Improving Enviromental Management

ENV03: Increase Energy and Water Efficiency



The federal government is the nation's largest energy consumer, with an energy bill of nearly $3.75 billion in fiscal year 1991 in its own buildings.[1] The General Services Administration (GSA) estimates that federal energy costs to operate office equipment alone are $115 to $150 million a year.[2] As part of Earth Day 1993 activities, President Clinton signed an Executive Order requiring the purchase of energy efficient computers and printers, which is estimated to save the American taxpayers $40 million per year.[3] Other commercially available, cost-effective measures, including high-efficiency lighting, heating, ventilation, and air conditioning systems could likely conserve 25 to 40 percent of the energy used in federal buildings without loss of comfort or productivity.[4]


The actual annual water consumption of the federal government is unmeasured, but the known magnitude of the use offers major, cost- effective opportunities for elimination of waste and improved efficiency. A recent survey showed that the federal government annually consumes a minimum of 23 billion gallons of water -- a figure that does not even include such major federal water users as the GSA, the Department of Defense (DOD), the Department of Veterans Affairs, and the U.S. Postal Service.[5] Annual expenditures for water at federal agencies are also quite significant. In 1989, for example, the Army's global water and sewer costs were almost $247 million.[6]

The federal government owns and leases approximately 500,000 buildings, including 422,000 housing units.[7] In the past two years, GSA has installed approximately 4,675 water efficiency upgrades, saving 4.1 million gallons of water per year.[8] Indoors is not the only place where water conservation measures are needed. They are needed outdoors as well. A large percentage of the water used in federal facility garden and landscape irrigation is lost to evaporation, runoff, and spillover to paved areas.[9]

The Energy Policy Act of 1992

The magnitude of federal energy consumption and the potential for conservation and cost savings it represents have formed the basis for numerous legislative efforts and Executive Orders.[10] Water conservation, meanwhile, has been almost an afterthought for government. Some of the past federal legislation set goals for reductions and some provided funding and cost-sharing mechanisms to help realize these goals. But there was little incentive for facility managers to pursue efficiency measures. Federal agencies have been offered a number of avenues for achieving energy and water conservation. They have produced mixed results.

Since 1986, the federal government has had the authority to participate in Shared Energy savings contracts, which allow agencies to share energy savings with contractors who finance and implement energy efficiency upgrades. Despite the savings sharing incentive, only 15 shared savings contracts have been negotiated in the past seven years. There are several reasons why the program has been so underused. The first is the slow and complex nature of federal procurement, which increases costs and delays savings. The second is the complicated calculations used to determine savings in the shared savings process. The third reason is the lack of high-level encouragement to pursue energy efficiency. Finally, there has also been a shortage of staff dedicated to such projects, which means that there is currently a lack of engineers, contracting officers, and project managers experienced in savings sharing contracts.[11]

The enactment of the Energy Policy Act of 1992 (EPACT) was the first time that water conservation efforts were recognized as equally important as energy conservation efforts.[12] EPACT requires each agency to install all energy efficiency and water conservation measures with a payback of 10 years or less by 2005 and to reduce energy use in federal buildings by 20 percent by the year 2000. The Department of Energy (DOE) estimated that each week the federal government did not meet the 20 percent goal in 1991 was equivalent to $20 million in lost opportunity.[13]

Since 1975, federal energy efficiency efforts have been coordinated by the DOE's Federal Energy Management Program.[14] Under EPACT, the Federal Energy Management Program was given responsibility for coordination of some water efforts in addition to its energy efficiency responsibilities. Key provisions in the EPACT are highlighted below.

b>ding for Efficiency Measures.
EPACT established a fund in DOE to provide grants to help agencies meet the statutory requirements. The fund was authorized at $10 million for fiscal year 1994 and $50 million for fiscal year 1995 and such sums as necessary thereafter. The federal budget for fiscal year 1994 provides $6 million for the fund and the President's budget calls for overall expenditures of $2.2 billion for implementation of energy efficiency retrofits between fiscal years 1994 and 1998. Use of federal funds for direct contracting for efficiency upgrades can provide taxpayers with the greatest benefit because all of the savings are kept by the government.15

gy Savings Performance Contracts.

EPACT allows agencies to enter into Energy Savings Performance (ESP) contracts which require the contractor to pay the government if the project does not achieve estimated energy savings. It is anticipated that the ESP contracts will be easier to negotiate and implement than the older Shared Energy Savings contracts.

Savings Retention.

Civilian Agencies. EPACT allows civilian agencies to retain 50 percent of energy and water cost savings for additional energy efficiency measures and employee incentive programs. -- Department of Defense. In 1990, DOD was authorized to keep two-thirds of the government's share of the energy cost savings for future efficiency projects and for base welfare and recreation funds.[16] This DOD authority does not allow retention of water-related cost savings through projects or participation in water utility conservation programs.[17] Since DOD was permitted to retain a larger portion of its savings under the earlier legislation, it was excluded from EPACT.

Bonus Program.

EPACT creates a bonus program to reward outstanding federal facility energy managers. The bonus program was authorized for $250,000 in each fiscal year -- 1993, 1994, and 1995.

Need for Change

New approaches are needed to jump start federal initiatives, create early progress, and achieve success. While EPACT recognizes the importance of water conservation, it does not contain comprehensive water efficiency language. However, EPACT still represents a significant opportunity to reduce both energy and water waste, if fully implemented. The awards for federal facility managers in EPACT will provide incentives if they are funded, but they are likely not enough to catalyze the widespread actions necessary in the energy and water efficiency area to meet the EPACT's statutory goals or to reap all of the potential savings available to the federal government.

Other fundamental changes are needed. For example, agencies should revise position descriptions and performance evaluations for facility managers so that conservation is an evaluation criterion, in order both to hold them accountable for results and to reward them for implementation. Leadership is also needed. For example, the Executive Order requiring the purchase of energy- efficient Energy Star computers fosters excellence in energy efficiency in new ways; nevertheless, many additional opportunities exist for energy and water conservation.

Many water utilities are planning price increases over the next several years, which will influence the cost of water at federal facilities. For example, Southern California's Metropolitan Water District will increase its water rates an average of 22 percent per year over the next two years, then increase them between 8 and 12 percent per year until 2000.[18] Since 1985, the Massachusetts Water Resources Authority, which supplies water and wastewater treatment services to communities in the Boston area, has increased its water and sewer charges 428 percent. The Authority now expects retail water and sewer bills to triple by 2000.[19] There are hundreds of federal buildings in these two water districts which have been and will be hit by price increases. These are not the only places where water and sewer rates will climb. In order to decrease demand for water and energy at federal buildings and lessen the fiscal impact of spiraling prices, the federal government will have to develop and promote innovative ways of achieving maximum energy and water use efficiency.

In fact, water conservation is essential to economic health in some parts of the nation. Estimates of future water demand in Southern California's Metropolitan Water District show that by 2010, the average annual water demand in Metropolitan's service area is expected to exceed the water supply, creating a water shortfall of 30 percent.[20] In 1990, the California Urban Water Agencies sponsored research that indicates that a one-year, 30 percent industrial water shortage in California would translate into an estimated $20 billion in losses and 160,000 lay-offs due to reduced production.[21] The federal government has a number of facilities in Southern California and in other areas experiencing or anticipating water shortages. To lead by example and help local governments solve pressing problems, the federal government needs to fully participate in conservation efforts.

Using less water will not only save tax dollars, but will also help postpone or eliminate the need for building new or expanded water or wastewater treatment facilities and reduce energy use. The California Energy Commission estimates that 56 percent of the state's municipal electricity use is applied to the pumping of water and the removal and treatment of wastewater.[22] Of course, using less water can also significantly reduce the adverse effects of water withdrawals from fragile aquatic ecological systems.

EPACT requires each agency to reduce energy and water use in its buildings. Although the act sets specific goals, a commitment to meet these goals is necessary. The Office of Technology Assessment estimated that it would take $2 to $3 billion to retrofit all government buildings for energy efficiency.[23] EPACT does not provide agencies with the necessary funds for achieving their resource use goals. The Department of Defense, for example, has programmed $1.1 billion for accomplishing EPACT goals, but it is believed this will not fully satisfy the requirement. The remaining funds and audits necessary to achieve the efficiency goals of the EPACT will probably need to come from the private sector, possibly through utility conservation programs and ESP contracting.

Streamlining Contracting Methods.

Despite improvements the EPACT made in the energy efficiency contracting process, the new ESP contracts still contain many of the complexities of the old Shared Energy Savings contracts. A new streamlined contracting method is currently being tested in Southern California where two federal agencies are working with state and local utilities to integrate water and energy efficiency upgrades through energy utilities' rebate and incentive programs.[24] All of the upgrades will be accomplished by modifying the existing energy utility contracts with the federal government. Working through existing contracts saves time and administrative costs, clears the red tape involved with new contracts, and gives federal facilities the opportunity to participate in more of the water and energy utility incentive/rebate programs.

This new streamlined method requires utilities to finance all of the parts and labor costs for the efficiency upgrades. The federal government will repay utilities through an agreed-upon conservation service charge for a set period of time. Utilities guarantee that the federal government's bill will never exceed the agreed-upon rate, which will generally be 20 to 30 percent lower than its current average bill.

Savings Retention and Bonus Programs.

Under EPACT, civilian agencies are allowed to retain 50 percent of the energy and water cost savings for additional energy efficiency measures and employee incentive programs. As stated earlier, however, since DOD was permitted to retain a larger portion of its savings under earlier legislation, it was excluded from EPACT. DOD interprets the exclusion to mean that it may not keep any savings from water projects, but still may keep the two-thirds allowed for energy efficiency projects under its previous legislation.

In addition to its inability to retain water savings, there are other barriers to the widespread implementation of conservation projects. For example, under the DOD conservation legislation, military installations are allowed to accept any financial incentive offered by utilities. However, those incentives cannot always be used to offset the costs of the project that triggered them. The incentive payment may be put into another fund and perhaps then become unavailable to the installation and DOD when that fund's appropriation expires. Some civilian agencies experience the same problem.

The DOE bonus program was not appropriated any funds in fiscal year 1993. Some, but by no means all, agencies have bonus programs of their own; however, most provide awards for energy projects but not water projects. The continued exclusion of water projects perpetuates the belief that water conservation measures are secondary and unrelated to energy efficiency. The intent of the bonus program and savings retention provisions is to encourage a change in "corporate culture" regarding conservation; however, with the immediate need for deficit reduction, some believe that the savings are likely to be turned back to the Treasury. There is, for the same reason, pressure to slash the relatively small bonus program budgets. It is a move that would eliminate a strong incentive for managers to save the government and the taxpayers significant amounts of money and meet statutory goals.

Renewable Energy.

Using less energy is only one part of the culture change the federal government needs to undergo. Another important element is to switch to less environmentally damaging forms of energy. Fossil fuel fired power plants produce acid rain and greenhouse gases. Petroleum use makes our nation vulnerable to dependency on foreign oil. Nuclear power plants generate hazardous nuclear waste. Hydropower dams destroy natural stream flows, degrading terrestrial and aquatic ecosystems.

In this vein, some utilities are experimenting with solar retrofits in customer facilities to manage their power demand. Solar generated power can reduce long-term energy costs and produce literally tons less pollution. For example, a water heater powered through solar technology instead of petroleum-based energy can avoid as much as one ton of carbon dioxide (CO2) emissions per year.[25]

Examples of Benefits

Aliamanu Military Reservation.

Despite the barriers to energy efficiency and water conservation detailed above, there are examples in the federal government which demonstrate savings, though they did not come easily. For example, the U.S. Army Corps of Engineers selected the Aliamanu Military Reservation at Honolulu, Hawaii, for a Shared Energy Savings contract to upgrade 2,600 housing units and support facilities. The contract was advertised in 1989, and after two years of bureaucratic wrangling and negotiating, a contract was awarded. The contractor will receive a share of the energy savings and maintenance savings generated for 15 years. The government expects to receive an estimated $7.8 million over the contract period.[26] The implementation of the proposed energy and water measures are expected to result in an annual reduction of over 24 million kilowatt hours and over 8.5 million gallons of water. This results in a reduction in annual pollution emissions of 23,655 tons of CO2, 107 tons of sulfur dioxide, and 64 tons of nitrous oxides.[27]

Tonto National Forest.

The federal government is demonstrating the energy and cost-efficiency of solar energy systems. The Department of the Interior funded a model solar project at the Cholla Recreation Site in Tonto National Forest. The solar energy system costs about one-third as much as extending the power lines to the site and does not entail a monthly service charge.[28] It provides energy to pump water from the facility's 165-foot well; powers the water disinfection process; and provides the lighting, forced air ventilation, and the power requirements for the toilets, showers, and other buildings. In addition, a solar process was adapted to produce hot water for the showers at no cost. Such models should be replicated wherever cost-effective. They may be particularly well-suited for military facilities, where command consolidations have led to increased energy demand -- a demand that could be met with less-expensive and less-polluting renewable energy sources.

Finally, federal efficiency-seeking efforts will also create new markets and incentives for innovative technologies. By itself, this should promote economic vitality and jobs in a critical industry sector.


1. Issue a directive on energy and water efficiency in federal facilities. (2)

The President should issue a directive by March 1994 to address the need for energy and water conservation and efficiency measures at all federal facilities where cost-effective. The directive should:

set a federal energy savings goal to encourage agencies to exceed the goal established in EPACT;

set a goal for federal water conservation; and

stress the importance of the link between water consumption and energy use.

The directive should also encourage the federal government's preference for less polluting forms of energy and:

state that the federal government's policy shall be to pursue aggressively the use of renewable energy sources in federal facilities; and

direct agencies to set goals for energy efficiency projects that include the use of renewable energy. These goals and progress reports in meeting them should be submitted to the DOE and the White House Office on Environmental Policy as a part of the annual reports on energy efficiency currently required by legislation; and, where cost-effective, direct government agencies to install renewable energy technologies in new federal facility construction projects and in future renovation projects.

The directive should include provisions directing agencies, where cost- effective, to: integrate energy and/or water efficiency upgrades to ensure maximum cost savings;

establish reinvention laboratories to showcase energy efficiency, water conservation, and renewable energy technologies, as well as innovative contracting techniques;

establish an Energy Efficiency Project Team including a procurement specialist, an energy manager, and other relevant members, and empower the team to focus on water conservation measures and energy efficiency projects;

pursue utility incentive and rebate programs;

consider energy and water conservation in the performance evaluation of facilities managers; and

review employee incentive programs to ensure that successful implementation of energy and water conservation/efficiency measures are appropriately rewarded.

To assist federal energy managers in implementing energy efficiency and water conservation projects, the directive should require within 180 days issuance of:

model solicitations to contract for water and energy upgrades;

model Energy Savings Performance contracts with a comprehensive list of efficiency measures;

guidance explaining the relationship between water use and energy consumption and energy savings achieved through water conservation measures; and

a national list of qualified water and energy efficiency contractors.

2. Propose legislation to allow the DOD to retain savings generated through water efficiency projects. (3)

The President should propose legislation to amend 10 U.S.C. Sec. 2865. The proposed legislative change should provide added incentive to DOD to implement water conservation measures to meet the statutory reduction goals of the Energy Policy Act of 1992 (EPACT).

3. Develop appropriate rules, procedures, or proposed legislation to allow rebates from utility companies to remain available beyond the fiscal year and to be used to fund additional energy efficiency and water conservation projects or to reduce the facility_s future utility bill. (1)

Agencies' heads should, within 120 days of the President's directive, develop appropriate rules, procedures, or proposed legislation, if necessary, to ensure:

rebates or incentive money is returned to the site where the savings occurred; and

rebates are available to fund energy improvement or water conservation projects or, alternatively, to be applied toward future utility bills.

Cross References to Other NPR Accompanying Reports

Department of Energy, DOE05: Strengthen the Federal Energy Management Program.

Reinventing Federal Procurement, PROC20: Streamline Buying for the Environment.

Improving Financial Management, FM06: "Franchise" Internal Services.

Reinventing Human Resource Management, HRM04: Authorize Agencies to Develop Incentive Award and Bonus Systems to Improve Individual and Organizational Performance.


1. The total energy bill for fiscal year 1991 was nearly $11.3 billion, including the energy costs associated with jet and diesel fuel. See U.S. Department of Energy (DOE), Annual Report to Congress on Federal Government Energy Management and Conservation Programs, Fiscal Year 1991 (Washington, D.C., October 22, 1992), p. 10. The federal government pays approximately $4 billion in subsidized energy expenses or low-income housing. See U.S. Congress, Office of Technology Assessment (OTA), Energy Efficiency in the Federal Government: Government By Good Example?, OTA-E-492 (Washington, D.C.: U.S. Government Printing Office, May 1991), p. 3.

2. Trenkle, Anthony, "Government Customer Perspectives," Proceedings: Energy-Efficient Office Technologies: The Outlook and Market (Electric Power Research Institute, December 1992), p. 3-6.

3. Executive Order 12845, "Energy Efficient Computer Equipment Purchasing," April 21, 1993. See also President William J. Clinton, "1993 Earth Day Address," April 21, 1993. (Press package.) 4. Installation of efficiency measures for cooling could reduce commercial energy consumption by 30 to 70 percent and space heating energy consumption for commercial and industrial uses by 20-30 percent. Rubin, Edward S., et al., "Realistic Mitigation Options for Global Warming," Science, vol. 257 (July 10, 1992), p. 148. Installation of a series of 11 best practice technologies options available at little or no net cost could reduce electricity use in the U.S. building sector by 45 percent. Id. at p. 149 and 262. In 1991, a highly efficient cooling and heating system and several other simple changes were estimated to cut office energy consumption by 50 percent or more. "Conservation Power: It Has a New Look That's Igniting an Energy Revolution," Business Week (September 16, 1991), p. 88.

5. The 23 billion gallons of water per year excludes most of the Department of Interior facilities and does not include any water figures from the Postal Service, the Department of Defense, the Department of Energy, the Department of Housing and Urban Development, the General Services Administration (GSA), the Department of Labor, and the Department of Veterans Affairs. "Water Efficiency in Federal Facilities and Programs," Environmental and Energy Study Institute, June 1993, pp. 1-3.6. Ibid.

7. OTA, p. 4. The figure includes multifamily units which may be in one building.

8. Telephone interview with Debra Yap, Office of Real Property and Management and Safety, General Services Administration, July 29, 1993.

9. See detailed discussion of water-efficient landscaping in ENV04: Increase Environmentally and Economically Beneficial Landscaping. 10. See Energy Policy and Conservation Act of 1975, P.L. 94-163; Energy Conservation and Production Act of 1976, P.L. 94-385; Department of Energy Organization Act of 1977, P.L. 95-91; National Energy Conservation Policy Act of 1978, P.L. 95-619; Comprehensive Omnibus Budget Reconciliation Act of 1985, P.L. 99-272; Federal Energy Management Improvement Act of 1988, P.L. 100-615; National Defense Authorization Act of 1989, P.L. 100-456; National Defense Authorization Act of 1990, P.L. 101-189; National Defense Authorization Act of 1991, P.L. 101-501; and Energy Policy Act of 1992, P.L. 102-486. Executive Orders: Executive Order 11912; Executive Order 12083; Executive Order 12374; and Executive Order 12759.

11. OTA, p. 3.

12. P.L. 102-486.

13. Ginsberg, Mark, Speech to World Energy Congress, Association of Energy Engineers, Atlanta, Georgia, October 1992.

14. The Department of Energy was established in 1977. Prior to that time the Federal Energy Management Program was located in the DOE's predecessor organization, the Federal Energy Administration.

15. For further discussion of contracting methods for energy efficiency and water conservation measures, see Reinventing the Procurement Process, PROC20: Streamline Buying for the Environment.

16. National Defense Authorization Act of 1991, P.L. 101-510.

17. 10 U.S.C. -2865.

18. Metropolitan Water District of Southern California, Proposed Executive Summary Annual Budget, 1993- 1994 Fiscal Year (April 2, 1993), p. D-18.

19. Telephone interview with Barbara LaHage, Massachusetts Water Resources Authority, July 20, 1993.

20. Dziegielewski, B. and D. Baumann, "The Benefits of Managing Urban Water Demands," Environment, vol. 34, no. 9 (November 1992), p. 7.

21. The loss in revenue is tied to 1990 value of shipments. See California Urban Water Agencies, "Cost of Industrial Water Shortages," November 1991, pp. 7-10 -- 7-19.

22. California Energy Commission.

23. OTA, p. 7.

24. The partnership includes the following: the GSA, the Naval Facilities Engineering Command, Metropolitan Water District of Southern California, San Diego Gas & Electric, Southern California Edison, the City of San Diego, and the San Diego County Water Authority.

25. Personal correspondence with Mark Ginsberg, Director of the Federal Energy Management Program, Department of Energy, August 15, 1993.

26. DOE, Annual Report to Congress, p. 18.

27. Personal correspondence with David R. Horne, David R. Horne and Associates, July 12, 1993.

28. The cost of extending the commercial grid power to the site was $750,000 and a monthly service charge of $1,000, while the cost of installing a solar system was only $240,000. See U.S. Department of Energy, "FY1991 Special Recognition Awards," Special Edition, No. 1, Washington, D.C., 1992, p. 2.

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