An Audit Report on Energy Savings Performance Contracts at Selected Agencies and Institutions of Higher Education
September 2008
Report Number 09-001
Overall Conclusion
Nine state agencies and institutions of higher education have entered into 15 energy savings performance contracts (contracts) with total calculated costs of $203.1 million. These contracts have reduced energy consumption, lowered utility costs, and resulted in needed capital improvements to state facilities. However, most of the contracts reviewed lack sufficient guaranteed savings to ensure that all contract costs will be recovered (see text box for definition of guaranteed savings). Improvements are needed in how contracts are reviewed, approved, and managed to maximize the benefit of these contracts to the State.
Analysis of the 15 contracts determined that:
- Two contracts with calculated costs totaling $30.9 million have guaranteed savings that are sufficient to recover the costs of the associated projects, as required by Texas Government Code, Section 2166.406, and Texas Education Code, Section 51.927.
- Thirteen contracts with calculated costs totaling $172.1 million do not have guaranteed savings that are sufficient to recover the costs of the associated projects. The guaranteed savings on these 13 contracts is $27.6 million less than the projected cost of the associated projects. While sufficient energy savings may be achieved over the life of these contracts to pay for the costs of the contracts, the guaranteed savings amounts specified in these contracts do not ensure recovery of total costs.
Auditors performed a detailed review of reported energy savings at three entities-Texas Woman's University, the Parks and Wildlife Department, and the Health and Human Services Commission-and verified combined energy savings of $14.1 million through reporting year 2007 and that the majority of the equipment in auditors' samples had been installed at the facilities visited. The energy savings reported by the energy savings performance companies (contractors) were materially accurate at these three entities.
State agencies and institutions of higher education have primary responsibility for ensuring that these contracts conform to statute. In addition, the State Energy Conservation Office and the Higher Education Coordinating Board are required by statute and the Texas Administrative Code to approve these contracts; however, their oversight processes are not sufficient to ensure that guaranteed energy savings cover the cost of these contracts. The State Energy Conservation Office's and the Higher Education Coordinating Board's procedures do not ensure that all costs are considered when contract applications are submitted for approval.
Contact the SAO about this report.
Download the Acrobat version of this report. (.pdf)
If you prefer an HTML version, follow this link to an Adobe site which converts PDF files to HTML.