Evaluating Electricity Procurement Options for Federal Agencies

Utility regulatory markets in the United States are typically determined at the state level and generally fall into one of two types: (1) vertically integrated markets (sometimes referred to as "regulated markets"), and (2) retail electric choice markets (sometimes referred to as "deregulated markets" or "competitive markets").

The procurement options for these market types differ and will be discussed in detail under the Strategize section, below. Figures 1 and 2 illustrate the differences between the market structures.

In vertically integrated markets, the serving utility is responsible for generation, transmission, and distribution of electricity. Customers receive all services including commodity electricity from their serving utility. A site's serving utility is determined by its geographic location.

In retail electric choice markets, customers can choose their electricity supplier and work with GSA or DLA Energy for their commodity electricity purchases, which will be aggregated with other federal loads.

The following states have either complete or partial retail electric choice: California*, Connecticut, Delaware, Illinois*, Maine, Maryland, Massachusetts, Michigan, New Hampshire, New Jersey, New York, Ohio, Oregon, Pennsylvania, Rhode Island, Texas*, Virginia*, and Washington, D.C.

^{*Electric choice may not be available in all parts of the state or for all customers.}

ACTION: Categorize sites based on the regulatory market in which they are located (e.g., retail electric choice, vertically integrated).

Because individual states regulate electric utility purchases and sales within their borders, the rules and options regarding the purchase of electricity will vary depending upon a site’s geographic location.

The electricity supply and demand must be balanced at all times for the electric grid to function properly and avoid blackouts. Within the United States, 66 balancing authorities play the key role of maintaining balance between electricity supply and demand within specific geographic regions. Some of these balancing authorities are individual utilities while others are larger regional transmission organizations that balance loads in areas that encompass multiple states.

As facilities consider strategies for increasing off-site procurement of energy sources in line with federal requirements or resilience goals, they may wish to prioritize generators that are relatively local to the facility and can deliver to the balancing area where the facility is located.

Leverage existing information on identified energy conservation measures (ECMs) to project estimated reductions in load. Consider deep energy retrofits and projects funded through performance contracting options such as energy saving performance contracts (ESPCs) and utility energy service contracts (UESCs).

Project future electricity load for each site. This is particularly important when there are plans for a significant increase or decrease in annual electricity consumption due to changes in facility usage or mission, for example.

For sites planning to increase their electric vehicle fleet, the FEMP Utility Program Navigator can help federal agencies locate incentives offered by their utilities.

On-Site Projects

Inventory

ACTION: Take an inventory of available information related to on-site energy generation.

• Do your sites have available real property that could be used to site energy generation or storage (e.g., rooftop, parking structures, adjoining land)?
• Agencies seeking to develop government-owned on-site energy projects: 
  • If appropriations are available for the installation of on-site energy generation projects:
    • Leverage available FEMP resources to support your efforts, as Utility regulations can be complex, and FEMP can help you navigate the options. Agencies can review recommended tasks and questions to ask their utility related to interconnection from the Distributed Energy Interconnection Checklist. FEMP is available for related questions or requests for help at our Technical Assistance portal.
  • If appropriations are not available for the installation of on-site energy generation projects:
    • Agencies should consider outreach to the appropriate Federal Project Executive for your region.
• Agencies seeking to develop third-party owned on-site energy projects:
  • Would your Agency consider hosting utility- or privately-owned energy generation on your land? FEMP is available for related questions or requests for help at our Technical Assistance portal.
     

FEMP Resources

Refer to the following FEMP resources for more information and technical assistance.

• REopt: Renewable Energy Integration and Optimization: Techno-economic decision support platform to evaluate the economic viability of distributed energy technologies (e.g., PV, wind, battery storage, geothermal heat pumps) at each site. Agencies can use REopt directly to evaluate on-site technologies as well as utility bill analysis, or reach out to FEMP for related technical assistance.
• Process for Planning and Implementing Federal Distributed Energy Projects: Six phase process to implement distributed energy projects
• Distributed Energy Interconnection Checklist: Series of questions and tasks for agencies to ask their utility, broken out by each interconnection process step
• AFFECT: Assisting Federal Facilities with Energy Conservation Technologies: Funding opportunity through FEMP to meet energy-related goals.

Performance Contracting Options

Energy Savings Performance Contracts (ESPCs), ESPC ENABLE Projects, and Utility Energy Service Contracts (UESCs), are collectively known as "performance contracts." Performance contracts are a useful strategy for installing energy conservation measures that increase energy and water efficiency as well as installing energy projects at federal sites without upfront capital funding.

The Energy Act of 2020 amended 42 U.S.C. § 8253(f)(4) to include a new requirement for federal agencies to implement all life-cycle cost-effective energy- or water-saving measures identified in a federal agency's evaluation of a federal facility subject to the requirements of 42 U.S.C. 8253(f) ("covered facility") not later than two years after the completion date of the evaluation.

Further, at least 50% of the project implementation must be accomplished through performance contracts.

Refer to the following FEMP resources for more information:

• Federal On-site Distributed Energy Project Financing Options: Description of distributed energy project financing options
• ESPC, including ESPC ENABLE: Details performance contracting mechanism to procure energy savings and facility improvements with no upfront capital costs through a partnership
• ESPC Energy Sales Agreement: Details use of the multiyear ESPC authority to implement distributed energy projects on federal buildings or land between an agency and an energy service company
• UESC: Details the limited source acquisition between a federal agency and serving utility for energy management services.

Identify how your site or sites take electric service. Part of a comprehensive plan to achieve agency goals is an understanding of how contract expirations provide opportunities to move towards consumption that provides resiliency and cost savings benefits while meeting federal requirements.

Vertically Integrated Markets

Agencies should understand the rate schedule, tariff, or separate contract under which they take electric utility service. Agencies will most commonly take electric service via a Task Order issued by the Agency under the appropriate GSA Areawide Contract (AWC). Pursuant to Federal Acquisition Regulation (FAR) Part 41.204(c), using the GSA AWC is required unless determined by the Agency Head Contracting Authority that its use is not advantageous to the Government.

Where no GSA AWC exists, sites will have negotiated separate contracts or interagency agreements in accordance with FAR Part 41.205; FAR Part 41.206. GSA's Utility Areawide Guide provides information for procuring utility services through AWCs.

ACTION: Take note of the following in vertically integrated markets:

• Sites with expiring electricity contracts
• Sites served by a utility with a GSA AWC that are not taking service via a task order under the AWC
• Sites taking electric service under a separate contract.

Off-site energy options are market dependent, though some options are available in both vertically integrated and retail electric choice markets.

Increase on-site energy generation where projects are cost-effective and scalable, and meet other strategic objectives. On-site projects may provide additional opportunities for energy efficiency, resilience, or to electrify other energy-intensive site loads, which may help agencies meet other statutory goals.

Examine utility offerings to determine if there are programs available that are best suited to meet your goals; switch to these programs if available to the site's customer class.

Ensure all commodity requirements are coordinated with GSA or DLA Energy for inclusion in their regional procurements.

Detail annual electricity use through the Annual Energy Management Data Report workbook. Follow FEMP Annual Energy Reporting Guidance.

On an annual basis, assess the achievement of agency annual targets and the success of various procurement strategies and adjust as needed to stay on track.