House that is chaired by Congressman Welsh and Congressman Gardner that really works on reducing barriers to their use. Citizens against Government Waste recently supported their efforts in a June 7 commentary entitled 

‘‘ESPC Zone: Everybody Scores with Energy Efficiency.’’ 

Using private sector money and expertise to reduce energy and 

infrastructure expenditures is a natural during this time of constrained budgetary Federal budgets, so I appreciate the opportunity to talk about the program and look forward to answering 

questions. Thank you. 

[The prepared statement of Ms. Schafer follows:] 
36 
37 
38 
39 
40 
41 
42 
43 

Chairman BROUN. Thank you, Ms. Schafer. 

I now recognize our final witness, Mr. Ron King. 

TESTIMONY OF MR. RON KING, 

PRESIDENT ADVISOR, 

NATIONAL INSULATION ASSOCIATION 

Mr. KING. Chairman Broun, Chairwoman Lummis, and Ranking 

Members Maffei and Swalwell and Members of the Oversight and 

Energy Committee, thank you for the opportunity to participate in 

this hearing and to discuss the importance of Energy Savings Performance Contracts. 

My name is Ron King. I am the President Advisor and a past 

president of the National Insulation Association. Our industry, the 

vast majority of which are small businesses, represent over 120,000 

employees across the United States and have an extensive track 

record of providing energy efficiency and emission reduction initiatives in manufacturing facilities and private and government buildings across the country. 

I sit here today as a supporter of energy performance contracts 

being employed by Federal agencies and to express to you the value 

that mechanical insulation can provide to achieving energy efficiency and financial return objectives. 

Thermal insulation for piping, equipment, and other mechanical 

devices, known as mechanical insulation, is a proven energy efficiency and emission-reduction technology that can create tens of 

thousands of jobs. It is also important to note that 95 percent of 

the products utilized in this industry are manufactured in the 

United States. 

Unfortunately, the benefits of mechanical insulation are often 

overlooked by all pipeline stakeholders in new construction, in retrofit, and in maintenance opportunities. The benefits of this technology are further reduced because minimum requirements in new 

construction and retrofit applications are seldom exceeded and 

maintenance opportunities are completed in a non-timely and proper manner. 

The National Insulation Association estimates that implementing 

a comprehensive mechanical insulation maintenance program in 

the commercial and industrial market segments would lead to annual energy savings of 1.2 quads of primary energy or savings of 

roughly $3.8 billion per year with a return of investments ranging 

from 25 percent to over 100 percent while reducing CO2 emissions 

by 105 million metric tons. 

Even with a relatively slow implementation rate, these numbers 

on a compounded basis over 10- or 20-year period would yield tremendous savings and this does not include the additional savings 

of going beyond minimum standards in new construction and retrofit applications. 

As you are aware, buildings are responsible for 40 percent of the 

United States’ energy demand and greenhouse gas emissions, 

which makes efficiency gains in this area crucial if we are to markedly reduce America’s energy consumption. Energy performance 

contracts can be and usually are comprehensive and employ a wide 

array of cost-effective measures to achieve energy savings. These 
44 

measures often include the high-profile energy efficiency measures 

such as lighting, heating and air-conditioning, efficient motors, centralized energy management systems. Mechanical insulation and 

potentially other less-known and proven energy efficiency initiatives they or may not be included. 

Unfortunately, we have found that mechanical insulation is easily and often overlooked. Mechanical insulation typically yields a 

return on investment ranging from a few months to less than seven 

years. As an example, a mechanical insulation energy appraisal 

was conducted on low-pressure steam and domestic hot water systems in a variety of State of Montana facilities. Estimated energy 

savings represent roughly eight percent of the total natural gas 

consumption with an annualized rate of return of 24 percent. 

The use of energy performance contracts by Federal agencies is 

an excellent means to which to achieve high-performance building 

objectives. These types of contracts have led the effort to verify results rather than imperially rely on estimates. Prescriptive measures like mechanical insulation are well-suited, add value, and 

should be an integral part of energy performance contracts and the 

resulting holistic savings verification process. 

As another example, one of our Members completed a mechanical 

insulation energy appraisal of four different operating systems at 

the National Institute of Health in Bethesda, Maryland. They determined by insulating areas not previously insulated and where 

insulation was missing, the potential of annual savings of $400,000 

with a simple payback of 3.3 years and over 6 million pounds of 

CO2 emissions reduction was attainable. 

Inclusive or independent of energy performance contracts, the return on investment of implementing and maintaining a proper and 

timely insulation maintenance program is compelling and easy to 

implement without extensive engineering support, and in many 

cases, any disruption of the workplace. 

We are committed to working with Congress, the Department of 

Energy and key stakeholder groups on energy performance contracts that will lead to greater energy efficiency nationwide, including working with the Department of Energy and other agencies to 

bring together a coalition to develop, implement, and provide mechanical insulation research, education, and training programs. 

Mechanical insulation is a simple, proven, prescriptive technology 

that can contribute to successful execution of Energy Savings Performance Contracts. 

Thank you for the opportunity to submit testimony in support of 

a program that is critical to job creation, economic growth, energy 

savings, and emissions reduction. I look forward to answering any 

questions you may have. Thank you. 

[The prepared statement of Mr. King follows:] 
45 
46 
47 
48 
49 
50 
51 
52 
53 
54 
55 
56 
57 
58 
59 
60 

Chairman BROUN. Thank you, Mr. King. I now want to publicly 

thank you for your very timely and efficient response to the request 

from this Committee for information, and I thank you so much. 

You are an example that every person who testifies before any 

Committee in the Congress should be utilized as an example of response for somebody whose testimony is requested. So thank you 

so much. 

I thank all the witnesses for their testimony. Reminding Members that Committee rules limit questioning to five minutes, the 

Chair at this time will start the first round of questions, and I recognize myself for five minutes. 

Dr. Hogan, given that the credibility of ESPCs rest on strong 

measurement and verification of energy savings, who is currently 

responsible for monitoring and verifying energy savings? 

Dr. HOGAN. So each performance contract in the Federal Government has a contracting officer that would reside in the agency that 

is putting that contract in place. So that is where the responsibility 

does reside. What our Federal Energy Management Program does 

is provide guidance on how to do that MTV well starting with sort 

of what the MTV plan should be at the start of the contract that 

gets written into the upfront contract as well as how to effectively 

do the ongoing monitoring. So we provide assistance, but it is the 

contracting officer in each agency who would be ultimately responsible. 

Chairman BROUN. During your testimony, you indicated that you 

are monitoring these things, and during my opening statement, I 

indicated that five couldn’t even be scored and numerous of them 

were in the red and yellow as far as their energy scoring. This is 

intolerable as far as I am concerned. 

Following up on that response, I would also like to ask Dr. 

Whitlow and Ms. Schafer to answer this: considering that the estimated savings directly relates to the financial payback of the 

ESCOs, would you support regular, mandatory, third-party measurement and verification of all projects over a certain threshold? 

Dr. Whitlow? 

Dr. WHITLOW. Well, when we implement our projects, we have 

our measurement verification, which we then use to verify saving. 

If third parties were to come in and provide some additional oversight of our savings, I think that would only verify the savings that 

we report. So there would be no objections to third party oversight. 

Chairman BROUN. So that is a yes? 

Dr. WHITLOW. That would be a yes. 

Chairman BROUN. Yes. Okay. Ms. Schafer? 

Ms. SCHAFER. You know, my organization hasn’t discussed that 

as a group but—so I don’t have really an official position. I would 

think that, you know, the guaranteed savings, the savings, they 

guarantee the savings. So if somebody is watching over their shoulder, I am sure that is great. The agencies do that already. DOE 

does that. 

DOE has something called life-of-contract oversight, which is 

really nice because every year they come in as a third party and 

they look at what the agency is getting and then they can say, oh, 

well, you know, agency actually didn’t ask for—or you didn’t re-
61 

spond to this MTV or this piece doesn’t look right. How do we deal 

that? So some of that is being taken care of. 

One thing is if you have a third-party come in, if it is a government person who is a third party or a nongovernment person who 

is a third-party, it is not part of the contract. So again, we are 

going to have to find funding for that, which is an ongoing problem 

with getting more efficient in the Federal Government right now. 

Chairman BROUN. I am trying to figure out if your answer is yes, 

no, or maybe. 

Ms. SCHAFER. You know, I don’t have an official position. 

Chairman BROUN. Okay. 

Ms. SCHAFER. I can get one because we haven’t discussed it, but 

it seems to me as though we have that going on both with the 

agency and with the Department of Energy doing that, the labs actually doing that, on a yearly basis to verify that the MTV is correct. 

Chairman BROUN. Okay. Dr. Hogan, what is your opinion about 

this, having third-party assessment? 

Dr. HOGAN. So I think what we are interested in doing is having 

a program of continuous improvement. We are interested in looking 

at any number of ideas that can continue to deliver value for the 

Federal Government and we would be happy to engage in this conversation. 

Chairman BROUN. Okay, thank you. 

Mr. King, comparatively speaking, what are some benefits of mechanical insulation versus—as you mentioned in your testimony, 

‘‘high-profile energy efficiency measures’’ such as high-efficiency 

lighting, high-efficiency heating and air-conditioning? 

Mr. KING. Because mechanical insulation is dealing with the installation of domestic hot water or steam systems and so forth, the 

temperature differentials are much greater. Thus, the energy savings on a per-dollar, per-capita basis is 10, 20, 50 times that of a 

lighting or air-conditioning primarily driven by just the science of 

energy efficiency based on thermal conductivity and what we are 

dealing with. 

Chairman BROUN. Very good. I hope our government will start 

looking more at insulation as a process, and I am sure you would 

be happy with that. 

My time is about expired. I now recognize Mr. Maffei for five 

minutes. 

Mr. MAFFEI. I thank the Chairman and agree with him on that 

last point about insulation. 

My understanding—Dr. Hogan, my understanding is that there 

is a current performance contract that involves energy efficiency 

gains and a data center that OMB is holding up. Do you have any 

idea why OMB’s holding that up? I know that the Energy Department is trying to do its best to administer it, but you are not allowed to go forward, I suppose, until OMB gives the go-ahead? So 

do you have any idea why they are holding that up? This is the 

one involving Lockheed Martin and the Department of Energy. It 

is a $70 million contract. Are you aware of the one I am talking 

about? 

Dr. HOGAN. Yes, so this, of course, is a particular contract that 

we are working on. It is under discussion and review. We are work-
62 

ing to get it resolved. And I can’t really speak to much more than 

that at this time other than we hope to resolve it as soon as we 

can. 

Mr. MAFFEI. All right. I respect that. Do you know who can 

speak to it? Is it—does it have to be OMB to speak to it or—I mean 

we do have oversight responsibility so I understand why you and 

the Department may not be able to, but is it OMB that has to address—— 

Dr. HOGAN. Certainly, this is a Department of Energy decision 

and the contract is under review at the Department of Energy. We 

are happy to engage with you after the hearing today to further figure out what we can talk about here. 

Mr. MAFFEI. Yes. No, okay. I would like as close as you can a 

specific answer as to why that is being delayed. And the reason is, 

it is not just—I am not just trying to pick on this one contract but 

I do think that with all the good things we have been saying about 

these ESPCs, there is a chilling effect if one of the major ones that 

is—has been presented that as far as anybody can see is a good 

idea is being held up in this way, it is a—it creates this perception 

that there is going to be a lot of red tape. So I do think it is important not just for this particular contract but for others. 

Ms. Schafer, one of the issues that we face as we look at the savings in this is the fact that the Congressional Budget Office refuses 

to score the savings from these contracts. I presume that your 

group disagrees with their position. Can you enlighten us at all as 

to why CBO has that position and why it is, you believe, incorrect? 

Ms. SCHAFER. Yes, thank you. In 2002 or 2003 CBO started to 

score ESPCs for the first time. That became apparent to us when 

our 40 was about to expire. As we understand it—and this is been 

the case for the past several years with the CBO, although not the 

case with the OMB—they do not score it and haven’t—and it has 

been reaffirmed through three Administrations. 

But they assume that in ESPC you enter into a mandatory contract to pay back the contractor. So you are going to pay them back 

over several years. You are going to get paid back out of energy 

savings. So what you have now is a mandatory expenditure on the 

books according to the CBO and discretionary money—energy 

bills—that pay that back. We don’t count energy bills in the CBO 

sort of—they don’t have a way to rectify those things. They assume 

anything that is appropriated is discretionary money. It could not 

be appropriated. You could just not appropriate money for those energy bills. So it doesn’t count the same as the mandatory expenditure that is on the books. So that is the large part of it. 

The other part is some of the savings that accrue, accrue outside 

of the ten-year scoring window. So—— 

Mr. MAFFEI. So does your organization—what do you say in response to that? You have actually explained it very, very well, I 

think, but what do you say in response to it? 

Ms. SCHAFER. Well, we don’t believe the score makes any amount 

of sense, and I don’t know how else to say it other than, you know, 

there should be a way to find, you know, we have got admissions 

from CBO in the past that are somewhat different because there 

is a guarantee of savings. It is the only thing where there is a 
63 

guarantee of savings. It is the only thing where OMB and CBO do 

not agree on how to score it. 

And our point is—I mean, Chairman Nichols of the Budget Committee, his line was ‘‘ignore the score’’ several years ago, you know, 

tough to do these days. 

Mr. MAFFEI. Well, yes, particularly since it is in the Congressional rules that we can’t ignore the score. 

Dr. Whitlow, do you—have you seen the savings from this that 

isn’t scored by CBO in the contracts you have worked on? 

Dr. WHITLOW. I will have to go and—— 

Chairman BROUN. Turn on the mike. 

Mr. MAFFEI. You know, that is fine, and I am out of time anyway—— 

Dr. WHITLOW. Yeah. 

Mr. MAFFEI. —but, yes, I am looking for specific instances where 

clearly there has been savings. I—this is very frustrating because 

it is one of those issues where I think all of us—and I didn’t even 

ask Mr. King; I am just presuming that you would agree. I think 

all of us sort of see clear savings here and yet, you know, there is 

all these sort of inside baseball technical reasons or whatever. So 

I do want to look at that further. 

And, Mr. Chairman, I apologize for going over and I yield to you. 

Chairman BROUN. Well, I thank you, Mr. Maffei. And I think we 

all want answers to those questions because I think it is critical for 

the taxpayers to have those answers because this scoring problem 

is certainly something that we need to get to the bottom of it. 

Mr. MAFFEI. If the Chairman would yield, yes, absolutely. It prevents us from doing something that is going to save the taxpayers 

money if there is absolutely no way that we can record that it is 

likely to save the taxpayers money. It just doesn’t make any sense. 

I thank you for your comments on that. 

Chairman BROUN. Absolutely. I agree. I now recognize Mr. 

Hultgren for five minutes. 

Mr. HULTGREN. Thank you, Chairman. Thank you all for being 

here. 

With the President’s budget continuing to slash funding for discovery sciences in the Department of Energy in order to pay for 

ever-expanding loan guarantee programs and energy subsidies, I 

have seen personally how our labs must find creative ways to reduce their cost so they can continue their groundbreaking work. 

In my district, I have Fermilab. And just Fermilab alone has 

over 400 buildings on its site, as they talked about in their last 

newsletter, and there is no question that we can find energy savings with 400 buildings in our laboratories and we need to do that. 

First question, Dr. Hogan, if I can address it to you, can you tell 

me how much energy consumption has been reduced at agencies 

due to ESPC usage and how that figure can be verified? 

Dr. HOGAN. Yes, so as we have been talking about within the energy performance contracts, there is guaranteed savings. There are 

MTV plans that go with that guaranteed savings. In the program 

that the Department of Energy runs—and keep in mind that is just 

a piece of what goes on in the performance contracting space—we 

have been able to report on $2.7 billion of investment in energy ef-
64 

ficiency projects and $7.2 billion in savings that go with those contracts. 

Mr. HULTGREN. And how are those verified? 

Dr. HOGAN. So that is, as we have been discussing, through ongoing monitoring and verification. There is an MTV plan that is part 

of every contract in terms of what the pieces of equipment need to 

do to perform to sort of meet the elements of the contract and then 

the ongoing monitoring that shows indeed that those pieces of 

equipment do perform that way. 

Mr. HULTGREN. Shifting or getting a little more specific, in 2009, 

DOE awarded a 15-year ESPC at Fermilab for 1.4 million in upfront cost projecting savings of 3.25 million over the life of the contract. I wonder if you could tell me how realistic these savings are 

looking and how quickly they are coming into place? 

Dr. HOGAN. I certainly can go back and look specifically—— 

Dr. HOGAN. —into that contract—— 

Mr. HULTGREN. If you could and if you can respond maybe in 

writing. 

Dr. HOGAN. Sure. 

Mr. HULTGREN. I will follow up with you on that. 

Dr. HOGAN. Absolutely. 

Mr. HULTGREN. And wonder if you can also respond how long 

after the life of these contracts can we expect to see savings? 

Dr. HOGAN. So that is actually one of the topics that is taken up 

in this Oak Ridge report that people are talking about. You know, 

the average life of a contract has been on the order of 17 years. 

Clearly, some of the measures that go into these buildings, such as 

a chiller, can have a lifetime of 25 years. So indeed a fair amount 

of time there for additional savings beyond the guaranteed savings 

in the contract. 

Mr. HULTGREN. Shifting over to Ms. Schafer, as interest rates 

fluctuate, can ESPCs be renegotiated to take advantage of lower financing rates that we have seen recently? If so, how many FPCC 

companies have done this? 

Ms. SCHAFER. Well, several FPCC companies have been working 

with their agency customer and the financing community on potential refinancing opportunities. That really is something that the financial community has to do. We are sort of in the middle of that. 

So some of them will agree to them. Often, they will agree to a refinance if there is additional scope. And we work to see if we can 

make that happen when it makes sense for the site. 

Mr. HULTGREN. Okay. You had testified about the work at Oak 

Ridge National Laboratory saving twice the guaranteed amount. Is 

this common for these type of contracts and can you tell me how 

that number was derived? 

Ms. SCHAFER. I can tell you as much as I know because I am not 

the technical guy at Oak Ridge, but what I understand is that 

when we went under ESPC, an ESCO guarantees an amount of 

savings over the life of the contracts. So say it is a 15-year contract, and over that lifetime they will guarantee X dollars. Generally, more occurs because they underestimated whatever it might 

be, and that savings goes directly to the agency, to the customer 

during the life of the contract. After the contract, you get a lot 

more savings because then you don’t pay back for all the invest-
65 

ment that the ESCO did. And so that is included, too, and so it is 

those types of things that have really increased the value of the 

ESPC. 

The other thing that isn’t counted is the fact that you get things. 

So agencies generally enter into an ESPC because they need something. My chiller is in bad shape, I have got to get a new one. That 

is infrastructure expenditures that go away upfront. 

Mr. HULTGREN. Right. Okay. I have only got 30 seconds left. 

Real quickly, I wonder if you could again, Ms. Schafer, staying 

with you, can you tell me of any of the downsides to the Federal 

use of ESPCs? 

Ms. SCHAFER. Well, I think that depends on who you are talking 

to. I think some people feel that financing an ESPC, financing energy projects is a bad idea, that it is cheaper to do it with appropriated dollars. Oak Ridge in a 2006 report said that is not the 

case, but if you just look at it flat out, you say why should I pay 

financing charges if I don’t have to? That is a potential downside. 

Some people may want to have the expertise in-house; we can’t 

really afford that right now, so for the time being, I don’t see a lot 

of downside to an ESPC. 

Mr. HULTGREN. Well, my time is expired so I do want to yield 

back, but if any of you would have a response to that, other 

thoughts of things we should be watching for, be concerned about, 

potential downsides, and maybe if we can follow up with some 

other questions, that would be great as well. 

So with that, I yield back. Thank you, Mr. Chairman. 

Chairman BROUN. Now the Chairman recognizes Mr. Swalwell 

for five minutes. 

Mr. SWALWELL. Thank you, Mr. Chairman. 

We have seen locally in the cities that I referred to, Dublin and 

Livermore, that having these types of contracts not only reduce the 

city’s energy bill but the installation of the different types of upgrades that take place and the maintenance that is required thereafter creates new local jobs. 

And so I am wondering, Ms. Schafer, if you can talk about if 

there is a correlation between creating jobs and also reducing the 

Federal Government’s energy bill? 

Ms. SCHAFER. Well, the nice thing about Energy Savings Performance Contract or really any energy efficiency project is it is 

local. You can’t offshore efficiency upgrades to a building that is 

here. We have estimated that we get about 10 jobs per million dollars of investment. So it does add up. The Chamber testified to, you 

know, I think it was like 400,000 jobs or something from ESPCs 

already so—— 

Mr. SWALWELL. And also, do you see a potential—and I would 

also ask Dr. Hogan this question—do you see a potential to increase the role that ESPCs play with respect to data centers? And 

we know that data centers, you know, a growing trend to add more 

and more data centers across the country or move information into 

the cloud. I mean they really do consume a lot of energy. Now, are 

there more opportunities out there to use ESPCs for data centers? 

And I will start with Dr. Hogan. 

Dr. HOGAN. Well, I think that is a great question. Certainly, 

there are some sort of data center configurations that we can use 
66 

ESPCs for now given the reliance on, you know, intensive air-conditioning in data centers. But we do know that there is interest in 

figuring out how to do more with these ESPCs and we would be 

happy to respond to any proposals that people might have in that 

space. 

Mr. SWALWELL. Great. And Ms. Schafer? 

Ms. SCHAFER. We are very concerned about the data center area. 

It—we feel it is completely in the authority of existing ESPCs. 

There are—the government has definitely seen some opportunity 

for data centers. They have put out notices of opportunity to our 

ESCO community asking them to bid on projects for data center 

consolidations. We have had selections for those from NASA Glenn 

at GSA and in the Navy. We have also had just NOOs that are 

some of them a little bit held up because of this current holdup on 

the first one with the Department of Transportation, the Air Force, 

and with the USDA. 

So we do—the government definitely sees it as an opportunity 

and so do our members. 

Mr. SWALWELL. Can you—ESPCs be applied to the Federal vehicle fleet under existing law? And we saw Dr. Hogan refer to, I 

think, 600,000 civilian vehicles. And I know there are efforts underway, but what role can ESPCs play in upgrading our vehicle 

fleet to hybrid or electric cars? And, Dr. Hogan, I will start with 

you. 

Dr. HOGAN. So as the statute is currently written, it does not 

allow us to use ESPCs for our fleets. 

Mr. SWALWELL. And, Ms. Schafer, is that—would that be a positive change? Is there interest in industry to compete for that if it 

was available? 

Ms. SCHAFER. There definitely would be and we have seen legislation, bipartisan legislation in the past trying to do this. But it 

triggers a score from CBO because it is an expansion of our authority. So scores are triggered both when we try to expand the authority into things that are non-building-related or non-plug-load-related, as well as when we actually say from a Congressional angle, 

hey, get more efficient if they might use us to—use an ESPC, then 

that also scores. So it is back to the scoring. 

Mr. SWALWELL. I am glad the scoring has been brought up and 

maybe this is an opportunity that the Chairman and I and Ranking Member Maffei can work on to address and try and correct this 

because it sounds like there is agreement among the three of us 

that it is just a—kind of a mindless approached to scoring and 

there are opportunities for further savings that we could look into. 

Chairman BROUN. Mr. Swalwell, you are suggesting the Federal 

Government is mindless? 

Mr. SWALWELL. Not too mindless, that you and I, Mr. Broun, 

couldn’t fix it. 

Chairman BROUN. Well, I will agree with that, Mr. Swalwell. 

Mr. SWALWELL. Well, thank you, and I yield back. 

Chairman BROUN. Thank you so much. Now, the Chairman will 

recognize Mr. Cramer for five minutes. 

Mr. CRAMER. Thank you, Mr. Chairman, Ranking Members, for 

this, and thank you to all of the witnesses. 
67 

I am still trying to get over the fact that the Federal Government 

manages half-a-million buildings in the United States, and that 

speaks to a whole other challenge, which I think, frankly, is symptomatic of why Administration officials and bureaucrats can come 

in here and give roundabout answers to direct questions. The bureaucracy is too big. 

That said, I want to expand this discussion on efficiency a little 

bit because my personal belief is that efficiency ought to be its own 

reward. It shouldn’t be this complicated. I have always found it 

frustrating that it requires a whole bunch of people creating a 

whole bunch of jobs to screw in a light bulb that will save money, 

and that ought to be fairly self-evident. 

I know a little bit more about it, however, because I do think, 

even as the largest landlord, largest energy user in the country, we 

have a broader responsibility as well, and that is to the rest of the 

ratepayers that are also affected in areas where we may find efficiencies in our federally owned buildings. I know there are a number of models that utilities can use to determine the value of energy efficiency, and it shouldn’t be done in a vacuum. And it is not 

just the one customer that uses an energy efficiency that has an 

impact in my energy efficiency, especially in a down economy. 

There are stranded costs in our plant, for example, that have to be 

paid for by the number of ratepayers that there are in any given 

service area. 

And so I would like somebody to speak to me about the various 

models and whether or not we consider other ratepayers than simply the Federal Government, because the Federal Government, 

while we can find efficiency in a particular building or a particular 

agency, those savings are going to be—the cost—there is still a cost 

somewhere else that somebody else has to bear as a result of those 

savings in some cases. 

So do you know what kind of modeling is used to determine 

whether there is a negative impact even of—and, by the way, I 

support this kind of thing, just so you know. But even in a savings 

to the Federal Government, do we measure the possibility that that 

savings will be a cost of the ratepayers not in their taxes but perhaps in their utility rates? If somebody could speak to that if it 

makes sense to anybody. 

Ms. SCHAFER. The only thing I can think of is if we get more efficient anywhere on the grid—— 

Mr. CRAMER. Um-hum. 

Ms. SCHAFER. —everywhere would be better on the grid. Then, 

you reduce the need to build new power plants, which cost money 

to do and that gets rate-based and affects all taxpayers. And I 

don’t—but I am having—I don’t think I understand about—— 

Mr. CRAMER. Okay. So let me ask you this—— 

Ms. SCHAFER. —the—if you get more efficient here, does it make 

it more expensive over here? I don’t think that is—I don’t understand that part. I apologize. 

Mr. CRAMER. That is—okay. Let me get Dr. Hogan and then I 

will—— 

Dr. HOGAN. But you were going in the right direction because 

many utilities run energy efficiency programs. I think if you look 

across the country, more than half the States have policies in place 
68 

where they are looking to procure energy efficiency whenever the 

energy efficiency costs less than the construction of the next power 

plant. And then they have energy-saving goals so that they know 

they don’t have to build that next power plant. 

And I think it is the programs that we are engaged with as well 

that help feed into the utilities planning and their ability to sort 

of avoid the construction of that next power plant. 

Mr. CRAMER. Teed up perfectly. I think that is exactly right. So 

then my question becomes what you have just described is what I 

would call a total resource cost-and-benefit analysis. But there is 

also a ratepayer impact model that I think we are ignoring in this 

discussion because your assumption, while usually true, I don’t 

think is always true. 

And when you consider in a down economy like we have today 

where there is plant built—and there is a lot of plant in certain 

areas that there isn’t the next generation of plants to be built unless, of course, we issue mandates that they have to be closed 

down. 

And, by the way, with regard to jobs creation, building new 

power plants is pretty good jobs creation as well. So this bias sort 

of against that, I think we need to put energy efficiency in a broader context and that is to consider not just the participants in an 

energy efficiency program but the nonparticipants and their ‘‘benefits’’ as well because in many utility situations that I am familiar, 

the cost to the nonparticipant is quite high. And generally, the nonparticipants are people that can’t afford the new refrigerator or the 

new lights or the new insulation at all this other things. 

So when we talk about energy efficiency, I don’t think we should 

talk about in the vacuum nor necessarily assume that the next 

plant is a negative to either society or to the local economy or to 

the ratepayer. 

With that, my time is expired. 

Chairman BROUN. Thank you, Mr. Cramer. Now, Mr. Peters, you 

are recognized for five minutes. 

Mr. PETERS. Thank you, Mr. Chairman. I want to first agree 

with the comments about scoring. One of the things that has been 

most surprising to me about the Federal Government is the rigidity 

with which they observe this scoring that doesn’t give you any benefit for what you might spend today in terms of the future. And 

this is not the way that any family or small business or local government would make a decision. 

And we would look—if we were ever to evaluate any investment, 

you would look at what you get back in the future. That is what 

distinguishes an investment from spending. And so, again, we see 

that today and I just want to say that don’t just leave it at the 

three of you, Mr. Swalwell. I would like to join up and be part of 

this conversation. 

The question I had for you, though, and perhaps this is for Dr. 

Hogan or Ms. Schafer, I love the idea of using these—it reminds 

me of a power purchase agreement kind of plan that would—it is 

a way to get significant savings for Federal facilities with minimal 

cost implications, really if any, and I think it is a great program. 

But I am interested in the context because, as we think about 

upgrading Federal facilities in general to be making improvements, 
69 

I wonder whether you might tell me whether this model could assist in making Federal facilities more resilient to the kind of big 

weather events we have been seeing lately. That can be enhancing 

structural activity, the building envelope, moving infrastructure to 

where it is less vulnerable to floods or earthquake or wind, and 

also maybe improving the strength of glass in the window. Have 

you given any thought to that and how might the big weather be 

accounted for in this kind of program where we are going to be 

making these improvements? And I would be interested in hearing 

your answer to that. 

Dr. HOGAN. Well, I think we do have to start with an understanding that the performance contract is helping the government 

put in place things without having the upfront capital that can get 

paid back with a saving stream. So within that construct, we can 

look at, you know, what can fit into that type of contract. 

I guess one area I would pull out in particular that we have been 

doing a lot of work in right now is with combined heat and power, 

right, which many people also believe is a resiliency measure that 

provides for some amount of power activity on a base or in a facility during an extreme weather event. But we are happy to look at 

what can be built into the construct of a performance contract in 

that space. 

Mr. PETERS. Ms. Schafer? 

Ms. SCHAFER. Our members are very excited about the resiliency 

and the security—we do a lot of defense facilities—possibilities. We 

do do a lot of onsite generation, distributed generation, whether it 

be with renewables or with natural gas, CHP, whatever it is, and 

we are looking to do more. 

Mr. PETERS. Okay. I would just ask you it just makes sense if 

we are going to be making these improvements to think about some 

of these new realities we are facing. 

Thank you, Mr. Chairman. I yield back. 

Chairman BROUN. Thank you, Mr. Peters. 

I next recognize Mr. Schweikert for five minutes. 

Mr. SCHWEIKERT. Thank you, Mr. Chairman. 

You know, this is one of those where you have a dozen sort of 

questions and you are hoping none of them make you actually 

look—what is the term—oh, yes, stupid. But mechanically, first— 

and is it Ms. Hogan or Dr.—how many spots do we have where we 

have entered into these types of agreements and it happens to be 

in a state or a regulated area where there is a purchase buyback? 

So you are doing distributed generation and we have had a contract, we have put solar panels on the building, and certain times 

of the day we are generating more, we turn the meter backwards, 

and the municipal or private power producer has to buy that 

power. Do you know of that existing in any of these contracts? 

Dr. HOGAN. Yes, I certainly don’t have those numbers off the top 

of my head. We can collect that information for you. 

Mr. SCHWEIKERT. Ms. Schafer—is it Schafer-Soderman? 

Ms. SCHAFER. Schafer. We generally do small-scale renewables or 

small-scale generation that is used within the fence. So there isn’t 

a lot of selling back to the grid. There have been a few projects in 

the past. Currently, the Administration is—has different ways that 

they would like to do power purchase agreements. They don’t really 
70 

want to put them within an ESPC so we sort of don’t do a lot of 

that at this point. 

Mr. SCHWEIKERT. Okay. I know that is becoming actually quite 

an issue in California, Arizona, and others where the distributive 

generation is actually creating some fascinating curve on adoption 

and sort of transfer pricing. 

But that is—walk me through—if I were actually describing this 

to my constituents—the benefit of using sort of a private financing 

mechanic as we do here compared to an appropriated one? 

Ms. SCHAFER. So you get a couple of benefits and you—it is a different construct but what happens is you go into—you select a contractor based on maybe some preliminary audits and that type of 

thing, and then you work with them very collectively. It is a very 

cooperative program between the government customer and the 

ESCO deciding what all do we want in here? Here is our immediate problem. What else can we do to help pay for that? What 

else—what other beneficial things do you want? And it is a back 

and forth, back and forth, back and forth. It is very different than 

a design-build type of contract. You actually don’t sign a contract 

with the Energy Service Company until you get all of that done. 

Mr. SCHWEIKERT. Okay. We are a little off. 

Ms. SCHAFER. Okay. I am sorry. 

Mr. SCHWEIKERT. But—okay. Let me box it in. 

Ms. SCHAFER. Okay. 

Mr. SCHWEIKERT. Will the benefit of the contract change much 

if interest rates, cap rates, the costs change? 

Ms. SCHAFER. It is locked in so whatever you lock in at the time 

of—— 

Mr. SCHWEIKERT. But that is in the contract that is signed 

today? 

Ms. SCHAFER. The contract signed today. 

Mr. SCHWEIKERT. How about into the future if we are sitting 

here and a year from now we are back at historically normal interest rates, do you think the value of these contracts—— 

Ms. SCHAFER. Well, you have locked in it really good rates—— 

Mr. SCHWEIKERT. No, one more time—— 

Ms. SCHAFER. —you did it today—— 

Mr. SCHWEIKERT. New contract—— 

Ms. SCHAFER. Oh, okay, new contract—— 

Mr. SCHWEIKERT. —a year in the future under current—— 

Ms. SCHAFER. Okay. 

Mr. SCHWEIKERT. —more normalized interest rate environment. 

Ms. SCHAFER. So in 2006, as Oak Ridge report said, that even 

if the interest rates then, which were significantly higher than they 

are today, they were still a very good deal, a better deal than a 

project done with appropriated dollars straight up. 

Mr. SCHWEIKERT. Okay. That—— 

Ms. SCHAFER. And that—— 

Mr. SCHWEIKERT. Is it Dr. Whitlow? And let’s see if I can come 

up with the proper way to build this box and this question. 

I have a government facility. I have infrastructure needs. I need 

a new chiller, I need a new air conditioner, I—it is time for new 

windows. Does this become an alternative way to finance capital 

costs, as well as being able to talk about the energy savings? And 
71 

I am sort of curious what ultimately—on occasion does—do I have 

multiple motivators here of this is a way to sort of strip certain 

capital costs off my budget and find another way to finance them? 

Dr. WHITLOW. Right. It is a way to finance the project without 

using the appropriated funds, and then the big advantage is when 

we enter into these projects, it is the guaranteed savings that we 

get. 

Mr. SCHWEIKERT. Well, but in that case, if I am financing these 

improvements, it would have been in my capital budget. Do I have 

any sort of movement of what those appropriated dollars would be? 

So, you know, a budget is built, we have a capital value, we are 

going to build a new chiller, all of this, and I enter into one of these 

agreements. I get my chiller. Do those dollars end up being fungible and move somewhere else? 

Dr. WHITLOW. Well, what we will not do if, when we enter into 

these agreements, our appropriated dollars don’t come into play because when we use this alternative—this—well—— 

Mr. SCHWEIKERT. They wouldn’t come into play but you have actually—is the term subrogation? I have covered my costs here so 

I still have that dollar in my budget line items. I am not saying 

it is bad or evil; I am just trying to understand. Is it something 

we should look more to when we are building budgets saying, hey, 

there is an ESPC possibility on this facility; therefore, certain capital cost shouldn’t be in their line items? 

Dr. WHITLOW. Well, I certainly think it would be an advantage 

to us to look at that mechanism—— 

Mr. SCHWEIKERT. Okay. 

Dr. WHITLOW. —because it allows us to use our appropriated dollars, as you say, use our appropriated dollars other places and not 

have to use them to do these capital improvements, which result 

in these energy segments. 

Mr. SCHWEIKERT. I am over my time. Thank you, Doctor. 

Mr. Chairman, thank you for your patience. 

Chairman BROUN. Thank you, Mr. Schweikert. 

Now, Mr. Veasey, you are recognized for five minutes. 

Mr. VEASEY. Thank you, Mr. Chairman. And I wanted to ask Dr. 

Hogan specifically about the ESPCs and other options. Are there 

other options that are available besides the ESPCs and direct funding that agencies can consider to pay for energy-saving projects? 

Dr. HOGAN. Yes, we talked about performance contracting generally with Energy Savings Performance Contracts being one mechanism. We have also talked about appropriated dollars being available to the extent that agencies have those dollars in their facility 

budgets. And then I think we also talked a little bit today about 

the service contracts that utilities can provide, UESCs, which are 

also an important mechanism that many agencies have availed 

themselves of but again are different than the federally administered contract mechanisms. 

Mr. VEASEY. Let me move over to Energy Independence and Security Act of 2007. Of course, that authorized the use of any appropriated funds for upfront ESPC financing. And I wanted to ask Dr. 

Whitlow about NASA. 
72 

I was really curious what effect that would be on NASA and 

other Federal agencies if the ability to use other funds were removed? 

Dr. WHITLOW. Well, if we remove that ability, what it does, it 

gives us more flexibility in meeting our energy and water reduction 

goals because we have found that just the use of the tools that we 

have available such as ESPCs have provided us great benefit and 

great savings not only in our energy usage, our water usage, and 

has resulted in significant dollars savings annually as well. So additional tools would benefit the agency. 

Mr. VEASEY. Dr. Schafer, do you want to add anything? 

Ms. SCHAFER. I guess I was trying to understand—okay. So in 

2007 I think there was language that said something about you can 

mix money so you could use appropriated dollars in with an ESPC. 

This doesn’t mean you are suddenly replacing it necessarily. What 

it means is if you have got some really expensive widget that you 

want to install along with a bunch of energy conservation measures 

and you want to use some money up front that you have so you 

do have appropriated dollars for efficiency, you could put that in, 

too, and shorten your timeline of payback. Some agencies have 

done this in the past; other agencies are—don’t do it and still don’t 

do it. I don’t think the language really had any impact at all on 

whether and which agencies. 

Mr. VEASEY. Thank you, Mr. Chairman. I yield back my time. 

Chairman BROUN. Thank you, Mr. Veasey. I now recognize Mr. 

Weber for five minutes. 

Mr. WEBER. Thank you, Mr. Chairman. 

Dr. Hogan, among the dozens of actions the President announced 

on Tuesday as part of his Climate Action Plan, was a commitment 

to complete numerous new energy efficiency regulations for appliances. I understand those regulations are promulgated under your 

supervision, is that right? 

I have the list of current active rulemakings. They include virtually every appliance you can either do what we call hardwire or 

plug into an outlet. That would be ceiling fans, air conditioners, 

heat pumps, furnaces, boilers, refrigerators, and on and on and 

on—heaters included and on and on and on. And executing the 

President’s directive under your supervision, which rulemakings do 

you expect to finalize first and how soon should we expect to see 

these? 

Dr. HOGAN. We can certainly provide you with a list of the rule 

actions that are currently in play. I think it is great to think about 

the amount of energy savings that these appliance standards have 

brought forth to the American consumer. You know, just the ones 

that have been put in place over the last four years are helping 

save something close to $400 billion through 2030. So they are a 

great way to help consumers and businesses save energy. 

Mr. WEBER. Well, let me—I will just editorialize for a second. 

The government’s role is to protect us from our enemies. When it 

decides it has to protect us from ourselves, we have a problem. And 

my concern with these rules beyond the principle that the Federal 

Government should not be in the business of designing appliances—and I own an air-conditioning company—— 

Dr. HOGAN. Um-hum. 
73 

Mr. WEBER. —is that they limit consumer choice. They will raise 

the purchase price of these appliances, actually reduce the sales for 

manufacturers because as—and I have witnessed that in my own 

company—as units get more and more efficient, people cannot afford to purchase them. And they actually have the old one repaired. 

Now, what does that say about higher efficient standards or reducing the energy cost? And many manufacturers have actually filed 

comments with DOE along those lines. 

And just one example, remanufacturing comments on the DOE’s 

rule for residential furnace fans say that the rule would result in— 

and, of course, I am reading from their comments and I can attest 

to them in my own business—higher initial cost, which would lead 

to consumers switching to less-efficient products. They literally will 

buy a less-efficient air-conditioning system because the price is 

higher or because in many ways the rules promulgated, what manufacturers have to do. Higher initial cost, as I stated earlier, will 

push consumers to repair rather than replace their units. And I 

can go on and on and on. Window units might be used as opposed 

to buying a whole complete central system, which we have experienced in our business. 

Let me just ask you, when is the last time you bought an air conditioner or furnace? 

Dr. HOGAN. Certainly within the last 10 years. 

Mr. WEBER. Within the last ten years. And then I would—let me 

just go down the panel. 

And Dr. Whitlow, when is the last time you bought one? And, by 

the way, yours is inefficient now. You need to replace it. 

Go ahead. 

Dr. HOGAN. It was efficient when I bought it. 

Mr. WEBER. Well, I understand. And as often as we have these 

meetings and change the rules, there—you know, there—you are 

going to be replacing it more often. 

Go ahead, Dr. Whitlow. 

Dr. WHITLOW. The last air-conditioning and furnace I bought was 

in 2000 when I purchased my home. 

Mr. WEBER. Okay. 

Ms. SCHAFER. 2007. 

Mr. WEBER. Okay. 

Mr. KING. 2009. 

Mr. WEBER. Well, Mr. King, there is hope for yours for at least 

a couple more years. Gosh, I got lots of questions. 

You talk about increasing energy efficiency and power on the 

grid but you don’t—did you—Dr. Hogan, do we weigh the impact, 

lost opportunity—investment opportunity when you don’t build 

that new power plant? Those investors don’t get a return on their 

money, for example, number one. Number two, new power plants 

are a lot more efficient than the older power plants, so we can actually bring them online, less emissions. Do we measure the amount 

of money that will be spent on trying to get carbon pollution out 

of the air or do we just say we want to reduce energy usage so that 

new plants are not built and we keep driving the old ’60 model 

Chevy Caprice? 

Dr. HOGAN. I think the premise behind energy efficiency—and 

we sort of talk loosely about avoiding the construction of the next 
74 

power plant. I mean I think what we are all interested in is providing the services that people want and to be doing it as efficiently 

as possible because efficiency aligns with lower cost—— 

Mr. WEBER. Okay. But I am—— 

Dr. HOGAN. —to the consumer. 

Mr. WEBER. —running out of time so bear with me for one second. That is a private decision. If a company wants to invest in a 

power plant and they can produce energy at a more reasonable rate 

and do it more environmentally friendly, why would we want to 

deter that? 

Dr. HOGAN. I think you are sort of putting me now in the position of being a state regulatory commissioner, right, who is responsible for overseeing these types of decisions for our regulated electricity industry, but I think generally, people are looking for solutions that deliver the least-cost energy to the American customer. 

Mr. WEBER. Well, and I am sorry. Forgive me. As we seek to justify higher and higher efficiency ratings that we impose on manufacturers, in essence, we are stepping in between state regulatory 

agencies and we are saying, look, you are going to have to build 

more efficient units that use less electricity. And the net result 

may be that we actually defer the building of more efficient, more 

environmentally friendly plants. And I think that cost needs to be 

taken into account. 

Mr. Chairman, thank you for your indulgence. I yield back. 

Chairman BROUN. Thank you, Mr. Weber. 

Now, the Chairman recognizes Mr. Lipinski for five minutes. 

Mr. LIPINSKI. I thank you, Chairman Broun. I unfortunately had 

another hearing at the same time so I apologize for not being here 

to hear the—your spoken testimony. 

But in going through the written testimony, I know, Mr. King, 

you highlighted the amount of energy savings from mechanical insulation and it seems like it could be very helpful for manufacturers and industries who are trying to boost their competitiveness. I 

wanted to ask not only Mr. King but the entire panel. Do you see 

a greater potential role for things like mechanical insulation in Energy Savings Performance Contracts or in other ways—other use by 

the Federal Government? So let’s start with Mr. King. 

Mr. KING. We would certainly hope so. One of the biggest hurdles 

I would say, barriers today with mechanical insulation in existing 

buildings is when they are looking at existing buildings outside of 

a major performance contract, it is basically referred to as a maintenance expense. And whether it is government or private business, 

people are cutting expenses and not completing things that are energy efficiency that do in fact have a tremendous return on investment from an efficiency standpoint. And, as a result of that, it is— 

nothing is being done because of budgetary restraints. They are 

looking at it as an operating expense as opposed to an energy efficiency investment. 

So it is the fact that the energy performance contracts, when you 

look at it holistically, if they would look at the proven prescriptive 

items like mechanical insulation—and there are others—to be included in that, all inclusive in that, it actually helps the implementation of those types of measures. 

Mr. LIPINSKI. Thank you. And anyone else want to—Ms. Schafer? 
75 

Ms. SCHAFER. We definitely use insulation and—when we do mechanical work when we replace chillers, decentralized boilers, all 

those things. So it is used. We are getting in to deeper and deeper 

retrofits in Federal buildings, working on Net Zero with the Department of the Army right now, and there will be even more opportunities for insulation. 

Another place that we really see a role for both ESPCs and an 

increase used in mechanical insulation is in the industrial markets, 

which we don’t have a lot in the Federal Government, but it is a 

huge opportunity to save energy at very low cost. 

Mr. LIPINSKI. Thank you. Dr. Whitlow? 

Dr. WHITLOW. When we work with the DOE to identify potential 

projects and the task orders that we would do to improve our energy efficiency, if there is a role for insulation in meeting our goals 

and then certainly we would use insulation as appropriate. 

Mr. LIPINSKI. Thank you. Dr. Hogan, anything to add? 

Dr. HOGAN. Certainly, as we give guidance out to the Federal 

agencies around the types of measures that are appropriate for use 

in performance contracting, you know, we include a complete slate 

of those measures and certainly insulation will be part of that. 

Mr. LIPINSKI. Great. Thank you. With that, I will yield back. 

Chairman BROUN. Thank you, Mr. Lipinski. 

And I think we have exhausted our numbers of Members that 

wanted to ask questions, and so our first round is over. 

And I want to thank the witnesses for your valuable testimony 

and Members for their questions. Members may have additional 

questions. In fact, I will promise you we do. And I thank you, Dr. 

Hogan, for your promise to get the responses back for these questions for the record back in a very expeditious manner, within two 

weeks. I hope. 

So Members—the record will remain open for two additional 

weeks for additional comments and for the questions that are being 

provided to the panel. 

I thank you all for your being here today and for your excellent 

testimony and very interesting testimony. We have got a lot of 

things that we need to be doing to try to promote more energy efficiency and savings to the taxpayer, particularly in these hard times 

economically for the government and for everybody. The witnesses 

are excused and the hearing is now adjourned. 

[Whereupon, at 11:35 a.m., the Subcommittees were adjourned.] 

(77) 

Appendix I 

ANSWERS TO POST-HEARING QUESTIONS
78 

ANSWERS TO POST-HEARING QUESTIONS

Responses by Dr. Kathleen Hogan 
79 
80 
81 
82 
83 
84 
85 
86 
87 
88 
89 
90 
91 
92 
93 
94 
95 
96 
97 
98 
99 
100 
101 
102 
103 
104 
105 
106 
107 
108 
109 
110 
111 

Responses by Dr. Woodrow Whitlow, Jr. 
112 
113 
114 
115 

Responses by Ms. Jennifer Schafer 
116 
117 
118 
119 
120 
121 
122 

Responses by Mr. Ron King 
123 
124 
125 
126 
127 

(129) 

Appendix II 

ADDITIONAL MATERIAL FOR THE RECORD
130 

SUBMITTED LETTER FOR THE RECORD BY REPRESENTATIVE ERIC SWALWELL
131 

Æ