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National Association of Energy Service Companies

Policy Priorities

Federal Policy Advocacy Update

National Voice of the ESCO Industry

NAESCO serves as the national voice of the ESCO industry through its national and regional advocacy efforts that have such a direct impact on the strategic interests of its members. We can be proud that our industry and our members are the vanguard of leading the economy back to life by providing the investment, the jobs, and the infrastructure improvements needed to rebuild America.

We expect that our advocacy work in 2012 will build on the work undertaken in 2011 and will continue to be a mix of ensuring the continued funding and political support for key federal, state and utility-administered ESPC programs, advocating for utility and state energy efficiency incentives that enhance ESCO projects in states with major ESCO markets, and promoting the adoption and use of state and utility energy savings monitoring and verification (M&V) rules and protocols that are workable and that recognize the full value that customers realize from ESCO projects.  

Federal Policy and Advocacy Activities

NAESCO Advocacy work in 2011 shifted away from its effort in 2010 to enact comprehensive national climate and energy legislation to supporting the achievement of more modest federal goals.

Federal ESPC

Through a subcontract with the Lawrence Berkeley National Laboratory, NAESCO is providing technical assistance to FEMP to assist FEMP to expand the scope of ESCO projects into what are being called Deep Retrofits, and to assist FEMP in addressing some of the persistent barriers to performance contracting within federal government agencies.

In order to accomplish the aggressive mandates to which federal civilian and military agencies are subject, FEMP, GSA and CERL, working with the 16 Super ESPC ESCOs, are developing new retrofit strategies that will, among other things, minimize the thermal load of each building with super insulation and air sealing, technologies that are rarely used in ESPC projects today because of their high cost and long paybacks; Implement district heating and cooling and CHP strategies as feasible; and, implement renewable energy generation to meet the fossil fuel reduction goals.

NAESCO has participated in two kick-off conferences on Deep Retrofit strategies. The first conference was organized by FEMP and CERL, and focused on the development of projects in which renovation funding from the Army will be blended with ESPC funding from ESCOs to achieve 60-70% energy savings in Army facilities. The second conference was organized by the Rocky Mountain Institute and focused on GSA’s Zero Net Energy Challenge, in which each of the Super ESCOs will be given the chance to respond to an RFQ which solicits their qualifications to develop Deep Retrofit and Zero Net Energy strategies in about 35 selected federal facilities.

In 2012, we expect to continue the work of assisting FEMP to develop its Deep Retrofit program, and to assist FEMP in identifying and addressing the barriers to ESPC implementation in federal agencies. We have been addressing these barriers in our policy work for years, but much of the research that underlies our arguments is outdated and/or in the form of federal laboratory research reports that are not very user-friendly. So we are going to assemble the most up-to-date research information and write it into documents that are accessible to the target audience of federal agency facility and financial managers.

Federal Administrative Actions

On December 2, President Obama and Former President Clinton announced a program that will invest $2 billion in energy efficiency retrofits in federal and $2 billion in local government and university facilities in the next two years. The program, which is part of the President’s Better Buildings Initiative announced last January, will give a strong boost to federal ESPC, because it is done through a Presidential Memorandum and is not accompanied by a request for a budget appropriation to pay for the work. Since local governments generally have little or no capital funds for EE projects, we expect that they will also have to meet their commitments through ESPC projects. NAESCO has worked on the Better Buildings Initiative since last winter, meeting with senior US DOE staff and supporting the EE elements of the President’s Jobs Bill.

Federal Budget

The federal budget situation is pretty grim. The debate is Congress is not about how to expand EE and RE programs, but rather how much will be cut from US DOE Energy Efficiency and Renewable Energy programs and the US EPA programs to curtail air pollution. With the failure in late November of the Congressional Super Committee to produce a bi-partisan agreement on debt reduction and tax reform initiatives, significant additional federal budget cuts will automatically be triggered in 2013, and the federal government seems likely to limp through FY 2012 on a series of Continuing Resolutions, which are extensions of the FY 2011 budget.

The programs that directly affect the ESCO business which have already been cut significantly include the following:

  • The Better Buildings Initiative, which President Obama proposed to provide incentives and loan guarantees for public and private commercial building energy efficiency, is zeroed out.
  • The State Energy Program, which provides funding to the State Energy Offices that usually administer state ESPC programs, is cut by 61%.
  • The Weatherization Program, which funds low-income programs in which our RES ESCO members work, is cut by 90%.

We continue to work with a broad national coalition of EE, RE and business groups to convince Congress to restore funding to these critical programs, but it is very difficult, in the current deadlocked political situation, to even get focused debate and votes on these programs.

3% Withholding Tax Repeal

NAESCO joined the broad-based Government Withholding Relief Coalition (GWRC), organized by the US Chamber of Commerce, which worked successfully to repeal the 3% withholding on all federal payments to contractors that was scheduled to start on January 1, 2012. The repeal legislation was enacted and signed into law by President Obama.

Federal Energy Legislation

The extended Congressional debate on deficit and tax policies has precluded action on several energy policy bills that have been introduced into the Senate this year. These bills, unlike ARRA or last year’s failed energy and climate legislation, do not rely on massive federal grants or huge new sources of funding like a carbon trading regime, but rather on mandates (building codes and appliance standards), modest tax incentives, and revolving loan programs. It should be noted that the House does not seem to be enthusiastic about the Senate energy efficiency policies under consideration. NAESCO has provided industry input to these bills as they have been assembled and introduced.

Federal Regulatory Issues: Municipal Advisor Registration Requirement under the Dodd-Frank Act

NAESCO has spent a significant amount of time in 2011 seeking to prevent a proposed regulatory change that would significantly affect the ESCO industry were it enacted in its current form.  The Securities Exchange Commission (SEC), under what they believe is a mandate enacted in the Dodd-Frank financial reform legislation, has proposed that ESCOs be required to register as municipal securities advisors and be subject to regulatory oversight appropriate to that status.

NAESCO has worked extensively with its member companies to mount a major lobbying effort to overturn this SEC rule. Members companies and NAESCO have met with SEC Commissioners and staff, as well as staff and members of Congressional Committees that have jurisdiction over the SEC and/or are concerned with the potential effects of the rule on the ESCO industry. Our argument is that the SEC has misunderstood the intent of the Congress, which specifically exempted engineering firms from the registration requirement, and should apply a similar exemption to ESCOs. In response to our efforts, and those of other concerned industries, the SEC has delayed the issuance of the final rules; NAESCO continues to work to get the proposed rules modified and “safe harbor” language adopted. The SEC is re-writing the rule, and NAESCO continues to meet with SEC staff to respond to their questions, and to help them understand the distinction between the spreadsheets and other analyses that ESCOs provide to customers in the course of project development and the kind of services that municipal financial advisers provide.

State Energy Efficiency Action Project

NAESCO is participating in the State Energy Efficiency Action (SEE Action) project, which has been convened by US DOE and US EPA. The purpose of SEE Action is to accelerate the adoption of aggressive energy efficiency programs that seek to acquire all cost-effective energy efficiency, across the country. It appears that the US DOE Office of Energy Efficiency and Renewable Energy (EERE) is using the SEE Action blueprint as the foundation of its national EE strategy. NAESCO is a member of the Executive Group and three Working Groups – EM&V, Finance and Utility Motivation. NAESCO was also asked to join a national Steering Group, convened by US DOE that will guide a pilot project to set a common framework for M&V protocols for common energy efficiency measures, which we think will benefit the ESCO industry.

Federal Advocacy Resources

The following are Federal Policy Priorities: