Energy Savings Performance Contract Energy Sales Agreements

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An energy savings performance contract energy sales agreement (ESPC ESA) is a project structure that allows federal agencies to utilize the ESPC long-term multiyear contracting authority to implement cost-saving renewable energy conservation measures on federal buildings and land that support domestic energy production and leverage private sector investment.

The Federal Energy Management Program developed the ESPC ESA Toolkit to provide federal agency contracting officers and other acquisition team members with information that will facilitate the timely execution of ESPC ESA projects.

Access the ESPC ESA Toolkit and its editable templates.

ESPC ESA Details

Below is information about ESPC ESAs.

  • ESPC ESA projects must meet all ESPC statutory and regulatory requirements (see 42 U.S.C. § 8287 et seq. and 10 C.F.R. § 436.30 et seq.), including the requirement that the agency pay for the cost of the ESPC ESA from energy savings generated each year over the life of the contract.
     
  • In order for the ESPC ESA contract to be scored annually, it must be consistent with the requirements under the Office of Management and Budget (OMB) Addendum to OMB Memorandum M-98-13 on Federal Use of Energy Savings Performance Contracts (ESPCs) and Utility Energy Service Contracts (UESCs) (M-12-21, dated September 28, 2012), including the requirement that the federal government retain title to the onsite renewable energy generation system at the conclusion of the contract.
     
  • The renewable energy conservation measure (ECM) is initially privately owned and the federal agency purchases the electricity. Before the end of the contract, the federal agency purchases the renewable ECM at fair market value (FMV).
     
  • The energy service company (ESCO) transfers a portion of the payments it receives into a reserve account held by the ESCO for the future FMV purchase. The amount charged for each payment period includes the price of power and an amount for the reserve account that is separate and in addition to the price of power.
     
  • The Internal Revenue Service (IRS) recently issued an ESPC ESA safe harbor Revenue Procedure 2017–19. Section 4 specifies a maximum contract length of 20 years and a requirement that all operations and maintenance must be provided by the ESCO. Section 5 contains details regarding an example ESPC ESA project.
    • FEMP issued two requests for comments (RFC) in 2016 to solicit industry input regarding ESPC ESAs and tax incentive eligibility. View the February 2, 2016 RFC or the August 4, 2016 RFC
    • Note: Tax incentive eligibility due diligence is the responsibility of the ESCO.
       
  • Federal Acquisition Regulation authorizes federal agencies to undertake an ESPC for the acquisition of utility services, 48 CFR § 41.102(b)(7) (2015).