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Budgetary Impact of Energy Savings Performance Contracts 1 (July 1, 2011)

handle is hein.congrec/cbo10565 and id is 1 raw text is: CONGRESSIONAL BUDGET OFFICE Douglas W. Elmendorf, Director U.S. Congress Washington, DC 20515 July 1, 2011 Honorable Fred Upton Chairman Committee on Energy and Commerce U.S. House of Representatives Washington, DC 20515 Dear Mr. Chairman: This letter responds to your request for information about the Congressional Budget Office's (CBO's) analyses of the budgetary impact of energy savings performance contracts (ESPCs). ESPCs are a specific type of long-term contract used by federal agencies to procure certain energy services. In particular, you asked us to explain how CBO's estimates of the cost of legislation related to ESPCs take into account any energy cost savings that accrue to the government under such contracts. In its cost estimates for proposals to modify current law related to ESPCs or to establish energy-related goals or requirements for federal agencies that may lead to increased use of such contracts, CBO attempts to take all potential budgetary impacts into account. Because of the long-term nature of ESPCs, however, a significant portion of anticipated effects on net spending related to those contracts are expected to occur well beyond the five- and ten-year estimating windows covered by CBO's cost estimates. In brief, energy savings performance contracts are a tool, available under current law, that permit federal agencies to enter into long-term contracts for energy- efficiency improvements without having up-front discretionary appropriations to cover the costs of those federal commitments. In CBO's view, entering into such legally binding agreements results in mandatory spending (that is, obligations and outlays that stem from budget authority provided in laws other than appropriation acts). The subsequent savings in energy costs fall in a different budget category. Because energy costs are generally paid from annually appropriated funds, any net savings generated by using more energy-efficient equipment could eventually lead