How to Make Improvements When the Cupboard is Bare: Energy Savings Performance Contracting

Utilities are facing increasing pressures to maintain or improve their treatment processes with little additional revenue through rate increases. This means that utilities need to make hard choices about spending priorities. Efficiency and renewal projects are often assigned lower priorities than regulatory or infrastructure replacement projects. However, utilities that evaluate projects based on long term costs and benefits may be able to justify investments for operational efficiencies – including reductions in the use of power, chemicals, or solids disposal costs, or increased revenues. Even when the utility recognizes that there is a good business case to make an investment, sometimes there simply is not adequate money. Partnering with an Energy Services Company (ESCO) can be an option to fund improvements and maintain a positive cash flow. There are various vehicles to fund Energy Savings Performance Contract (ESPC) projects developed by the ESCO, but ESPC projects provide guaranteed efficiency savings to offset the capital cost of the projects, consequently greatly reducing utility risk. This paper addresses the issues facing utilities in making capital decisions, how to evaluate them as business cases, and the ESPC process. The experiences of two utilities, Frederick Winchester Service Authority and Upper Occoquan Service Authority, illustrate options, process, and outcomes.