Tweaked amendment highlights long-standing concern with budget office cost estimates

By Nick Juliano | 01/22/2015 07:33 AM EST

A long-running dispute between energy efficiency advocates and budgetary scorekeepers reared its head again in the Senate this week, forcing a last-minute amendment tweak and raising questions anew about efforts to expand federal agencies’ ability to reduce their utility bills without huge upfront costs.

The most immediate victim was one section of an already modest efficiency amendment from Sens. Rob Portman (R-Ohio) and Jeanne Shaheen (D-N.H.) to the bill being considered to approve the Keystone XL pipeline. Just before the Senate voted on the amendment Tuesday, Portman offered a modified version that removed language encouraging federal agencies to consider energy savings performance contracts (ESPCs) as one of several possible tools to become more energy efficient.

Portman and Shaheen are planning to introduce broader energy legislation next month that is expected to include the exempted provision, aides said yesterday, and a variety of lawmakers on both sides of the aisle have pushed for expanded use of ESPCs and similar tools, including Sens. Chris Coons (D-Del.), Robert Menendez (D-N.J.) and Cory Gardner (R-Colo.), who moved from the House this year, as well as Rep. Peter Welch (D-Vt.).


ESPCs are popular because they allow federal agencies to perform efficiency upgrades, such as replacing boilers or upgrading windows or insulation, without incurring up-front costs. Instead, agencies partner with energy service companies that agree to perform the work up front and guarantee energy savings over the life of the contract. Those companies are then paid with a portion of the money agencies are no longer spending for heat or electricity.

The problem is that the Congressional Budget Office (CBO) does not count those savings because the money stays with the agencies rather than being refunded to the Treasury, but it does count the mandatory obligation agencies enter into when they sign the contract to begin with. Effectively, advocates say CBO is only looking at one side of the ledger, and that leads them to determine that ESPC legislation would actually cost the government money (E&E Daily, June 20, 2013).

Coons and Gardner last week offered an amendment to the KXL bill encouraging expanded use of ESPCs and other efficiency measures, and both said yesterday they are exploring possible additional amendments or standalone legislation to address the scoring concerns. However, they acknowledged the concerns would linger past the expected passage of the underlying bill, which the White House has threatened to veto.

"The bottom line is, Keystone will pass and it still won’t be solved yet," Gardner said in a brief interview yesterday. "But we will continue to work on it, and I think we will send some very strong and key signals with the Keystone pipeline where we believe it should be headed."

Coons said he was undecided whether to pursue an ESPC vote during consideration of KXL or focus on other issues more closely related to the pipeline bill. But he said he was optimistic about working with Gardner and eventually prevailing over CBO.

The first step, Coons said, would be enacting a nonbinding budget resolution "urging" CBO to change its scorekeeping methods when it comes to ESPCs. If that doesn’t work, legislation forcing the office to make the change could follow, he said.

The stripped-down Portman amendment — itself a stripped-down version of he and Shaheen’s broader efficiency bill — passed 94-5 and was added to the Senate’s pending bill to approve the Keystone XL pipeline, S. 1 (E&ENews PM, Jan. 20). Its remaining sections include provisions to establish a voluntary program to encourage efficiency in offices and apartments, establish recommended benchmarking standards and adjust a Department of Energy rule that would block the use of certain grid-connected water heaters.

CBO informed Portman’s staff about an hour before the Tuesday vote that it expected the amendment would trigger a score, meaning pay-as-you-go rules apply, Senate aides said yesterday. While the CBO determination was that the stripped provision would trigger an insignificant cost estimate, less than $500,000, that was enough to require either an offset or budgetary point of order under pay-go, the aides said. But there was too little time to pursue those avenues, so sponsors decided instead to just eliminate the provision.

While these types of scoring issues have bedeviled efficiency advocates for years, some are hopeful that growing attention to the problem could either convince CBO to change its rules or build enough support for Congress to do it for them.

However, there are some worries that the issue becomes conflated with the unrelated push being led by Republicans to encourage CBO to use "dynamic scoring," which considers the macroeconomic effects of policy changes, when evaluating major pieces of legislation.

Efficiency advocates say they do not need dynamic scoring to achieve favorable scores for ESPC legislation. CBO does not need to consider what those policies would do to the economy at large, they say — it just needs to count the energy savings guaranteed within ESPCs as spending reductions, rather than only counting the outlays necessary to repay the contract.

"If the federal government saves money from energy, do you credit that in the scoring? That doesn’t need dynamic scoring," said Steven Nadel, executive director of the American Council for an Energy Efficient Economy. "That’s a direct impact that they are not now including."