Public Institutions & Local Governments

Performance Contracting

An Energy Performance Contract (EPC) allows a building owner to identify and complete energy savings projects without having to pay upfront capital costs. EPCs begin when the building owner enters into an agreement with a private energy services company, usually called an ESCO. An ESCO is a business that identifies, evaluates, recommends, develops, installs, and arranges financing for projects that are designed to improve the energy and water efficiency and reduce maintenance costs for a facility. The ESCO conducts a comprehensive energy audit for the facility and identifies improvements to save energy. In consultation with the agency, the ESCO designs and constructs a project that meets the agency's needs and arranges the necessary funding. The ESCO will guarantee that savings meet or exceed annual payments to cover most or all of the project costs over the term of the contract. If the energy savings don’t materialize, the ESCO pays the difference, not the building owner. After the contract ends, all additional cost savings accrue to the building owner.

The Energy Office does not endorse any specific contractor. For more information on performance contracting, visit the National Association of Energy Service Companies (NAESCO).