Glossary
Government and public sector

What is ESPC and UESC performance contracts?

Definition

An energy savings performance contract (ESPC) has a private contractor fund and guarantee efficiency upgrades repaid from savings. A utility energy service contract (UESC) has the serving utility deliver the project instead.

Who uses them

Federal agencies use both, and many states, school districts and universities run similar programs under their own laws. A UESC is a limited-source acquisition with the agency's serving utility, authorized by the Energy Policy Act of 1992 (42 U.S.C. 8256), per FEMP. An ESPC goes to an energy service company, often through DOE's ESPC IDIQ contract.

Federal rules and how savings are proven

Per FEMP, a federal ESPC term cannot exceed 25 years, savings guarantees are mandatory and measurement and verification is mandatory.

FEMP's M&V Guidelines version 5.0, dated 14 October 2024, replaced version 4.0 from November 2015 and aligned the M&V plan, post-installation report and annual report outlines with the DOE ESPC IDIQ. A data center addendum followed in September 2025.

Plans mix methods by measure: sub-metering an isolated retrofit, analyzing whole-facility utility data, or stipulating savings that are agreed on paper instead of measured each year.

The owner's own view of the guarantee

Contractor M&V reports come once a year. Aqueduct gives the owner a running record between them: a regression baseline from pre-project bills and degree days, retrofit isolation on sub-metered measures, and actual versus expected use each month, priced through rate configuration. A measure that starts slipping shows up months before the annual report, and stipulated measures can be spot-checked.

Questions

ESPC and UESC performance contracts: common questions

An energy savings performance contract is a way to fund efficiency upgrades from the savings they produce. An energy service company designs, installs and finances the work, guarantees a level of savings, and is paid over the contract term. It relies on measurement and verification to show the guarantee is met.

The partner and the procurement route. A UESC is placed with the utility that already serves the site, while an ESPC is awarded to an energy service company that guarantees a savings stream. Both still need an M&V approach the agency accepts.

Values both sides fix in the M&V plan rather than measure every year. They lower M&V cost, but the owner carries the risk if real performance differs, which is why owners often watch stipulated measures with their own meter data.

Retrofit isolation fits equipment that can carry its own meters, such as a chiller or lighting circuit. Whole-facility analysis fits projects where many measures interact. IPMVP describes both, and most contracts mix options measure by measure.

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