The Not-So-Risky Business Of Energy Savings Performance Contracts

By Fred Ellermeier and Peter Thomson

Energy savings performance contracts enable public utilities to improve facilities and reduce costs in a way that minimizes financial risk.

Water and wastewater treatment operations are estimated to use 3% of the total United States electrical consumption — more than 100 billion kilowatt-hours per year. Many utilities report that electrical power is not only their largest budget item, but also one of their fastest-rising costs. At the same time, utilities face significant strains on infrastructure and competition for their capital improvements budgets. Capital programs, regulatory burdens, rising costs, and rate issues compete for attention and create additional funding battles. Communities and utilities must make difficult choices about spending priorities.

Utilities that take a holistic look at actual long-term costs and evaluate projects as business cases, often can justify investments that address long-term issues. Investing now can provide paybacks either in reduced future costs (efficiency) or in renewal and replacement ahead of failure at a lower cost (avoided costs).