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entitled 'Electricity Markets: Actions Needed to Expand GSA and DOD 
Participation in Demand-Response Activities' which was released on 
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United States Government Accountability Office: 
GAO: 

Report to Congressional Requesters: 

July 2014: 

Electricity Markets: 

Actions Needed to Expand GSA and DOD Participation in Demand-Response 
Activities: 

GAO-14-594: 

GAO Highlights: 

Report to Congressional Requesters: 

July 2014: 

Why GAO Did This Study: 

As electricity demand varies throughout the day and year, operators of 
the electricity grid respond by continually increasing or decreasing 
the amount of electricity that they call upon power plants to 
generate. Some grid operators and other entities offer demand-response 
programs, which provide customers with financial incentives to reduce 
their electricity use during periods of peak demand. Consumers, 
including GSA and DOD-—among the federal government's largest 
electricity users-—may enroll in these programs. 

GAO was asked to examine GSA and DOD demand-response activities. This 
report examines: (1) steps these agencies have taken to facilitate 
their sites' participation; (2) the extent to which these agencies 
have participated in and benefited from demand-response activities; 
and (3) challenges these agencies' sites face participating in these 
activities. GAO examined agency documents and data on participation 
and benefits, surveyed GSA regions and 20 selected DOD installations, 
and conducted interviews with officials. 

What GAO Found: 

The General Services Administration (GSA) and the Department of 
Defense (DOD) facilitate participation in electricity demand-response 
activities by their buildings and installations, but unlike GSA, DOD 
does not have guidance encouraging this participation. Specifically, 
GSA has provided information to its building managers about periods of 
peak demand. GSA also issued guidance encouraging its building 
managers to participate in demand-response programs. In contrast, DOD 
has some energy management initiatives underway that could facilitate 
participation in demand-response programs by DOD installations 
including expanding the use of advanced meters-—meters that measure 
and record data on electricity use and enable consumers to identify 
opportunities to reduce use during peak times-—but DOD does not have 
current policies or guidance encouraging installations' demand-
response participation. 

GSA and DOD have participated in demand-response activities to some 
extent, and participation at both agencies has provided financial 
benefits. GSA has not consistently tracked information on 
participation and financial benefits, therefore, this information is 
not readily available. But, data GAO collected indicate that GSA's 
participation in demand-response programs has yielded financial 
benefits of approximately $888,000 for fiscal year 2012. Similarly, 
the full extent of military installations' participation in demand-
response programs, and any resulting financial benefits, are unknown 
because DOD does not track this information, but the data GAO 
collected indicate that at least 56 of 450 domestic DOD installations 
have participated in demand-response programs since 2009, and 
participation yielded about $6.8 million in total financial benefits 
for fiscal years 2011 and 2012. Without consistently tracking 
participation and benefits, GSA and DOD cannot fully assess their 
agencies' participation in demand-response programs and may miss 
opportunities to expand participation. 

GSA and DOD face challenges to facilitating broader participation in 
demand-response activities, including challenges outside of the 
agencies' control, such as limited program availability in certain 
regions where demand-response programs are not offered, and challenges 
they may be able to address, such as technological hurdles associated 
with automated systems to control building electricity usage. Also, 
DOD faces challenges in accepting and using financial benefits for 
participating in programs. Congress has provided DOD facilities with 
authority to receive financial benefits for participation in demand-
response programs as either a cost reduction to their utility bill or 
a direct payment. However, unlike GSA's authority, any financial 
benefit not received as a cost reduction to a DOD installation's 
utility bill must be deposited into a designated Treasury fund and 
appropriated prior to use and, if appropriated, the funds may not end 
up back at the installations that earned them. DOD officials told GAO 
that financial benefits are needed to offset costs of participating in 
demand-response programs. If installations cannot retain incentive 
payments, this may discourage participation. Further, DOD officials 
told GAO that a cost reduction to the utility bill for an installation 
in 1 year could reduce their utility budget in subsequent years, and 
some demand-response programs do not offer financial benefits as 
credits to the utility bill, thus limiting options available to some 
installations. 

What GAO Recommends: 

GAO recommends, among other things, that GSA and DOD consistently 
track and assess participation in demand-response programs, and DOD 
establish guidance encouraging participation and ask Congress to 
provide it with authority similar to GSA, allowing use of payments 
without further appropriation. GSA and DOD generally agreed with GAO's 
recommendations. 

View [hyperlink, http://www.gao.gov/products/GAO-14-594]. For more 
information, contact Frank Rusco at (202) 512-3841 or ruscof@gao.gov. 

[End of section] 

Contents: 

Letter: 

Background: 

GSA and DOD Have Taken Steps to Facilitate Participation in Demand-
Response Activities, but DOD Does Not Have Guidance Encouraging 
Participation: 

GSA and DOD Participate in Demand-Response Activities to Some Extent 
and Receive Financial Benefits, but Neither Agency Consistently Tracks 
Data on Participation and Benefits: 

GSA and DOD Face Challenges to Facilitating Broader Participation in 
Demand-Response Activities, but Neither Agency Has a Strategy to 
Address Challenges: 

Conclusions: 

Recommendations for Executive Action: 

Agency Comments and Our Evaluation: 

Appendix I: Objectives, Scope, and Methodology: 

Appendix II: Comments from the General Services Administration50: 

Appendix III: Comments from the Department of Defense: 

Appendix IV: GAO Contact and Staff Acknowledgments: 

Tables: 

Table 1: GSA Headquarters' Guidance on Region's Participation in 
Demand-Response Activities: 

Table 2: Examples of DOD Service-Level Policies and Documents Related 
to Demand-Response Participation: 

Table 3: Amount of Financial Benefits Received from Participation in 
Demand-Response Programs by GSA Region in Fiscal Year 2012: 

Table 4: Number of DOD Installations Enrolling in Demand-Response 
Agreements Facilitated by the Defense Logistics Agency in 2009-2013 by 
Share of Financial Benefit: 

Figures: 

Figure 1: GSA's 11 Regional Offices and the States They Serve: 

Figure 2: The Number of GSA Sites Enrolled in Demand-Response Programs 
and the Percentage of Total kWs enrolled by GSA's 11 Regional Offices 
in Fiscal Year 2012: 

Abbreviations: 

DLA: Defense Logistics Agency: 

DOD: Department of Defense: 

GSA: General Services Administration: 

FERC: Federal Energy Regulatory Commission: 

kW: kilowatt: 

LMP: locational marginal price: 

MWh: megawatt hours: 

Navy: Department of the Navy: 

OSD: Office of the Secretary of Defense: 

[End of section] 

United States Government Accountability Office: 
GAO:
441 G St. N.W. 
Washington, DC 20548: 

July 11, 2014: 

The Honorable Thomas R. Carper: 
Chairman: 
Committee on Homeland Security and Governmental Affairs: 
United States Senate: 

The Honorable Susan M. Collins: 
United States Senate: 

The Honorable Peter Welch: 
House of Representatives: 

Electricity is vital to the nation's economy and central to the lives 
of all Americans. The federal government used about 55 million 
megawatt hours (MWh) of electricity in fiscal year 2012,[Footnote 1] 
and two agencies--the General Services Administration (GSA) and the 
Department of Defense (DOD)--are among its largest users. These two 
agencies manage federal buildings and military installations, among 
other things. GSA and DOD are two of the largest holders of federally 
owned property, and together they spend billions of dollars each year 
on electricity. GSA owns and leases more than 354 million square feet 
of space in 9,600 buildings--including courthouses, post offices, 
laboratories, and data processing centers--in more than 2,200 
communities nationwide. In fiscal year 2012, GSA buildings' 
electricity consumption totaled approximately 2.6 million MWh, making 
GSA the fifth largest federal electricity user, with about 5 percent 
of the federal government's total electricity use.[Footnote 2] DOD 
manages more than 1.8 billion square feet of space in over 230,000 
buildings at 450 installations nationwide.[Footnote 3] In fiscal year 
2012, DOD installations' electricity consumption totaled approximately 
30 million MWh, making DOD the largest federal electricity user, with 
about 54 percent of the federal government's total use. DOD and the 
military services--the Army, Air Force, Navy, and Marine Corps--use 
electricity at their facilities to carry out mission needs, such as 
weapons testing and maintenance, ship and submarine repair, training 
facilities and housing, as well as for energy used at office buildings 
and base residences. 

Electricity demand from all users--including households, industrial 
and manufacturing sites, and the federal government--varies 
significantly with the time of day and year, generally reaching its 
highest levels on hot summer afternoons. As demand for electricity 
varies throughout the day and year, operators of the electricity grid--
the complex network of power plants and power lines across the 
country--respond by continually increasing or decreasing the amount of 
electricity they call upon power plants to generate. As we have 
previously reported, the cost of generating electricity also varies, 
and grid operators generally call on plants in order of their costs, 
with the least costly to operate plants being called on first and the 
most costly called on last and typically only during periods of peak 
demand.[Footnote 4] Because the plants used to meet the highest levels 
of demand are generally among the most expensive to operate, there is 
significant variation in the costs of serving consumers throughout the 
day and year. 

In 2004 and again in 2014, we reported that encouraging consumers to 
reduce their demand for electricity in times of high prices can lead 
to lower prices and improved reliability of the electricity system 
compared to relying solely upon increases in the production of 
electricity to meet demand.[Footnote 5] These efforts are collectively 
known as "demand-response activities." For example, some utilities 
offer demand-response programs that provide customers with financial 
benefits--such as a one-time or recurring payment or a cost reduction 
to their utility bill--in exchange for agreeing to take steps to use 
less electricity than otherwise planned during periods of peak demand. 
Consumers, including GSA and DOD, may enroll in these demand-response 
programs in which they agree in advance to reduce their electricity 
use by a certain amount when the utility deems it necessary. In 
addition to enrolling in demand-response programs, consumers can also 
take other demand-response actions without enrolling in a demand-
response program. For instance, utilities may use time-based pricing--
prices that vary throughout the day and year to reflect the costs of 
serving consumers to encourage consumers to lower their electricity 
use at times of high prices or shift their use to times of the day 
when prices are lower, which can lower their electricity bills. 

Through the Energy Policy Act of 2005, Congress encouraged demand-
response activities, including time-based pricing. The act also 
provides that it is the policy of the United States to facilitate the 
deployment of technology and devices that enable electricity customers 
to participate in demand-response programs and time-based pricing and 
eliminate unnecessary barriers to demand-response participation in 
electricity markets.[Footnote 6] Specifically, the act requires all 
federal agencies to install electricity meters on their facilities by 
October 1, 2012, with advanced meters to be installed to the maximum 
extent practicable; advanced meters measure and record data on 
electricity use at closer intervals than standard electricity meters 
and may help facilitate participation in demand-response activities. 
[Footnote 7] 

You asked us to examine GSA's and DOD's demand-response activities. 
The objectives of our review were to examine: (1) steps GSA and DOD 
have taken to facilitate their sites' participation in demand-response 
activities; (2) the extent to which GSA and DOD sites have 
participated in and received financial benefits from demand-response 
activities; and (3) challenges that GSA and DOD face in facilitating 
their sites' participation in demand-response activities. 

To address these objectives, we gathered data on the demand-response 
activities of two of the largest holders of federally owned property, 
GSA and DOD--specifically, the Air Force, Army, Navy, and Marine 
Corps. We selected these agencies to provide an opportunity to 
evaluate what GSA had done in response to our past recommendations, 
and because DOD represents the largest federal user of electricity. We 
administered a survey to all 11 GSA regions and 20 selected military 
installations--a total of 31 respondents.[Footnote 8] We selected a 
nonprobability sample of military installations based on geographic 
location and electricity use and to ensure representation from each of 
the services. We selected installations based on geographical location 
and electricity use to increase the likelihood of selecting 
installations (1) served by a diverse set of utilities with more 
varied opportunities for demand-response participation and (2) that 
have staff dedicated to energy management and demand-response 
activities. Our survey requested information about participation in 
demand-response activities, any benefits resulting from participation, 
and any challenges faced, among other things. Our survey received a 
100 percent response rate. For further information on our survey, see 
appendix I. In addition, we examined data from GSA regions and the 
Defense Logistics Agency (DLA)[Footnote 9] about enrollment in demand-
response programs. To assess the reliability of these data, we 
interviewed and corresponded via e-mail with knowledgeable officials, 
analyzed the data to identify problems with completeness and accuracy, 
and, where possible, corroborated the data with other available 
information and followed up with officials to resolve any 
inconsistencies. We determined the data were sufficiently reliable for 
our purposes. We also reviewed the policies and directives GSA and DOD 
developed related to demand-response programs. We interviewed 
officials at GSA and DOD headquarters--including Air Force, Army, 
Navy, and Marine Corps service-level officials--and, in some cases, 
the individual GSA and DOD sites we surveyed to gather more detailed 
information on the extent of their participation in demand-response 
programs, any financial benefits that resulted from their 
participation, and any challenges they face. We also interviewed 
representatives from organizations that work with the federal 
government and the military on demand-response issues, including DLA 
and other entities to discuss their roles in coordinating demand-
response programs with GSA and DOD. A more complete discussion of our 
objectives, scope, and methodology is provided in appendix I of this 
report. 

We conducted this performance audit from August 2013 to July 2014 in 
accordance with generally accepted government auditing standards. 
Those standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe 
that the evidence obtained provides a reasonable basis for our 
findings and conclusions based on our audit objectives. 

Background: 

This section describes (1) demand-response activities, (2) the roles 
of GSA and DOD in energy management and demand-response activities, 
and (3) types of demand-response activities available for GSA and DOD 
participation. 

Demand-Response Activities: 

As we previously reported, demand-response activities provide grid 
operators with a key tool to balance the supply and demand of 
electricity and can provide benefits to consumers, such as enhancing 
the reliability of the system and lowering electricity 
prices.[Footnote 10] As demand rises throughout the day and year, grid 
operators typically begin using power plants that are more costly to 
operate. However, demand-response activities that encourage consumers 
to reduce their demand for electricity provide grid operators another 
tool to balance the supply and demand of electricity in lieu of using 
increasingly costly additional power plants. In this way, demand-
response activities can assist in managing electricity shortages, as 
customers lower electricity use overall or shift use to other times of 
the day. Additionally, avoiding the use of the most costly power 
plants can lead to lower prices for all consumers and, over time, 
lower peak demand can reduce the need to build additional, costly 
power plants and transmission infrastructure. 

In addition to the reliability and price benefits, demand-response 
activities can also provide benefits to participants, including 
federal agencies that participate in demand-response activities. 
Demand-response participants can achieve savings on their electricity 
bill--for example, if they pay a fluctuating electricity rate and take 
steps to reduce consumption during the hours of peak demand or when 
electricity prices are high. However, demand-response participation 
may also have costs. For example, as we reported in March 2014, 
consumers may incur initial costs to participate in demand-response 
activities, including the cost of investing in advanced meters or 
energy management systems.[Footnote 11] 

In 2004, we reported that, according to GSA, GSA buildings 
participating in demand-response activities saved about $1.9 million 
from 1999 through 2003 through the participation of only a few of its 
buildings.[Footnote 12] However, we estimated that GSA could 
potentially save millions more with broader participation. In 2004, we 
also reported that there were several barriers to broader demand-
response participation, generally, and for GSA. For example, we 
reported that some buildings lacked appropriate infrastructure such as 
meters and GSA lacked sufficient guidance on how to participate in 
these programs. 

Roles of GSA and DOD in Energy Management and Demand-Response 
Activities: 

As federal agencies, GSA and DOD face a variety of federal mandates 
and requirements related to energy management. For example, in 
addition to the requirement to install meters on their facilities by 
2012, federal agencies must also reduce energy consumption per square 
foot by 30 percent by 2015, compared with 2003 energy levels.[Footnote 
13] Although Congress broadly encouraged demand-response activities in 
the Energy Policy Act of 2005, neither GSA nor DOD is required by law 
to participate specifically in demand-response activities. However, 
GSA and DOD's internal processes may allow for participation in demand-
response activities, as follows: 

GSA. GSA manages government-owned and leased properties for use by 
federal agencies who act as tenants in these facilities. In effect, 
GSA serves as the federal government's principal landlord for federal 
agency tenants. GSA's Energy Division disseminates policies and 
guidance documents related to energy management issues, including 
demand-response participation. As shown in figure 1, GSA is divided 
into 11 regions, and GSA regional staff typically implement energy 
management policies at the regional level. Depending on factors such 
as the type of property and the rental agreement terms with tenants, 
GSA regional staff may manage the acquisition and supply of utility 
services, including electricity, and demand-response activities for 
buildings in their regions.[Footnote 14] The decision to enroll 
individual buildings in demand-response programs or take other demand-
response actions is primarily made by GSA regional staff, with support 
from the GSA headquarters Energy Division. Typically, GSA regional 
staff enroll their buildings in demand-response programs. GSA regional 
staff and designated contractors manage the steps taken to reduce 
electricity use for participation in demand-response activities. Since 
GSA serves as a landlord to its federal agency tenants, GSA regional 
staff must ensure that demand-response participation does not violate 
lease conditions with its tenants such as required temperature 
settings or lighting requirements. 

Figure 1: GSA's 11 Regional Offices and the States They Serve: 

[Refer to PDF for image: illustrated U.S. map] 

Region 1: New England region: 
Connecticut; 
Maine; 
Massachusetts; 
New Hampshire; 
Rhode Island; 
Vermont. 

Region 2: Northeast and Caribbean region: 
New Jersey; 
New York. 

Region 3: Mid-Atlantic region: 
Delaware; 
Maryland; 
Pennsylvania; 
Virginia; 
West Virginia. 

Region 4: Southeast Sunbelt region: 
Alabama; 
Florida; 
Georgia; 
Kentucky; 
Mississippi; 
North Carolina; 
South Carolina; 
Tennessee. 

Region 5: Great Lakes region: 
Illinois; 
Indiana; 
Michigan; 
Minnesota; 
Ohio; 
Wisconsin. 

Region 6: The Heartland region: 
Iowa; 
Kansas; 
Missouri; 
Nebraska. 

Region 7: Greater Southwest region: 
Arkansas; 
Louisiana; 
New Mexico; 
Oklahoma; 
Texas. 

Region 8: Rocky Mountain region: 
Colorado; 
Montana; 
North Dakota; 
South Dakota; 
Utah; 
Wyoming. 

Region 9: Pacific Rim region: 
Arizona; 
California; 
Hawaii; 
Nevada. 

Region 10: Northwest/Arctic region: 
Alaska; 
Idaho; 
Oregon; 
Washington. 

Region 11: National Capital region: 
District of Columbia. 

Sources: GAO based on GSA information; Map Resources (map). GAO-14-594. 

[End of figure] 

DOD. DOD's Office of the Secretary of Defense, specifically the Office 
of the Deputy Under Secretary of Defense for Installations and 
Environment's Facility Energy and Privatization Directorate, is 
responsible for issuing energy policy and guidance for DOD and the 
services. In addition, the services may also issue specific energy 
guidance targeted to meet specific needs.[Footnote 15] According to 
DOD officials, decisions about electricity procurement--including 
participation in demand-response programs--are made locally at 
individual installations since, among other things, installation staff 
are knowledgeable about operational needs. Installations' energy staff 
manage electricity procurement and demand-response participation with 
technical assistance provided by the services and other support 
agencies including DLA, which provides support to the services and 
civilian agencies, including GSA. DLA's mission is to provide DOD and 
other government agencies with energy solutions in the most effective 
and efficient manner possible. DLA's Energy Office provides assistance 
to the services and GSA on demand-response participation by offering 
contractual and technical assistance. Installations can, but are not 
required, to seek DLA assistance and recommendations when considering 
demand-response participation. 

Types of Demand-Response Activities Available for GSA and DOD 
Participation: 

Electricity consumers, including some GSA buildings and DOD 
installations, can engage in different types of demand-response 
activities including enrolling in programs offered by multiple 
electricity entities, and other demand-response actions such as taking 
steps to reduce consumption in response to a fluctuating electricity 
rate when electricity prices are high. 

GSA and DOD, like other consumers, often work with their local 
utilities or other entities to procure electricity. Over the last two 
decades, some states and the federal government have taken steps to 
restructure the electricity market with the goal of increasing 
competition.[Footnote 16] Therefore, in some regions of the United 
States, known as restructured markets, consumers may choose among 
potentially several retail electricity providers--entities that 
compete with utilities to provide electricity to consumers by offering 
electricity plans with differing prices, terms, and incentives. In 
other regions, known as traditionally regulated markets, a single 
local utility provides electricity to all consumers in a specified 
area at regulated rates. 

Demand-response programs are offered by multiple electricity 
entities.[Footnote 17] Local utility companies and retail electricity 
providers--which sell electricity to retail consumers--may offer 
demand-response programs to retail consumers including GSA buildings 
and DOD installations.[Footnote 18] In addition to enrollment in 
programs offered by utilities and retail electricity providers, 
"demand-response aggregators"--private companies that combine the 
demand-response activities of multiple consumers--may also offer 
financial incentives to consumers for agreeing to reduce demand during 
certain periods of time. Demand-response aggregators typically enroll 
multiple electricity consumers in demand-response programs that 
otherwise would only be open to consumers with higher levels of demand 
such as programs offered by regional grid operators--the entities 
responsible for managing the wholesale electricity grid in some parts 
of the country. Regional grid operators carry out the same grid 
management functions as a utility, but they do so for a region that 
may be the size of a utility's territory. Programs offered by regional 
grid operators may require a minimum amount of potential demand 
reduction from participants and, in some states, demand-response 
aggregators are allowed to combine multiple retail consumers for 
participation in these regional programs.[Footnote 19] Demand-response 
aggregators may provide opportunities for GSA buildings and DOD 
installations to participate in demand-response programs when utility 
programs are not available to them because they do not meet the 
minimum requirements; however, demand-response aggregators typically 
retain a portion of any financial benefits resulting from consumers' 
participation. 

In addition to enrollment in demand-response programs, GSA buildings 
and DOD installations can take other demand-response actions to reduce 
the amount of electricity they consume at times of peak demand that 
can provide financial benefits. For example, GSA buildings and DOD 
installations that pay electricity rates that vary throughout the day 
and year to reflect the varying costs of generating electricity may 
take steps to lower their electricity use when prices are high or 
shift their use to times of the day when prices are lower, in order to 
save money on their utility bills. Additionally, GSA buildings and DOD 
installations may reduce electricity use during peak demand periods in 
order to incur lower "demand charges"--fees included on electricity 
bills in many parts of the country to cover the cost of ensuring that 
sufficient generation and transmission resources are available to 
serve customers during periods of peak demand. Because system 
operators must ensure that resources are available for any level of 
electricity usage even when resources are not being utilized, demand 
charges are generally assessed based on an individual consumer's peak 
electricity usage during a certain time frame, then billed at various 
rates, including a fixed rate, for an entire year. For consumers who 
pay demand charges, reducing electricity consumption during periods of 
peak demand may reduce the demand charge for an entire year. 

The steps GSA buildings and DOD installations can take to reduce their 
electricity use during periods of peak demand also vary. For example, 
buildings that use large amounts of electricity for air-conditioning, 
or cooling, may take steps including "cycling" air-conditioning 
equipment--shutting down air-conditioning for several short periods of 
time--or "pre-cooling" buildings by operating cooling systems during 
less costly hours so less cooling will be needed during costly hours. 
Other actions could include shutting down nonessential equipment--such 
as some elevators, escalators, noncritical lighting, and electronics--
during times of high electricity prices. These actions can be carried 
out by manually adjusting equipment or using automated systems, such 
as programming equipment to automatically reduce air-conditioning use 
when prices reach a certain level. Furthermore, as we reported in 
March 2014, in some cases, consumers may participate in demand-
response activities using backup generators--on-site generating units 
that replace electricity that would have been provided by the grid--to 
generate electricity to offset some or all of their demand reductions. 
[Footnote 20] 

GSA and DOD Have Taken Steps to Facilitate Participation in Demand-
Response Activities, but DOD Does Not Have Guidance Encouraging 
Participation: 

GSA and DOD have taken steps to facilitate participation by their 
respective buildings and installations in demand-response activities, 
but DOD does not have guidance encouraging demand-response 
participation. Specifically, GSA headquarters has taken steps to 
facilitate GSA building managers' participation in demand-response 
activities, including identifying opportunities to participate in 
programs and providing information about periods of peak demand. GSA 
has also issued guidance encouraging its building managers to 
participate in demand-response activities. DOD and the services have 
some energy management initiatives under way that could facilitate 
participation of installations in demand-response activities including 
the expanded use of advanced meters but DOD does not have current 
policies or guidance encouraging installations to participate in 
demand-response activities. 

GSA Has Taken Steps to Facilitate Its Buildings' Participation in 
Demand-Response Activities and Has Issued Guidance Encouraging 
Participation: 

GSA headquarters has taken steps to facilitate its buildings' 
participation in demand-response activities. These actions include the 
following: 

* Identifying opportunities to participate. Since 2012, the GSA Energy 
Division in headquarters has helped GSA regions identify and enroll in 
demand-response programs by organizing and holding competitive 
auctions to solicit demand-response opportunities available in their 
area. During these auctions, aggregators assess demand-response 
opportunities available to GSA buildings in the region and provide an 
estimate of financial benefits GSA could receive for participation. 
GSA headquarters officials noted that these auctions are a useful tool 
in soliciting demand-response opportunities and ensuring that GSA 
buildings receive competitive financial benefits for participation. 
For example, in 2012, GSA held a demand-response auction in New York 
that resulted in reducing the aggregator's share of the financial 
benefit for GSA's participation in a demand-response program in that 
region from about 25 percent to less than 10 percent. A GSA 
headquarters official noted that increasing GSA's share of the 
financial benefit is an important factor in encouraging GSA 
participation in demand-response programs. 

* Providing information about periods of peak demand. GSA headquarters 
enrolled buildings in several GSA regions in an e-mail alert program 
offered by the local aggregator aimed at encouraging and facilitating 
demand-response actions. Many GSA buildings, particularly in GSA 
region 11, pay demand charges on their electricity bills based on 
their electricity usage during periods of peak demand in the prior 
year. If GSA buildings reduce their electricity use during these 
periods, they can reduce their demand charges for the following year. 
GSA enrolled some of its buildings in a program that sends daily 
assessments of the probability of a peak demand day occurring, a 
specific time frame when demand-response actions should be taken, as 
well as an outlook for the week ahead, which allows energy mangers to 
plan near-term demand-response actions that can help reduce demand 
charges for the year ahead. 

* Installing advanced meters. In response to requirements in the 
Energy Policy Act of 2005, GSA has taken steps to expand advanced 
metering at its buildings, which may facilitate participation in 
demand-response activities. Specifically, GSA officials reported that 
the agency has installed advanced meters in approximately 437 
facilities that made up about 85 percent of GSA's total energy 
consumption in 2012. According to GSA officials, these advanced meters 
allow GSA staff to better monitor energy usage and therefore, more 
easily participate in demand-response activities. For example, one GSA 
regional official noted that advanced meters provide detailed 
information on GSA buildings' overall electricity consumption 
patterns. The official stated that their region uses the data provided 
by advanced meters to identify trends on electricity usage and take 
demand-response actions to reduce energy usage when it is cost-
effective to do so. 

* Smart building strategy. GSA has an initiative underway to modernize 
existing buildings and establish new standards for design and 
construction in order to achieve agency and administration goals of 
energy efficiency and sustainability. Some of these improvements could 
support future demand-response activities. 

In 2004 we recommended that GSA should, for locations where it has 
considerable energy consumption, develop guidance that clearly 
articulates to its regional offices that participation in demand-
response programs should be considered as part of the energy decisions 
that the offices make.[Footnote 21] In response, in 2005, GSA 
headquarters issued guidance to GSA regions explaining and encouraging 
the use of available demand-response activities to reduce overall 
electricity costs (see table 1). 

Table 1: GSA Headquarters' Guidance on Region's Participation in 
Demand-Response Activities: 

Guidance: Demand Response and Energy Curtailment Guide; 
Description: In 2005, GSA's Energy Division published guidance to 
explain and encourage the use of available demand-response activities 
to reduce overall electricity costs for GSA regions. The guidance 
provides background information on the electricity market and 
electricity demand, and it describes types of demand-response 
activities GSA's building managers may consider. It also provides 
information on communicating with building tenants about demand-
response activities. 

Guidance: Guidance for Regional Public Building Service on Market-
Based Demand Programs; 
Description: In 2005, GSA headquarters issued a memorandum stating 
that regions should increase their participation in demand-response 
activities to maximize potential savings on electricity costs. The 
memorandum notes the importance of evaluating potential savings from 
demand-response programs and potential costs. The memorandum also 
states that GSA buildings should evaluate their ability to participate 
in the demand-response programs by determining whether buildings have 
the capability to monitor electricity usage, and that there are 
opportunities to curtail electricity consumption. 

Source: GAO analysis of GSA documents. GAO-14-594. 

[End of table] 

In addition to this guidance, GSA's Strategic Sustainability 
Performance Plan for fiscal years 2010-2015 established a series of 
goals to reduce the environmental impact of the federal government 
through sustainability efforts. As a part of these goals, the plan 
stated that GSA will increase participation in demand-response 
programs; however, GSA's updated plan for 2011-2016 did not include 
this goal. GSA officials told us that the agency continues to 
facilitate participation in demand-response activities, but that this 
specific goal was removed from GSA's 2011-2016 plan in response to 
changes in the Office of Management and Budget's guidance for 
developing these plans. In 2004, we also recommended that GSA should 
require regional energy managers to, among other things, identify what 
demand-response programs are available to them.[Footnote 22] In 
response, in 2005, GSA sent a list of all demand-response programs 
available nationally to their regional energy managers. One GSA region 
also created its own guidance related to demand-response programs in 
that region. Specifically, in 2011, GSA region 11 in the Washington, 
D.C., area issued its Utility Curtailment Guide for Building Managers, 
describing actions that GSA building managers can take to reduce 
electricity use, which could help building managers develop options 
for participating in demand-response programs or undertaking other 
demand-response actions. 

DOD Has Initiatives Under Way That Could Facilitate Participation in 
Demand-Response Activities but the Department Does Not Have Current 
Guidance on Participation: 

DOD has both department-wide energy management initiatives and service-
level initiatives under way that could facilitate participation in 
demand-response activities at its installations including the expanded 
installation of advanced meters. However, DOD does not have current 
policies or guidance encouraging installations to participate in 
demand-response activities. According to DOD officials, the 
initiatives DOD and the services have under way are designed to 
advance various energy goals--such as reducing peak electricity 
consumption--and also may facilitate participation in demand-response 
activities at installations across the country. These initiatives 
include the following: 

* Advanced meters. DOD expanded the installation of advanced meters at 
its buildings, which could facilitate participation in demand-response 
activities. Specifically, according to DOD's Annual Energy Management 
Report for fiscal year 2012, DOD has installed advanced meters at 
20,984 buildings--about 58 percent of buildings where DOD determined a 
meter of any kind would be appropriate.[Footnote 23] In total, these 
advanced meters captured 41 percent of DOD's total electricity 
consumption in fiscal year 2012. However, DOD reported that, in fiscal 
year 2012, only 18 percent of DOD's advanced meters--5,197 of 29,155 
meters--reported electricity usage to an advanced metering system that 
is needed to receive, store, and process the data from advanced 
meters.[Footnote 24] The absence of such a system could limit the 
usability of the electricity consumption data collected by the 
advanced meter. For example, officials from one Navy installation we 
spoke with stated that approximately 60 to 70 of its buildings are 
equipped with advanced meters, but those meters do not connect with 
the systems needed to view and analyze the data in real time. As a 
result, staff from the installation can only view some of the 
historical energy consumption data, rather than real-time data, which 
some officials told us may be more effective and accurate for 
participation in demand-response activities. 

* Smart grid initiatives. The Navy and Marine Corps have initiatives 
underway to explore opportunities to use smart grid technology--which 
integrates power, communications, and information technologies and 
enables monitoring, forecasting, and control of building and utility 
systems as well as participation by consumers in demand-response 
activities--at Navy and Marine Corps installations. According to Navy 
and Marine Corps officials and documents, these initiatives could 
identify opportunities to participate in demand-response activities. 
For example, officials told us that the Marine Corps' smart grid 
initiative will include an assessment of every Marine Corps 
installation and an evaluation of opportunities to participate in 
demand-response activities. 

* DOD's plug-in electric vehicle pilot program. In 2013, DOD initiated 
a pilot program at six installations to explore how plug-in electric 
vehicles--vehicles that operate using a battery charged with 
electricity from the electric grid--could be used at military 
installations. As part of this pilot, DOD is exploring the potential 
for using plug-in electric vehicles to provide an alternate source of 
backup power that installations could use to support demand-response 
participation. 

Despite these ongoing initiatives, according to DOD headquarters and 
service-level officials, there are no current DOD policies or guidance 
that encourage installations to participate in demand-response 
activities.[Footnote 25] Some of the services have issued guidance or 
developed strategies related to demand-response activities, but none 
of these include guidance specific to participation in demand-response 
programs (see table 2). 

Table 2: Examples of DOD Service-Level Policies and Documents Related 
to Demand-Response Participation: 

DOD service: Army; 
Policy/document: Army Regulation 420-41, Facilities Engineering 
Acquisition and Sale of Utilities Services (Draft); 
Description: This draft policy prescribes the Army's procedures and 
responsibilities regarding the acquisition of utilities and related 
services. It encourages Army installations to subscribe to time-based 
pricing and other forms of demand-response pricing during the 
acquisition of electricity whenever the installation can respond to 
such a demand pricing mechanism, and it is in the best interest of the 
government. According to Army officials, the draft policy is 
undergoing internal review, and the final policy is expected to be 
published near the end of fiscal year 2014. 

DOD service: Army; 
Policy/document: Army Regulation 420-1, Facilities Engineering Army 
Facilities Management, February 2008; 
Description: This policy prescribes guidance for the Army Energy and 
Water Management Program. Chapter 22 includes guidelines on Army 
installations' participation in utility-sponsored programs that 
increase energy efficiency and water conservation, or the management 
of demand. According to Army officials, this chapter is being updated 
and is expected to be published in 2015. 

DOD service: Air Force; 
Policy/document: Air Force Instruction 32-1061, Providing Utilities to 
U.S. Air Force Installations, February 2011; 
Description: This Air Force guidance on purchasing utility services on 
an Air Force installation generally addresses various electricity 
pricing programs and calls for installations to enroll in the most 
cost effective utility pricing plans but does not specifically address 
demand-response participation. 

DOD service: Marine Corps; 
Policy/document: The United States Marine Corps Energy Strategy, June 
2013; 
Description: This strategy document, which reinforces the Commandant 
of the Marine Corps' vision, mission, goals, and objectives for 
expeditionary and installations energy, calls for installations to 
minimize utility costs through demand-response activities but does not 
include specific guidance on participation. 

Source: GAO analysis of DOD policies and documents. GAO-14-594. 

Note: The Navy has not issued policies related to participation in 
demand-response activities, according to Navy officials. 

[End of table] 

DOD headquarters officials told us they believe that installations 
need to be educated about opportunities to participate in demand-
response activities, how participation could affect their electricity 
costs, and the potential benefits associated with participation. 
According to DOD officials, the department has been focused on other 
energy-management priorities, such as energy efficiency and energy 
reduction, but it plans to look more closely at demand-response 
participation in the future. Currently, however, without written 
policies encouraging participation in demand-response activities 
including guidance on what steps can be taken to participate in demand-
response programs, installations may not participate in such programs. 
Internal control standards in the federal government call for agencies 
to (1) communicate information to management and others within the 
agency that enables them to carry out their internal control and other 
responsibilities and (2) clearly document internal controls in 
management directives, administrative policies, or operating manuals. 
[Footnote 26] 

GSA and DOD Participate in Demand-Response Activities to Some Extent 
and Receive Financial Benefits, but Neither Agency Consistently Tracks 
Data on Participation and Benefits: 

GSA and DOD have participated in demand-response activities to some 
extent, and participation at both agencies has yielded financial 
benefits. Survey data we collected indicate that GSA participation in 
demand-response programs provided about $888,000 in financial benefits 
for fiscal year 2012. However, the full extent of GSA's participation 
and financial benefits over time is not completely known because such 
information is not readily available. Similarly, the data we collected 
and reviewed indicate that DOD and its services participated in demand-
response programs that yielded financial benefits of about $6.8 
million dollars in total for fiscal years 2011 and 2012; however, the 
full extent of military installations' participation in demand-
response programs and any resulting financial benefits are unknown 
because DOD and the services do not consistently track this 
information. 

GSA Has Participated in Demand-Response Programs and Received 
Financial Benefits but Does Not Consistently Track This Information: 

Many GSA buildings participated in demand-response programs in 2012 
and received financial benefits for doing so. However, the extent of 
participation varies by region, and GSA does not consistently track 
information on participation and benefits and, as a result, this 
information is not readily available. 

Many GSA Buildings Participate in Demand-Response Programs, but the 
Extent Varies by Region: 

Based on responses to our survey, 6 of the 11 GSA regions had 
buildings enrolled in demand-response programs in 2012. GSA's 
participation in demand-response in 2012 increased from the prior 
year. For example, in 2011, 38 GSA buildings enrolled in these 
programs to provide approximately 17,035 kilowatts (kW) of potential 
reduction in demand in 2011. However, in 2012, 59 buildings enrolled 
in these programs to provide approximately 25,186 kW of potential 
reduction in demand.[Footnote 27] GSA region 7 enrolled five buildings 
in a demand-response program in April 2013, but information on these 
enrolled buildings was not available at the time of our survey. 
Therefore, we did not include region 7 in our total of regions 
enrolled in demand-response programs or potential demand reduction. 
[Footnote 28] 

The extent of GSA's participation in demand-response programs in 2012 
varies regionally, as shown in figure 2 below. 

Figure 2: The Number of GSA Sites Enrolled in Demand-Response Programs 
and the Percentage of Total kWs enrolled by GSA's 11 Regional Offices 
in Fiscal Year 2012: 

[See PDF for image][Refer to PDF for image: illustrated U.S. map] 

Region 1: New England region: 
Number of GSA buildings enrolled in demand-response programs in fiscal 
year 2012: 1; 
Percentage of total kWs enrolled by GSA's 11 regional offices in 
demand-response programs in fiscal year 2012: 1%. 

Region 2: Northeast and Caribbean region: 
Number of GSA buildings enrolled in demand-response programs in fiscal 
year 2012: 21; 
Percentage of total kWs enrolled by GSA's 11 regional offices in 
demand-response programs in fiscal year 2012: 33%. 

Region 3: Mid-Atlantic region: 
Number of GSA buildings enrolled in demand-response programs in fiscal 
year 2012: 3; 
Percentage of total kWs enrolled by GSA's 11 regional offices in 
demand-response programs in fiscal year 2012: 14%. 

Region 4: Southeast Sunbelt region: 

Region 5: Great Lakes region: 
Number of GSA buildings enrolled in demand-response programs in fiscal 
year 2012: 9; 
Percentage of total kWs enrolled by GSA's 11 regional offices in 
demand-response programs in fiscal year 2012: 13%. 

Region 5: The Heartland region: 

Region 6: Greater Southwest region: 

Region 7: Rocky Mountain region: 

Region 9: Pacific Rim region: 
Number of GSA buildings enrolled in demand-response programs in fiscal 
year 2012: 7; 
Percentage of total kWs enrolled by GSA's 11 regional offices in 
demand-response programs in fiscal year 2012: 2%. 

Region 10: Northwest/Arctic region: 

Region 11: National Capital region: 
Number of GSA buildings enrolled in demand-response programs in fiscal 
year 2012: 18; 
Percentage of total kWs enrolled by GSA's 11 regional offices in 
demand-response programs in fiscal year 2012: 36%. 

Sources: GAO based on GSA information; Map Resources (map). GAO-14-594. 

Note: GSA regions 4, 6, 7, 8, and 10 either did not participate in 
demand-response programs in fiscal year 2012 or were unable to provide 
information on the enrollment and financial benefits from 
participation. 

[End of figure] 

Of the six GSA regions that reported buildings enrolled in demand-
response programs, 5 are located primarily in the Northeast, Mid-
Atlantic, or Midwest.[Footnote 29] These areas of the country are more 
likely to have demand-response programs in place, as well as 
relatively high electricity rates compared with other parts of the 
country. According to the responses to our survey, participating GSA 
buildings in these areas provided 24,686 kW of potential reduction in 
demand in 2012--approximately 98 percent of the 25,186 kW total for 
all GSA buildings enrolled in demand-response programs in the United 
States. According to a GSA official, GSA has primarily focused its 
demand-response efforts on encouraging participation in areas that 
offer higher financial benefits. 

In addition to participation in demand-response programs, 8 of the 11 
GSA regions reported that their buildings have taken other demand-
response actions. For example, 4 regions reported that they have taken 
demand-response actions during times of peak demand to reduce demand 
charges for the year ahead. Additionally, 7 regions reported that some 
of their buildings have paid time-based prices--rates for electricity 
that fluctuate throughout the day, and 3 of these regions reported 
that some of their buildings have taken steps to modify electricity 
usage in response to these rates. 

GSA's Participation in Demand-response Programs Yielded about $888,000 
in Financial Benefits in Fiscal Year 2012: 

According to GSA regional officials' responses to our survey, GSA's 
participation in demand-response programs yielded financial benefits 
of approximately $888,000 for fiscal year 2012, an increase from the 
approximately $442,000 GSA yielded in fiscal year 2011. As shown in 
table 3, the financial benefits for fiscal year 2012 varied 
considerably by region. The two GSA regions with the largest share of 
financial benefits from participation in demand-response programs--
region 2 in the Northeast and region 11 in the Washington, D.C., area--
received a total of about $742,200 for fiscal year 2012, 83.6 percent 
of the total financial benefits received by all GSA regions for 
enrollment in demand-response programs that year. 

Table 3: Amount of Financial Benefits Received from Participation in 
Demand-Response Programs by GSA Region in Fiscal Year 2012: 

GSA region: 1; 
Financial benefits received: $2,800; 
Percentage of total financial benefits: less than 1%. 

GSA region: 2; 
Financial benefits received: $303,100; 
Percentage of total financial benefits: 34%. 

GSA region: 3; 
Financial benefits received: $137,000; 
Percentage of total financial benefits: 15%. 

GSA region: 5; 
Financial benefits received: $5,100; 
Percentage of total financial benefits: 1%. 

GSA region: 9; 
Financial benefits received: $900; 
Percentage of total financial benefits: less than 1%. 

GSA region: 11; 
Financial benefits received: $439,100; 
Percentage of total financial benefits: 49%. 

GSA region: Total; 
Financial benefits received: $888,000; 
Percentage of total financial benefits: 100%. 

Source: GAO analysis of GSA data on demand-response participation. GAO-
14-594. 

Note: GSA regions not listed here either did not participate in demand-
response programs or were unable to provide information on the 
enrollment and financial benefits from participation. Data on 
financial benefits received are rounded to the nearest 100 and data on 
the percentage of total financial benefits are rounded to the nearest 
whole number. 

[End of table] 

GSA Headquarters Has Not Consistently Tracked Participation in Demand-
Response Programs or Financial Benefits: 

A GSA headquarters official said that, with the exception of fiscal 
year 2012, GSA has not consistently tracked regional participation in 
demand-response programs or financial benefits received from 
participation and has no formal plans to do so. In response to our 
survey, GSA regional officials provided information on participation 
and financial benefits from demand-response programs from fiscal years 
2011 and 2012, but GSA headquarters officials have not consistently 
collected this information from the regions. GSA regional officials 
were able to provide information, upon request, but GSA headquarters 
does not consistently track this information and does not have 
historical or comprehensive information on demand-response 
participation and financial benefits readily available. GSA 
headquarters officials stated that they typically track data on energy 
management initiatives that have corresponding GSA or federal targets. 
Without a specific GSA target or federal mandate, GSA instead 
prioritizes the tracking of other energy management goals and 
initiatives, such as its renewable energy use. Internal control 
standards in the federal government call for agencies to record and 
communicate information to management and others within the agency 
that enables them to carry out their internal control and other 
responsibilities.[Footnote 30] In particular, program managers need 
both operational and financial data to make operating decisions and 
monitor performance. Without consistently tracking participation and 
financial benefits received from participation in demand-response 
programs, GSA headquarters cannot fully assess the agency's current 
level of participation in demand-response programs and may be missing 
opportunities to provide support to GSA regional officials in 
expanding participation. 

DOD Installations Have Participated in Demand-Response Programs That 
Yielded Financial Benefits but DOD Does Not Collect Comprehensive 
Information on Participation and Benefits: 

Data from DLA, our survey of 20 installations, and a Navy data 
collection effort indicate that military installations participated in 
demand-response programs that yielded financial benefits. However, the 
full extent of military installations' participation in demand-
response programs is unknown because DOD and the services do not 
centrally track this information or collect comprehensive data about 
participation in demand-response programs. 

At Least 56 DOD Installations Have Participated in Demand-Response 
Programs Since 2009: 

Based on limited data available from DLA, our survey of 20 
installations, and a Navy data collection effort, we identified at 
least 56 of DOD's 450 domestic military installations that have 
participated in demand-response programs since 2009.[Footnote 31] 
However, because installations may have participated in demand-
response programs that are not reflected in these data, this may be a 
conservative estimate. DLA's limited data indicate that 46 
installations participated in demand-response programs and that 42 of 
these installations with data on enrollment initially signed up to 
provide from 250 kW to 15,000 kW of potential reduction in demand for 
a total of about 144,000 kW of potential reduction in demand.[Footnote 
32] We identified another 10 installations through our survey and the 
Navy's data. Of all the services, these available data indicate that 
the Navy (which includes Marine Corps installations) had the most 
installations--31 of the 56 installations we identified--participating 
in demand-response programs. Twenty-one of the Navy installations 
provided about 80,000 kW in potential reduction in demand or about 55 
percent of the total 144,000 kW in potential reduced demand resulting 
from military installations' participation in demand-response programs 
facilitated through DLA. According to the data from DLA, our survey, 
and the Navy data collection effort, almost half of the DOD 
installations that participated in demand-response programs--24 of the 
56 installations we identified--are located in Maryland, Virginia, and 
the District of Columbia.[Footnote 33] 

In addition to participating in demand-response programs, 13 of the 20 
installations we surveyed responded that they have taken other demand-
response actions. For example, 3 installations responding to our 
survey told us that, during periods of peak demand, they have taken 
demand-response actions to reduce demand charges for the year ahead. 
Additionally, 5 installations reported that they have paid time-based 
prices, and 2 of these installations reported that steps were taken to 
modify electricity usage in response to these rates. For example, one 
Navy installation told us that, during periods of peak demand, they 
have requested that tenants use natural daylight in place of electric 
lighting where available, adjust thermostats to decrease or shut down 
air-conditioning, turn off unused computers, delay charging electric 
vehicles, and post demand-response notifications at building entrances. 

DOD's Participation in Demand-Response Programs Yielded about $6.8 
Million in Financial Benefits in Total for 2011 and 2012: 

Comprehensive data is also not available on the financial benefits 
received from participation in demand-response programs for all of 
DOD, but the limited available data from DLA and our survey of 20 
installations indicate that DOD participation yielded about $6.8 
million dollars in financial benefits in total for fiscal years 2011 
and 2012. Specifically, according to DLA data, DOD received over $4.6 
million in financial benefits for installations participating in 
demand-response programs in 2011 ranging from about $90 to about 
$711,000 per installation.[Footnote 34] In addition, according to DLA 
data, DOD received about $2.2 million in financial benefits in 2012 
ranging from about $540 to approximately $492,000 per installation. 
[Footnote 35] 

DOD Does Not Consistently Track Information on Participation in Demand-
Response Programs or Financial Benefits: 

The data we obtained from DLA, the Navy, and in response to our 
survey, provide some information on DOD installations' participation 
in demand-response programs and the associated financial benefits, but 
they do not provide comprehensive information on the full extent of 
DOD's participation in such programs and the related financial 
benefits. Officials from DOD and the services said that they do not 
collect data on the extent to which military installations have 
received financial benefits from participation in demand-response 
programs. However, without information on installations' demand-
response participation, DOD and the services do not have the 
information needed to evaluate participation and maximize financial 
benefits. As previously noted, internal control standards in the 
federal government call for agencies to record and communicate 
information to management and others within the agency that enables 
them to carry out their internal control and other responsibilities. 
[Footnote 36] In particular, program managers need both operational 
and financial data to make operating decisions and monitor 
performance. Without consistently tracking participation and financial 
benefits received from participation in demand-response programs, DOD 
cannot fully assess the agency's current level of participation and 
determine whether additional efforts are needed. 

GSA and DOD Face Challenges to Facilitating Broader Participation in 
Demand-Response Activities, but Neither Agency Has a Strategy to 
Address Challenges: 

GSA and DOD face challenges to facilitating broader participation by 
their buildings and installations in demand-response activities, 
including challenges outside of the agencies' control, such as limited 
program availability in certain regions, and challenges they may be 
able to address, such as technological hurdles. However, neither 
agency has formally assessed current levels of participation or 
developed a strategy to expand participation, where appropriate, and 
address the challenges that they can. DOD installations face 
additional challenges in accepting and using financial benefits in the 
form of direct payments for participating in demand-response programs. 

GSA Regions and DOD Installations Face Challenges to Demand-Response 
Participation: 

The 11 GSA regions and the 20 selected DOD installations we surveyed 
reported that they face several challenges--both outside the agencies' 
control and within it--to facilitating broader participation in demand-
response activities. 

Challenges Outside the Agencies' Control: 

The GSA regions and 20 selected DOD installations we surveyed 
identified challenges that result from circumstances outside of the 
agencies' control. 

Limited Program Availability: 

Five GSA regions and four DOD installations we surveyed reported that 
demand-response programs are unavailable or limited in their areas. 
For example, GSA region 6 and region 8 reported that demand-response 
programs are not offered in their regions,[Footnote 37] which 
officials from one region told us was likely because electricity rates 
in their region are relatively low compared with other parts of the 
country, and sufficient electricity is available to meet demand. 

Lack of Economically Beneficial Opportunities: 

Three GSA regions and nine DOD installations we surveyed reported that 
the demand-response opportunities available in their areas were not 
economically beneficial, meaning the cost of participating in the 
program or taking demand-response actions outweighed the expected 
benefits to the GSA regions and DOD installations. For example, 
officials at one DOD installation we surveyed said that electricity 
rates in the region were low, and that any benefits resulting from 
demand-response actions would likely be outweighed by the costs of 
exploring opportunities for taking demand-response actions. 

Interference with Missions: 

Nine GSA regions and seven DOD installations we surveyed reported that 
participating in demand-response programs had the potential to 
interfere with their ability to achieve their missions. For example, 
one official from DOD told us that some Navy installations may have 
difficulty participating in demand-response programs that require them 
to reduce their electricity consumption at peak times when ships are 
docked in port. Electricity consumption at Navy installations may 
increase significantly at these times--as personnel conduct 
maintenance and other activities on the ship--and modifying docking 
schedules to participate in demand-response programs is not practical 
and could interfere with the Navy's broader mission. Additionally, a 
GSA regional official said that demand-response actions that conflict 
with tenant lease agreements, such as contractual temperature settings 
and lighting requirements, are unacceptable, even temporarily. 

Challenges within the Agencies' Control: 

In contrast, the GSA regions and DOD installations we surveyed 
identified several challenges to facilitating broader participation in 
demand-response activities that they may be able to address. 

Technological and Infrastructure Hurdles: 

Five GSA regions and nine DOD installations we surveyed reported that 
technological and infrastructure hurdles impede participation in 
demand-response programs. For example, two GSA regions and six DOD 
installations reported challenges associated with automated systems to 
control building electricity usage. Several DOD installations we 
surveyed reported that, for buildings that are not connected to an 
automation system, staff must manually lower electricity usage, which 
requires a technician to physically travel to the building and make 
manual adjustments to certain equipment such as thermostats or 
lighting controllers. Officials from two DOD installations also said 
that it was not always possible to conduct the manual demand-response 
steps within the response time allowed under the available program. 
For example, according to officials from one installation, it would 
take a minimum of 2 hours to manually turn on generators or reduce 
electricity use, which exceeds the 30-minute response time required. 
Building automation systems can be used to facilitate the 
implementation of demand-response activities. Nonetheless, for 
buildings connected to a building automation system, staff are needed 
to program and remotely initiate the process of reducing electricity 
consumption. 

Two GSA regions and three DOD installations reported challenges 
related to metering data, including insufficient data on electricity 
consumption at their facilities. For example, according to one GSA 
official, in some cases, data from utility bills are the only data 
available to energy managers, and obtaining accurate and up-to-date 
metering data to make informed decisions is a challenge. As mentioned 
previously, GSA and DOD have expanded the use of advanced meters at 
their buildings and installations; however, GSA and DOD officials told 
us that, even in cases where advanced meters are installed, there are 
challenges associated with training staff to use the data from the 
meters, concerns about whether such data can be securely transmitted, 
and locations where meters are not connected to a system through which 
staff can review the data the meters provide. An official from one DOD 
installation we surveyed said that, despite having advanced meters 
installed, because the meters are not connected to a system, staff 
rely on data on monthly electricity usage, rather than more detailed 
information--such as data about how electricity usage varies 
throughout the day and month--that would allow for more sophisticated 
demand-response activities. As mentioned previously, advanced metering 
systems provide the capability to view and analyze the data in real 
time and, as a result, some DOD officials told us may be more 
effective and accurate for participation in demand-response activities. 

Officials from three DOD installations and two GSA regions reported 
that sites may not have the infrastructure or equipment needed to 
participate in such programs. For example, according to officials from 
one GSA region, some buildings do not have backup generators or are 
not permitted to run them for demand-response efforts. Another GSA 
region reported that the installation of alternative systems or other 
technology--such as thermal cooling systems that would allow a site to 
chill water at night and use it during the day to cool a building and 
thereby avoid using air-conditioning--could support their expanded 
participation in demand-response programs, but modifications to 
existing infrastructure would be needed. 

Tenant Challenges: 

Nine GSA regions and two DOD installations we surveyed reported that 
tenant satisfaction and involvement posed challenges to facilitating 
broader participation in demand-response programs. Specifically, nine 
GSA regions told us that the need to maintain tenant comfort could 
make participating in demand-response programs more difficult. For 
example, representatives from some regions told us that they are 
limited in the options they have for reducing demand, such as lowering 
the air-conditioning, that do not impact tenant comfort.[Footnote 38] 
However, a GSA headquarters official we spoke with told us that 
tenants are becoming more accustomed to accommodating GSA's energy 
management initiatives, including demand-response activities, and said 
that a growing challenge is that tenants are increasingly seeking 
compensation for their contributions to energy conservation. This 
official told us that GSA is struggling with how to compensate tenants 
for assistance with demand-response activities, since tenants are not 
billed based on their actual electricity consumption. Instead, a fixed 
charge for electricity and other utilities are rolled into the rent 
tenants pay each month. Since GSA tenants are generally federal 
agencies, if GSA shares financial benefits with these tenants, the 
federal government is receiving the benefit of participation. 

Similarly, officials from two DOD installations we surveyed told us 
that their tenants are often not responsible for paying for the 
electricity they use; instead, it is reflected in the overall rent 
paid for the space they lease. These officials noted that the lack of 
visibility of the electricity consumption limits the tenants' 
incentive to take the actions needed for the installation to 
participate in demand-response programs. An energy management official 
at one installation we surveyed told us there is significant potential 
for more demand-response activities at the installation--for example, 
by reducing air-conditioning usage during periods of peak demand--but 
that because tenants on the installation are not directly billed for 
their electricity usage, they are unaware of how much electricity they 
are consuming and its costs. According to another DOD official, the 
lack of tenant awareness of their electricity usage combined with 
limited authority of energy managers to compel electricity reductions, 
results in tenants with little incentive to reduce their energy use. 
In 2004, we recommended that GSA clarify the incentives for 
participation by defining how GSA, its building operators, and its 
federal agency tenants will share the benefits and risks of 
participating in these programs through its leases.[Footnote 39] In 
response, GSA provided clarification for participation in demand-
response programs by informing regional directors and building owners 
of the risks and benefits of the programs. 

Competing Priorities: 

Two GSA regions and one DOD installation we surveyed and GSA 
headquarters officials reported that they have competing energy 
priorities, such as goals for reducing overall electricity consumption 
or increasing the use of renewable energy sources, which can take the 
focus off of demand-response activities. For example, one GSA region 
reported that actions to reduce electricity usage at GSA buildings at 
all times throughout the day to meet energy efficiency mandates can 
leave fewer options for reducing peak electricity demand. In addition, 
one military installation also reported that goals and targets are in 
place for energy efficiency and consumption but not specifically for 
demand-response efforts and, given that considerable financial 
resources are needed to implement demand-response activities, this 
means that such activities are not prioritized over other energy 
initiatives associated with specific federal goals. 

Demand-response actions achieved through the use of backup generators 
may also involve competing priorities. Six of the 20 DOD installations 
and four GSA regions we surveyed reported that they use backup 
generators to participate in demand-response programs. GSA officials 
noted that demand-response actions from backup generators may increase 
financial benefits for GSA, but these actions may not reduce GSA's 
energy consumption, and it is unclear how to prioritize these goals. 
DOD officials also told us that using generators for demand-response 
activities can create other issues such as environmental concerns and 
associated costs for fuel and maintenance. 

Other Challenges: 

GSA regions and DOD installations we surveyed, as well as GSA and DOD 
headquarters officials, also cited other challenges that affected 
participation in demand-response programs including a lack of funding 
and staff or expertise, as well as limited opportunities to reduce 
demand. For example, four GSA regions and five DOD installations we 
surveyed reported that a lack of staff resources poses a challenge to 
participation in demand-response programs. According to a headquarters 
GSA official, there is a learning curve associated with managing 
demand-response programs, and regions may not have staff with this 
expertise. Additionally, a GSA regional official and a DLA official 
told us that demand-response program availability and terms change 
frequently, and it can be challenging to keep track of these changes. 

GSA and DOD Have Not Formally Assessed Participation in Demand-
Response Activities or Developed a Strategy for Addressing Challenges 
to Expanded Participation: 

GSA and DOD officials told us that opportunities exist to expand 
demand-response participation if challenges are addressed, but neither 
agency has formally assessed current levels of participation or 
developed a strategy that addresses challenges and expands 
participation, where appropriate. Some DOD and GSA officials told us 
that while they have not yet performed a formal assessment, they 
believed benefits could be realized by engaging in additional demand-
response activities. For example, officials at two Navy installations 
said that the installation is currently paying electricity prices that 
fluctuate depending on the time of day, yet the installation is not 
taking any action to modify its electricity use in response to these 
price fluctuations. Officials from one of these installations said 
that financial and other benefits could be realized if a plan were 
implemented to modify electricity use in response to prices, 
particularly on days when the electricity prices are high. DOD 
headquarters officials and officials from the services told us that 
they have not assessed installations' participation and benefits 
received because either data on participation is not available or it 
would be more appropriate for the installations to individually 
evaluate their participation. According to Air Force and Navy 
officials, the individual installations are in the best position to 
determine their capabilities to participate in demand-response 
programs. GSA officials also told us GSA has taken informal steps to 
expand demand-response participation, but it has not established a 
formal strategy because of uncertainty about the extent to prioritize 
encouraging demand-response participation over the agency's other 
energy initiatives. Additionally, GSA officials told us that it can be 
difficult to justify investments in equipment or infrastructure that 
could support demand-response participation because the financial 
benefits from demand-response participation fluctuate from year to 
year, and there are changing rules for participation in demand-
response programs. GSA officials noted that, without being able to 
forecast the financial benefits of demand-response participation, it 
is difficult to assess which demand-response opportunities will be 
economically beneficial. Similarly, a DOD official told us that the 
agency has not developed a broad agency-wide effort to assess 
participation in demand-response activities and challenges to 
participation, because additional participation data is needed, and 
demand-response efforts have not been a departmental priority. Our 
prior work has found that federal managers need to use performance 
information to make decisions that affect future strategies, planning, 
and identifying priorities, among other things, and can use such 
information to improve programs and results.[Footnote 40] Without 
consistently tracking this information and assessing participation, as 
well as developing a strategy for addressing challenges to expanded 
participation, GSA and DOD may be missing opportunities to expand 
demand-response participation in cases where it is economically 
beneficial to do so. 

DOD Faces Two Additional Challenges to Facilitating and Maximizing the 
Potential Financial Benefits Received from Participation in Demand-
Response Programs: 

In addition to the challenges GSA and DOD reported they face in 
facilitating broader participation in demand-response programs, DOD 
faces two other challenges. First, its installations face challenges 
accepting financial benefits for participating in demand-response 
programs. Second, DOD has performed limited analysis of demand-
response agreements and the share of financial benefits retained by 
military installations, which may limit the ability of military 
installations to maximize the potential financial benefits received 
from participating in demand-response programs. 

DOD Installations Face Challenges Accepting Financial Benefits for 
Participation in Programs: 

DOD installations face challenges accepting financial benefits for 
participation in demand-response programs in the form of direct 
payments and as cost reductions to their utility bill. Congress has 
provided DOD facilities with authority to receive financial benefits 
for their participation in demand-response programs from utilities and 
aggregators as either (1) a cost reduction to their utility bill or 
(2) a direct payment such as a check payable to the installation. 
[Footnote 41] As required by statute, any financial benefit received 
as a direct payment as opposed to a cost reduction to a military 
installation's utility bill must be deposited into a designated 
Treasury fund--called an Energy Savings Financial Incentives Fund. DOD 
has not created the Energy Savings Financial Incentives Fund required 
for installations to deposit direct payments. As a result, some 
installations may not be able to participate because some demand-
response programs do not provide financial benefits in the form of 
credits to the utility bill. According to Air Force officials we spoke 
with, receiving a direct payment is often the only option available to 
installations for participation in demand-response programs. 

In addition, even if DOD establishes the Energy Savings Financial 
Incentives Fund, payments deposited into the fund must be appropriated 
by Congress prior to use. If Congress appropriates the funds, they may 
be appropriated to DOD or the services more broadly rather than to the 
participating installation. As a result, for installations to receive 
a financial benefit for participation, Congress must appropriate the 
funds to DOD or the services and DOD or the services must then 
allocate the funds to the individual installation for use. According 
to DOD and service-level officials we spoke to, DOD has not created an 
Energy Savings Financial Incentives Fund because, in their view, there 
is no incentive for installations to arrange to directly accept 
payments when the funds may not be returned to that installation. 
Further, according to some officials, installations may incur initial 
costs to participate in demand-response programs, and financial 
incentives are needed to offset the effort and cost of participating 
in demand-response programs. If installations cannot retain the 
financial benefits from participating in demand-response programs, 
this may discourage participation in these programs. In contrast, GSA 
has authority to directly accept payments for participating in demand-
response programs and use these funds without further appropriation. 
[Footnote 42] Furthermore, GSA policies ensure that the funds are 
returned to the region where the reductions were made. 

Neither DOD nor the services have formal guidance that addresses how 
military installations should accept direct payments for demand-
response participation,[Footnote 43] and we found that the select 
military installations we surveyed had varied understandings of their 
ability to accept and use payments from participation in demand-
response programs. Two of the 20 installations that we surveyed told 
us that they directly accept payments. Officials from these 
installations told us that an Energy Savings Financial Incentives Fund 
was not used to accept these payments and DOD had not set one up. 
Based on our review, if payments were accepted in this manner, it 
would not have been in accordance with the law. Officials from these 
installations told us that they consider the payments as rebates on 
payments they already made to the utility, and these payments are 
deposited directly into the accounts the installations use to pay 
their utility bill.[Footnote 44] Additionally, DOD and the services do 
not have guidance that clarifies how payments should be processed and 
whether payments will eventually be directed back to the installations 
where they originated or used in another way. According to a DOD 
official we spoke to, DOD has not developed such guidance because the 
services have not indicated a need for it, and many installations have 
only recently begun to participate in demand-response programs. As 
described above, internal control standards in the federal government 
call for agencies to (1) communicate information to management and 
others within the agency that enables them to carry out their internal 
control and other responsibilities and (2) clearly document internal 
controls, and documentation is to appear in management directives, 
administrative policies, or operating manuals.[Footnote 45] Without 
guidance clarifying whether and how installations should accept 
payments for participation in demand-response programs, DOD officials 
may continue to have varied understandings of how they can accept and 
use payments, and this could increase the risk of DOD installations 
accepting payments in a manner that is not in accordance with the law. 

In addition, receiving financial benefits as a cost reduction to an 
installation's utility bill can create challenges. Some officials told 
us that, although installations may be able to receive financial 
benefits as a credit to their electric utility bill, doing so may 
create disincentives because of the potential impact on the 
installation's budget. Specifically, bill credits--which lower a 
military installation's payment to their utility in a given year--may 
make it appear that the installations require less funding to pay 
their electric utility bill than they actually need, which could 
result in these installations being allocated less funding for their 
electric utility bill in subsequent years. Air Force officials we 
spoke with confirmed the potential disincentive of receiving bill 
credits. Specifically, these officials told us, although a credit on 
an installations' utility bill appears to be an incentive to 
participate, such credits can be problematic for installations because 
the Air Force's budgeting process includes the review of the prior 
year utility expenses when budgeting for the upcoming year, and 
financial officials expect the utility budget to remain the same or 
decrease. If an installation receives a bill credit, it could lead to 
a lower overall budget for the installation because of the expectation 
that its utility bills will be lower in the upcoming year. However, as 
Air Force and DLA officials noted, while demand-response activities 
can reduce energy bills in 1 year, because market conditions or the 
ability of the installation to participate may change, there is no 
guarantee that an installation will be able to participate in and 
benefit from a demand-response program to the same extent in future 
years. Therefore, if an installation receives a utility bill credit 
for its participation in a demand-response program, that may have a 
negative unintended consequence because its budget may be decreased in 
subsequent years. 

As we have previously reported, long-standing weaknesses in DOD's 
financial management adversely affect the economy, efficiency, and 
effectiveness of the department's operations.[Footnote 46] Since 1995, 
DOD has been on our list of programs at high risk of fraud, waste, 
abuse, and mismanagement because of financial management weaknesses 
that affect its ability to control costs and ensure basic 
accountability, among other issues.[Footnote 47] As we have previously 
reported, while DOD has made efforts to improve financial management, 
it still has much work to do if it is to meet its long-term goals of 
improving financial management.[Footnote 48] 

DOD Has Performed Limited Analysis of Demand-Response Agreements: 

DOD has performed limited analysis of demand-response agreements, 
which may limit the ability of military installations to maximize the 
potential financial benefits from participating in demand-response 
programs. The demand-response agreements determine how the 
installations will be compensated for participating in the demand-
response program--by establishing the share of financial benefit 
retained by the military installation compared with the share kept by 
the aggregators or utilities administering the demand-response 
program.[Footnote 49] 

Within DOD, DLA is responsible for providing technical assistance to 
DOD including assistance on demand-response programs. Our review of 
the demand-response agreements that DLA facilitated for Air Force, 
Army, Navy, and Marine Corps installations indicates that the share of 
financial benefits retained by installations varies from a low of 50 
percent to a high of 93 percent.[Footnote 50] As shown in table 4 
below, almost half of DOD installations that participated through DLA-
facilitated agreements--20 installations, which represent about 56 
percent of the demand reductions initially enrolled for DLA-
facilitated agreements--receive 80 percent or more of the financial 
benefits. Twenty-one installations receive less than 80 percent, and 5 
installations receive a specific dollar amount per kW enrolled or 
delivered rather than a percentage of the financial benefit. 

Table 4: Number of DOD Installations Enrolling in Demand-Response 
Agreements Facilitated by the Defense Logistics Agency in 2009-2013 by 
Share of Financial Benefit: 

Installation share of benefit: >90%; 
Number of installations receiving this share: 8; 
Percentage of installations receiving this share: 17%; 
Percentage of demand reduction initially committed by these 
installations: 22%. 

Installation share of benefit: 80-89%; 
Number of installations receiving this share: 12[A]; 
Percentage of installations receiving this share: 26%; 
Percentage of demand reduction initially committed by these 
installations: 34%. 

Installation share of benefit: 70-79%; 
Number of installations receiving this share: 14[B]; 
Percentage of installations receiving this share: 30%; 
Percentage of demand reduction initially committed by these 
installations: 32%. 

Installation share of benefit: 60-69%; 
Number of installations receiving this share: 6; 
Percentage of installations receiving this share: 13%; 
Percentage of demand reduction initially committed by these 
installations: 6%. 

Installation share of benefit: <60%; 
Number of installations receiving this share: 1; 
Percentage of installations receiving this share: 2%; 
Percentage of demand reduction initially committed by these 
installations: less than 1%. 

Installation share of benefit: Other[C]; 
Number of installations receiving this share: 5; 
Percentage of installations receiving this share: 11%; 
Percentage of demand reduction initially committed by these 
installations: 5%. 

Installation share of benefit: Total; 
Number of installations receiving this share: 46; 
Percentage of installations receiving this share: 100%; 
Percentage of demand reduction initially committed by these 
installations: 100%. 

Source: GAO analysis of DLA-facilitated demand-response agreements. 
GAO-14-594. 

Note: Percentages may not total to 100% due to rounding. We analyzed 
agreements for 46 of the 56 installations we identified from DLA data 
that participated in demand-response programs. 

[A] Enrollment terms for five of these installations were negotiated 
as part of one agreement. 

[B] Two military installations in this category received 78% of the 
financial benefit in the initial year with a potential increase to 80% 
in year 2, then 82% in year 3. 

[C] Information on share of financial benefit was not available for 
five installations; these installations entered into agreements where 
payments are determined based on specific dollar amount per kW 
enrolled by the installation rather than a percentage share of the 
financial benefit. 

[End of table] 

DLA officials and representatives from two demand-response aggregators 
we spoke to told us that the share of the benefit received by military 
installations may be influenced by various factors. Aggregators and 
utilities administering demand-response programs recover their costs 
of doing business through the share of the benefit that these entities 
retain. The amount retained by installations compared with aggregators 
and utilities may be influenced by the level of assistance aggregators 
and utilities provide installations to manage their participation in 
the demand-response program. For example, if the aggregator or utility 
installs technology needed for demand-response program participation, 
such as advanced metering infrastructure, or provides a value-added 
service, such as consulting or energy monitoring services, they may 
recover the costs of providing these services by lowering the share of 
the financial benefit received by the installation. According to DLA 
officials and representatives from one aggregator we spoke to, other 
factors such as the competitiveness of the market in which an 
aggregator is selling its services, the amount of reduction in 
electricity use an installation agrees to make, and the expected 
amount of the financial benefit, can also influence the share of the 
benefit an installation receives. 

Based on our review of the agreements, it was not possible to 
determine the reasons for variation in the share of financial benefits 
across the agreements. In some cases, installations with similar 
characteristics and agreement terms retained very different amounts of 
the financial benefits. For example, we identified three installations 
with similar characteristics--the same military service, similar 
initial agreement dates, similar levels of committed reduction in 
demand, the same aggregator, and similar regions of the country--that 
received different shares of financial benefits for participation in 
demand-response programs. Two installations' share of the benefit was 
80 percent, while the third installation was 65 percent. Other terms 
outlined in these agreements were similar and did not suggest a reason 
why this installation's share of the benefit would be different. DLA 
officials told us that they did not have specific information on why 
installations with similar characteristics sometimes received 
different shares of the financial benefit for participation in a 
demand-response program. DLA officials reported that the agency has a 
general understanding of the share of financial benefits installations 
receive, but that, because of its limited staff, as well as the need 
to focus on other priorities, the agency does not formally analyze 
demand-response agreements to determine whether opportunities exist to 
increase the share installations receive or in order to provide 
installations in the process of negotiating with aggregators 
information about what share comparable installations are receiving. 

DLA officials do not routinely provide information to military 
installations about the range of financial benefit shares 
installations that the agency works with have been receiving. DLA 
officials told us that they sometimes inform a military installation 
if the share of financial benefit it has negotiated seems very 
unreasonable, but they have not conducted an analysis of the share of 
financial benefits that installations have received and may not have 
information on contracts negotiated by installations. As described 
previously, federal internal control standards call for agencies to 
record and communicate information to management and others within the 
agency that enables them to carry out their internal control and other 
responsibilities.[Footnote 51] In particular, program managers need 
both operational and financial data to make operating decisions and 
monitor performance. Pertinent information should be identified, 
captured, and distributed in a form and time frame that permits the 
program managers to perform their duties efficiently. The absence of 
formal analysis and information-sharing by DLA and installations may 
result in missed opportunities to increase the share of financial 
benefits retained by military installations seeking to sign up for 
demand-response programs. This is particularly true because staff at 
DOD installations may have limited experience with demand-response 
programs, particularly if they are negotiating agreements for the 
first time. Some staff told us that negotiation of agreements can be 
complex. Some military officials we spoke with who are responsible for 
negotiating demand-response agreements for their installations told us 
that having more information about the share of financial benefits 
received by other installations and other services could help inform 
their process for negotiating the terms of demand-response agreements. 
By not sharing information routinely with installations prior to 
negotiation of their demand-response agreements, DOD is missing an 
opportunity to provide installations with potentially valuable 
information that could be used to maximize the share of financial 
benefits they receive from participation in a demand-response program. 

Conclusions: 

GSA and DOD have taken steps to facilitate participation in demand-
response activities. However, unlike GSA, DOD does not have written 
policies encouraging demand-response participation. Without such 
policies, DOD installations may choose not to participate in these 
programs and may forgo the potential financial and other benefits. In 
addition, neither DOD nor GSA consistently track information on the 
extent of participation and financial benefits generated from 
participation in demand-response programs. Without consistently 
tracking this information and assessing participation, as well as 
developing a strategy for addressing challenges to expanded 
participation, GSA and DOD may be missing opportunities to expand 
demand-response participation in cases where it is economically 
beneficial to do so. Furthermore, without guidance clarifying whether 
and how installations should accept direct payments, DOD officials may 
continue to have varied understandings of how they can accept and use 
payments, which could increase the risk of DOD installations accepting 
payments in a manner that is not in accordance with the law. In 
addition, GSA has the authority and has policies in place to ensure 
funds are returned to the GSA region where reductions were made, but 
DOD does not have this authority. DOD installations cannot retain 
direct payments because Congress must take steps to appropriate these 
funds and, as such, these payments may, or may not, be available for 
use by the installations that earned them. While we have previously 
reported on weaknesses in DOD's financial management, if DOD 
installations cannot retain direct payments, this may discourage 
installation officials from participating in demand-response programs 
and lead to missed opportunities to obtain financial benefits. In 
addition, without sharing information on installations' demand-
response participation, such as the share of financial benefits 
installations are receiving, DOD and the services do not have the 
information needed to evaluate participation and maximize financial 
benefits from participation. Specifically, the absence of formal 
analysis and information sharing by DLA and installations may result 
in missed opportunities to increase the share of financial benefits 
retained by military installations. 

Recommendations for Executive Action: 

We are making eight recommendations to improve GSA's and DOD's demand-
response efforts. 

We recommend that the Administrator of the General Services 
Administration take the following two actions: 

* consistently track information on demand-response participation and 
financial benefits received from participation, and: 

* use information on demand-response participation and benefits to 
assess the regions' current levels of demand-response participation 
and develop a strategy to expand economically beneficial participation 
that addresses challenges to expanded participation. 

We recommend that the Secretary of Defense, in coordination with the 
services, take the following six actions: 

* establish formal guidance to encourage economically beneficial 
demand-response participation and provide information to support 
participation in demand-response programs; 

* consistently track information on demand-response participation and 
financial benefits received from participation; 

* use information on demand-response participation and benefits to 
assess its installations' current levels of demand-response 
participation and develop a strategy to expand economically beneficial 
participation that addresses challenges to expanded participation; 

* establish the Energy Savings Financial Incentives Fund needed for 
installations to directly accept payments for participation and 
establish guidance clarifying (1) how installations should accept and 
deposit payments resulting from participation in demand-response 
programs into the fund, and (2) whether, in cases where Congress 
appropriates these funds for use by DOD or the services, the payments 
made into the fund will be directed back to the installations where 
they originated or used in another way; 

* request that Congress provide DOD with authority similar to GSA, 
allowing participating installations to use direct payments that they 
receive from providers without further appropriation and, in doing so, 
DOD should identify specific steps it would take to ensure effective 
control over the financial benefits received as a result of 
participation in demand-response programs and how the benefits will be 
used; and: 

* direct DLA to formally analyze the share of financial benefits that 
installations receive from demand-response agreements that DLA 
facilitates and routinely provide this information to installations, 
where possible, to inform their negotiations with aggregators. 

Agency Comments and Our Evaluation: 

We provided a draft of this product to GSA and DOD for review and 
comment. In written comments, reproduced in appendix II, GSA agreed 
with our findings and concurred with our recommendations. GSA stated 
that the agency has already initiated steps to implement our 
recommendations, including steps to identify the array of buildings 
that could benefit from participation in demand-response activities. 
In written comments, reproduced in appendix III, DOD's Acting Deputy 
Under Secretary of Defense, responding on behalf of DOD, generally 
concurred with our recommendations. However, DOD suggested that we 
combine our recommendation that DOD establish the Energy Savings 
Financial Incentives Fund with our recommendation that DOD request 
that Congress provide DOD with authority allowing participating 
installations to use direct payments without further appropriation. In 
its letter, DOD stated that combining these recommendations would 
acknowledge that DOD's use of the fund is contingent on having the 
authority to use these savings without further appropriation. 
Moreover, DOD stated that, to use this fund to effectively expand 
DOD's participation in demand-response programs, it is critical to 
ensure the DOD has ready access to the deposited energy savings for 
the purpose of executing energy management initiatives. 

We agree that the incentives for using the Energy Savings Financial 
Incentives Fund are not currently well-aligned with encouraging 
installations to participate in demand-response programs, and that it 
is important for DOD to have authority to use the savings deposited in 
this fund to provide an incentive for participation. However, we 
believe that establishing the fund is important in its own right to 
reduce the risk of DOD staff at installations accepting payments in a 
manner that is not in accordance with the law. As we noted in our 
report, two installations told us that they directly accept payments 
without using an Energy Savings Financial Incentives Fund which, if 
payments were accepted in this manner, would not have been consistent 
with the law. We also concluded that, without guidance clarifying 
whether and how installations should accept direct payments--which is 
part of our recommendation to establish the fund--DOD officials may 
continue to have varied understandings of how they can accept and use 
payments. As such, we did not change the recommendations in response 
to this comment. 

As agreed with your offices, unless you publicly announce the contents 
of this report earlier, we plan no further distribution until 30 days 
from the report date. At that time, we will send copies to the 
appropriate congressional committees, the Administrator of the General 
Services Administration, and the Secretary of Defense. In addition, 
the report will be available at no charge on the GAO website at 
[hyperlink, http://www.gao.gov]. 

If you or your staff members have any questions about this report, 
please contact me at (202) 512-3841 or ruscof@gao.gov. Contact points 
for our Offices of Congressional Relations and Public Affairs may be 
found on the last page of this report. GAO staff members who made 
major contributions to this report are listed in appendix IV. 

Signed by: 

Frank Rusco: 
Director, Natural Resources and Environment: 

[End of section] 

Appendix I: Objectives, Scope, and Methodology: 

This report examines demand-response activities at the General 
Services Administration (GSA) and the Department of Defense (DOD). Our 
objectives for this report were to examine: (1) steps GSA and DOD have 
taken to facilitate their sites' participation in demand-response 
activities; (2) the extent to which GSA and DOD sites have 
participated in and received financial benefits from demand-response 
activities; and (3) challenges that GSA and DOD face in facilitating 
their sites' participation in demand-response activities. 

To identify what steps GSA and DOD have taken to facilitate their 
sites' participation in demand-response programs, we reviewed federal 
legislation and policies and directives that GSA and DOD developed 
related to demand-response programs. For example, we reviewed the 
Energy Policy Act of 2005 and GSA and DOD policies related to 
electricity procurement and demand-response participation. We reviewed 
our previous work on demand-response activities examining the types of 
demand-response programs in use, barriers to their introduction and 
expansion in electricity markets, as well as GSA's participation in 
demand-response programs.[Footnote 52] Additionally, we reviewed our 
past work on demand-response activities examining the Federal Energy 
Regulatory Commission's demand-response efforts and the challenges 
associated with those efforts.[Footnote 53] We also interviewed 
officials at GSA and DOD. Specifically, we spoke with GSA's Energy 
Division in headquarters, as well as DOD's Office of the Deputy Under 
Secretary of Defense (Installations and Environment) Facility Energy 
and Privatization Directorate. We spoke with offices within each of 
the Services (Army, Air Force, Navy, and Marine Corps) that are 
responsible for issuing and implementing facility energy policy and 
guidance.[Footnote 54] We also interviewed representatives from 
organizations that work with the federal government and the military 
on demand-response issues, including the Defense Logistics Agency 
(DLA) and other entities to discuss their roles in coordinating demand-
response programs with GSA and DOD. 

To assess the extent to which GSA and DOD sites participated in demand-
response programs and the extent to which they have yielded financial 
benefits, we reviewed data GSA and DOD provided about their demand-
response participation and financial benefits. To obtain additional 
information on the scope of demand-response participation in GSA 
regions and at DOD installations, we developed and administered a 
survey about demand-response participation to a total of 31 
respondents--11 GSA regions and 20 selected military installations. 
[Footnote 55] For GSA, because many decisions about demand-response 
participation are made at the regional, rather than building level, we 
sought and received responses from all 11 GSA regions. GSA regional 
officials provided data for all 11 regions about participation in 
demand-response programs and any financial benefits received in fiscal 
years 2011 and 2012. To assess the reliability of the GSA data, we 
interviewed and corresponded via e-mail with knowledgeable officials 
and corroborated the data received from the GSA regions with data 
provided by GSA headquarters officials. We found these data to be 
sufficiently reliable for the purposes of this review. 

For the DOD data, DOD and most of the services did not have data 
available about the extent of their demand-response participation and 
associated financial benefits. Data was available, however, from the 
Department of the Navy (Navy). This data identified demand-response 
agreements in place at Navy installations and was collected by the 
Navy from individual Navy installations. To assess the reliability of 
the Navy data, we interviewed and corresponded via e-mail with 
knowledgeable officials and corroborated the data with other available 
information including the DLA data and survey responses. We found the 
Navy data to be sufficiently reliable for the purposes of this review. 
DLA provided us with data for installations with DLA-facilitated 
demand-response agreements including data on financial benefits. To 
assess the reliability of the DLA data, we interviewed and 
corresponded via e-mail with knowledgeable officials, analyzed the 
data to identify problems with completeness and accuracy, and, where 
possible, corroborated the data with other available information 
including the Navy data and survey responses and followed up with 
officials to resolve any inconsistencies. We determined the data were 
sufficiently reliable for our purposes. 

For our survey of DOD installations, we selected a nonprobability 
sample of military installations based on geographic location and 
electricity use, as well as to ensure representation from each of the 
services.[Footnote 56] We did not include defense agencies such as the 
Defense Commissary Agency and the Defense Finance and Accounting 
Services. To select the sample of 20 military installations, we sought 
to identify installations based on several factors including 
geographical location to increase our chances of selecting 
installations served by a diverse set of utilities with more varied 
opportunities for demand-response participation. Specifically, we 
divided the United States into 10 regions, and then selected 
individual installations from each region based on each region's share 
of domestic electricity consumption. We selected installations with 
the largest electricity use from each region to increase the 
likelihood of selecting installations that would be more likely to 
have staff dedicated to electricity management and demand-response 
activities. The sample of 20 military installations represents 
approximately 27 percent of the total domestic electricity usage for 
the four services we focused on in our review. We used electricity 
consumption data the Office of the Secretary of Defense (OSD) collects 
from each of the services for DOD's Annual Energy Management Report to 
Congress. To assess the reliability of the electricity consumption 
data, we corresponded via e-mail with knowledgeable officials and 
compared the data with information from the prior year to check for 
any significant variation. We determined the reliability of the 
electricity consumption data for fiscal year 2012 was sufficiently 
reliable for our purposes. 

In our survey, we asked GSA regions and DOD installations about their 
demand-response participation; specifically, our survey requested 
information about participation in demand-response activities, any 
benefits resulting from participation, and any challenges faced, among 
other things. We conducted a series of pretests with two GSA regions 
and two DOD installations (one GSA region and one DOD installation 
that participated in demand-response programs and one GSA region and 
one DOD installation that did not participate) and requested feedback 
from GSA, OSD, and DOD service-level headquarters offices to further 
refine the survey. We conducted pretests to check that (1) the 
questions were clear and unambiguous, (2) terminology was used 
correctly, (3) the questionnaire did not place an undue burden on 
agency officials, (4) the information could feasibly be obtained, and 
(5) the survey was comprehensive and unbiased. We made changes to the 
content and format of the questionnaire after each of the pretests and 
based on the feedback we received from GSA and DOD. After finalizing 
the content of the survey, we e-mailed it to points of contacts at the 
11 GSA regional offices and 20 DOD installations, and we received 
survey responses from 100 percent of the GSA regions and DOD 
installations. We analyzed these survey responses to identify the 
extent to which they participated in demand-response programs and the 
financial benefits yielded from participation, among other things. 
Additionally, we corresponded via e-mail and spoke to some GSA regions 
and DOD installations to obtain additional information or clarify 
information provided in their responses. 

To determine the challenges GSA and DOD face in facilitating 
participation in demand-response activities at their sites, we 
analyzed information from the survey, conducted follow-up interviews 
with some GSA regions and DOD installations, and corresponded via e-
mail to obtain additional information or clarify information provided 
in their responses. We identified the challenges most commonly 
reported in response to our survey and through follow-up and also 
discussed barriers to participation in demand-response activities with 
officials from GSA and DOD headquarters, GSA regions, and DOD 
installations. In addition, we spoke with agencies and offices within 
each of the services that support installations with electricity 
procurement and demand-response activities, including DLA's Energy 
Office. Furthermore, to obtain information about DOD installations' 
share of financial benefits from participation in demand-response 
programs, we reviewed demand-response agreements provided to us by 
DLA. Specifically, we reviewed the share of benefits installations 
received for their participation in demand-response programs to 
identify possible variation across aggregators and services. We had 
discussions with DLA, some installations, and other DOD officials to 
better understand what, if any, factors might influence the 
installations' share of financial benefits. Additionally, to obtain 
information on DOD policies and information about the ability of 
installations to accept and use direct payments from participation in 
demand-response programs, we met with DOD officials from headquarters 
and some installations to discuss their statutory authority and 
policies related to accepting and using direct payments for 
participation in demand-response programs. We also reviewed 
legislation related to DOD installations' authority to accept and use 
payments, including 10 U.S.C. 2919, which permits defense agencies to 
accept payments from participation in demand-response programs. In 
addition, to obtain information on how the 20 installations we 
surveyed accept and use direct payments, we analyzed their responses 
to our related survey questions and conducted follow-up as needed. 

We conducted this performance audit from August 2013 to July 2014 in 
accordance with generally accepted government auditing standards. 
Those standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe 
that the evidence obtained provides a reasonable basis for our 
findings and conclusions based on our audit objectives. 

[End of section] 

Appendix II: Comments from the General Services Administration: 

GSA Administrator: 
U.S. General Services Administration: 
1800 F Street, NW: 
Washington, DC 20405-0002: 
[hyperlink, http://www.gsa.gov] 

June 19, 2014: 

The Honorable Gene L. Dodaro: 
Comptroller General of the United States: 
U.S. Government Accountability Office: 
Washington, DC 20548: 

Dear Mr. Dodaro: 

The U.S. General Services Administration (GSA) appreciates the 
opportunity to review and comment on the draft report entitled 
Electricity Markets: Actions Needed to Expand GSA and DOD 
Participation in Demand-Response Activities, (GAO-14-594). GSA has 
reviewed the report and found that the Government Accountability Office
(GAO) conducted a thorough audit which accurately represents GSA's 
actions and the nature of the demand-response industry and electricity 
markets in general. To expand participation in demand-response 
activities, GAO recommends that the GSA Administrator take the 
following two actions: 

* Consistently track information on demand-response participation and
financial benefits received from participation; and; 

* Use information on demand-response participation and benefits to 
assess the regions' current levels of demand-response participation 
and develop a strategy to expand economically beneficial participation 
that addresses challenges to expanded participation. 

GSA agrees with the recommendations and has already initiated steps to 
identify the array of buildings that could benefit from participation 
in demand-response activities. GSA believes that demand-response 
participation should be optimized since it offers a relatively free 
source of revenue, improves grid reliability, and benefits the 
environment. Therefore, GSA will continue its efforts to develop a 
national strategy to expand participation in demand-response programs 
where an economic analysis determines it is cost effective to do so. 

If you have any additional questions or concerns, please do not 
hesitate to contact me at (202) 501-0800 or Ms. Lisa Austin, Associate 
Administrator, Office of Congressional and Intergovernmental Affairs, 
at (202) 501-0563. 

Sincerely, 

Signed by: 

Dan Tangherlini: 
Administrator: 

cc: Frank Rusco, Director, Natural Resources and Environment: 

[End of section] 

Appendix III: Comments from the Department of Defense: 

Office of The Under Secretary Of Defense: 
Acquisition, Technology and Logistics: 
3000 Defense Pentagon: 
Washington, DC 20301-3000: 

June 27, 2014: 

Mr. Frank Rusco: 
Director: 
Natural Resources and Environment Team: 
U.S. Government Accountability Office: 
441 G Street, N.W. 
Washington, DC 20548: 

Dear Mr. Rusco: 

This is the Department of Defense (DoD) response to the GAO Draft 
Report, GAO-14-594, "Electricity Markets: Actions Needed to Expand GSA 
and DoD Participation in Demand-Response Activities," dated May 20, 
2014 (GAO Code 361510). Detailed comments on the report 
recommendations are enclosed. 

Sincerely, 

Signed by: 

John Conger: 
Acting Deputy Under Secretary of Defense (Installations and 
Environment): 

Enclosure: As stated: 

GAO Draft Report Dated May 20, 2014: 
GAO-14-594 (GAO CODE 361510): 

"Electricity Markets: Actions Needed To Expand GSA and DOD 
Participation In Demand-Response Activities," 

Department Of Defense Comments To The GAO Recommendation: 

Recommendation 1: The GAO recommends that the Secretary of Defense, in
coordination with the Services, establish formal guidance to encourage 
economically beneficial demand-response participation and provide 
information to support participation in demand-response programs. 

DoD Response: DoD concurs with Recommendation 1. 

Recommendation 2: The GAO recommends that the Secretary of Defense, in
coordination with the Services, consistently track information on 
demand-response participation and financial benefits received from 
participation. 

DoD Response: DoD concurs with Recommendation 2. 

Recommendation 3: The GAO recommends that the Secretary of Defense, in
coordination with the Services, use information on demand-response 
participation and benefits to assess its installations' current levels 
of demand-response participation and develop a strategy to expand 
economically beneficial participation that addresses challenges to 
expanded participation. 

DoD Response: DoD concurs with Recommendation 3. 

Recommendation 4: The GAO recommends that the Secretary of Defense, in
coordination with the Services, establish the Energy Savings Financial 
Incentives Fund needed for installations to directly accept payments 
for participation and establish guidance clarifying (1) how 
installations should accept and deposit payments resulting from 
participation in demand-response programs into the fund, and (2) 
whether, in cases where Congress appropriates these funds for use by 
DOD or the services, the payments made into the fund will be directed 
back to the installations where they originated or used in another way. 

DoD Response: To date, DoD has not established the Energy Savings 
Financial Incentives Fund since the current authorization, 10 U.S.c. 
2919, requires a subsequent appropriation before any funds in the 
account can be used, making the process untimely and resource 
intensive. In order to use this fund to provide effective incentives 
to installations to expand DoD's participation in Demand Response 
programs, it is critical to ensure the funds received at the
installation level are readily available for the purpose of executing 
energy management initiatives. Years-long delays, the clear 
possibility of a lack of subsequent appropriation, and the costs of 
routing the funds through the Federal financial system where they may 
be diverted before they are returned to the installation severely 
reduces the incentive to use this authority. 

Given the challenges associated with establishment and use of this 
account under the current authority, DoD requests that Recommendation 
4 be combined with Recommendation 5 to acknowledge that DoD's use of 
the fund is contingent on modification of the authority to allow
DoD direct access to deposited savings. 

Recommendation 5: The GAO recommends that the Secretary of Defense, in
coordination with the Services, request that Congress provide DOD with 
authority similar to GSA, allowing participating installations to use 
direct payments that they receive from providers without further 
appropriation and, in doing so, DOD should identify specific steps it 
would take to ensure effective control over the financial benefits 
received as a result of participation in demand-response programs and 
how the benefits will be used. 

DoD Response: DoD concurs with Recommendation 5. 

Recommendation 6: The GAO recommends that the Secretary of Defense, in
coordination with the Services, direct Defense Logistics Agency (DLA) 
to formally analyze the share of financial benefits that installations 
receive from demand-response agreements that DLA facilitates and 
routinely provide this information to installations, where possible, 
to inform their negotiations with aggregators. 

DoD Response: DoD concurs with Recommendation 6. 

[End of section] 

Appendix IV: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

Frank Rusco, (202) 512-3841 or ruscof@gao.gov: 

Staff Acknowledgments: 

In addition to the individual named above, Jon Ludwigson (Assistant 
Director), Mike Armes, Janice Ceperich, Margaret Childs, Alysia Davis, 
Philip Farah, Cindy Gilbert, Paige Gilbreath, Mae Liles, Alison 
O'Neill, Harold Reich, and Barbara Timmerman made key contributions to 
this report. 

[End of section] 

Footnotes: 

[1] A watt is the basic unit used to measure electric power. A watt-
hour is equal to a watt of power applied for 1 hour. A megawatt-hour 
is 1,000,000 watt-hours. One traditional incandescent light bulb 
consumes about 60 watts, and a comparable compact fluorescent light 
bulb consumes approximately 15 watts. 

[2] In fiscal year 2012, the five largest federal electricity users 
included DOD, the Department of Energy, the United States Postal 
Service, the Department of Veterans Affairs, and GSA, according to 
data from DOE's Federal Energy Management Program. 

[3] The 450 installations include Air Force, Army, Navy, and Marine 
Corps installations located in the 50 states and the District of 
Columbia. 

[4] GAO, Electricity Markets: Consumers Could Benefit from Demand 
Programs, but Challenges Remain, [hyperlink, 
http://www.gao.gov/products/GAO-04-844] (Washington, D.C.: Aug. 13, 
2004) and Electricity Markets: Demand-Response Activities Have 
Increased, but FERC Could Improve Data Collection and Reporting 
Efforts, [hyperlink, http://www.gao.gov/products/GAO-14-73] 
(Washington, D.C.: Mar. 27, 2014). 

[5] [hyperlink, http://www.gao.gov/products/GAO-04-844] and 
[hyperlink, http://www.gao.gov/products/GAO-14-73]. In our 2004 
report, we also examined the federal government's participation in 
these programs through GSA activities and made recommendations to 
improve GSA's focus on demand-response activities. 

[6] Pub. L. No. 109-58, § 1252(f), 119 Stat. 594, 963 (Aug. 8, 2005). 

[7] A federal building may be excluded based on a minimal quantity of 
energy use. 42 U.S.C. § 8253 (e)(2)(B)(iv). 

[8] Because the 11 GSA regions include the entire population of GSA 
buildings, this information is generalizable to GSA broadly. Our 
sample of 20 DOD installations was a nonprobability sample, the 
results of which cannot be used to make inferences about a population. 

[9] DLA is a support agency that provides logistics, acquisition, and 
technical services assistance to DOD. Specifically, DLA's Energy 
Office provides assistance to DOD on a wide range of energy needs 
including demand-response programs. 

[10] [hyperlink, http://www.gao.gov/products/GAO-04-844] and 
[hyperlink, http://www.gao.gov/products/GAO-14-73]. 

[11] [hyperlink, http://www.gao.gov/products/GAO-14-73]. 

[12] [hyperlink, http://www.gao.gov/products/GAO-04-844]. 

[13] Certain buildings in which energy intensive activities are 
carried out may be excluded by the agency. Energy Independence and 
Security Act of 2007, Pub. L. No. 110-140, § 431 (Dec. 19, 2007), 
codified at 42 U.S.C. § 8253. Agencies have taken steps to achieve 
these reductions through increasing energy efficiency; energy 
efficiency measures are aimed at using less energy, including 
electricity, to perform the same task, and they often achieve a 
permanent, continuous reduction in energy use. Energy efficiency 
measures, once installed, typically continue to reduce energy usage 
over a multiyear economic lifetime, usually without much ongoing 
consumer attention. In contrast, demand-response activities focus on 
reducing demand only at certain times throughout the year, and these 
typically require specific consumer actions, such as turning off 
lights or air-conditioning. 

[14] GSA may manage demand-response programs if GSA pays the 
electricity bill for its federal agency tenants. If federal agency 
tenants manage and pay their electricity bill without GSA assistance, 
GSA is generally not responsible for managing their participation in 
demand-response programs. 

[15] Some of these service-level organizations include: the Naval 
Facilities Engineering Command, which provides facilities engineering 
support to the Navy and Marine Corps; the Office of the Assistant 
Secretary of the Army for Installations, Energy, and Environment, 
which establishes policy and provides strategic direction on all 
matters pertaining to Army energy and environmental programs; and Air 
Force Installations, Environment and Logistics, which provides policy 
and oversight for environmental issues. 

[16] Responsibility for regulating electricity is divided between 
states and the federal government. Most electricity consumers are 
served by retail markets that are regulated by the states. Prior to 
being sold to retail consumers, electricity is traded in wholesale 
markets that the federal government oversees through the Federal 
Energy Regulatory Commission (FERC). For more information on federal 
efforts to expand demand-response activities that may occur within 
both retail and wholesale markets, see [hyperlink, 
http://www.gao.gov/products/GAO-14-73]. 

[17] The availability of demand-response programs and the compensation 
provided may change as a result of a recent ruling by the U.S. Court 
of Appeals for the District of Columbia Circuit, Electric Power Supply 
Assoc. v. FERC. No. 11-1486, et. al. (D.C. Cir., May 23, 2014), which 
held that FERC exceeded its statutory authority in Order No. 745 
issued in 2011. Order 745 required grid operators to pay demand-
response providers full locational marginal price (LMP), essentially 
the same wholesale price paid to generators, for the value of unused 
electricity. The court concluded that demand-response is a function of 
state-regulated retail electricity markets and thus outside of FERC's 
authority under the Federal Power Act. It also held in the alternative 
that FERC's determination that demand-response must generally be 
compensated at LMP was arbitrary and capricious under the 
Administrative Procedure Act. FERC has announced its intention to ask 
the full U.S. Court of Appeals for the District of Columbia Circuit to 
rehear en banc the decision of the three-judge panel. If the decision 
is ultimately upheld after all appeals are final, FERC will be 
precluded from regulating the price of demand-response. It is too soon 
to tell whether and how the decision will affect the pricing and 
availability of demand-response programs to federal agencies. 

[18] The availability of demand-response programs and the financial 
benefits associated with demand-response activities may vary because 
of differences between traditionally regulated and restructured 
markets and other regional factors. In some regions across the 
country, demand-response programs are limited or not offered for 
various reasons including factors such as low electricity demand, 
relative to available supply, which can render such programs less 
economically beneficial. 

[19] Additionally, transmission and distribution providers--those that 
manage systems to transport electricity from power plants to consumers-
-may also offer demand-response programs to lighten load on their 
systems. 

[20] [hyperlink, http://www.gao.gov/products/GAO-14-73]. 

[21] [hyperlink, http://www.gao.gov/products/GAO-04-844]. 

[22] [hyperlink, http://www.gao.gov/products/GAO-04-844]. 

[23] DOD, Annual Energy Management Report Fiscal Year 2012 (June 
2013). According to this report, appropriate facilities are those for 
which the DOD has determined metering--whether a standard or advanced 
meter-
-would be cost-effective and practical which is determined by each 
individual service or DOD agency. 

[24] Advanced metering systems provide (1) the capability to measure 
and store energy usage at intervals of 1 hour or less and (2) a 
communication link that allows the utility to remotely retrieve 
current usage information to support customer billing and other 
utility operational functions. The Energy Policy Act of 2005 requires 
all federal agencies to install electricity meters on their facilities 
by October 1, 2012, with advanced meters to be installed to the 
maximum extent practicable, and resulting data to be incorporated into 
existing federal energy tracking systems, but there are no 
requirements related to the installation of advanced metering systems. 

[25] DOD officials we spoke with told us there was no guidance 
specific to demand-response participation, but we identified DOD 
guidance issued in the early 1990s and in 2005 encouraging 
participation in energy conservation and other energy management 
programs that included material addressing aspects of demand-response 
activities. DOD, Defense Energy Program Policy Memorandum 94-1, 
Participation in Public Utility Sponsored Energy Conservation and 
Demand Side Management Programs (Dec. 20, 1993). This guidance called 
for installations to actively investigate and participate in programs 
offered by their utilities when determined to be advantageous based on 
the life-cycle costs and benefits of the proposed measures. The 
guidance also called for the annual publication and distribution of 
lessons learned information and the development of a strategy for all 
DOD components to coordinate activity and maximize benefits. In 
addition, DOD's 2005 Energy Manager's Handbook calls for installations 
to participate in such programs if their utility offers them but it 
does not include specific guidance on participation in demand-response 
programs. 

[26] GAO, Standards for Internal Control in the Federal Government, 
[hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1] 
(Washington, D.C.: November 1999). 

[27] Of the 59 GSA buildings enrolled in demand-response programs, 31 
are located in the service area of one regional grid operator--PJM 
Interconnection--and all of them are enrolled in a demand-response 
program offered through that operator, according to GSA officials. PJM 
Interconnection is a regional grid operator that coordinates markets 
and the movement of wholesale electricity in all or parts of Delaware, 
Illinois, Indiana, Kentucky, Maryland, Michigan, New Jersey, North 
Carolina, Ohio, Pennsylvania, Tennessee, Virginia, West Virginia, and 
the District of Columbia. 

[28] Additionally, GSA region 10 reported that one building was 
enrolled in a demand-response program in Alaska in 2012. However, we 
excluded this building because the demand-response program is uniquely 
structured based on an agreement from the 1990s and the region could 
not provide information on the enrollment and potential financial 
benefits from demand-response participation. 

[29] The other region, GSA region 9, includes Arizona, California, and 
Nevada. 

[30] [hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1]. 

[31] Five of the 56 installations we identified that have enrolled in 
demand-response programs since 2009 no longer have active agreements 
in place according to DLA and our survey responses. Of the 56 
installations, we identified 46 in the DLA data and an additional 10 
in the Navy data and in the responses to our survey. However, these 
data sources may not necessarily identify all of the installations 
participating in demand-response programs. DOD does not collect data 
from all of its installations on participation in demand-response 
programs, but we obtained data from three sources--DLA, our survey of 
20 installations, and a Navy data collection effort--that provided 
some information on participation. 

[32] The amount of kW of potential reduction in demand reflects the 
initial amount of kW committed by 42 of 46 military installations 
enrolling in demand-response programs with DLA assistance since 2009; 
data on kW committed were not available for the other 4 installations. 
DLA said that installations periodically reenroll in demand-response 
programs and, when doing so, may change their kW commitment. However, 
installations may not always involve DLA in this reenrollment process, 
and therefore, DLA data may not reflect current levels of enrollment. 
For the 10 installations identified in the Navy data and the responses 
to our survey, data was not available on the initial amount of kW 
committed by these installations. 

[33] According to the data from DLA, our survey, and the Navy data 
collection effort, more than half of the DOD installations that 
participated in demand-response programs--33 of the 56 installations 
we identified--are located within the PJM Interconnection service 
area. DLA data indicate that a total of about 118,000 kW--
approximately 81 percent of the 144,000 total kW in potential reduced 
demand resulting from military installations' participation in demand-
response programs facilitated through DLA--are from installations 
located in PJM Interconnection's service area. 

[34] The $4.6 million includes financial benefits reported for 33 
installations in 2011, according to DLA data. In addition to the 
installations receiving financial benefits included in the DLA data, 
our survey identified one additional installation that reported 
receiving financial benefits for participating in demand-response 
programs totaling over $700,000 in 2011. 

[35] The $2.2 million includes financial benefits reported for 28 
installations in 2012, according to DLA data. In addition to the 
installations receiving financial benefits included in the DLA data, 
our survey identified one additional installation that reported 
receiving financial benefits for participating in demand-response 
programs totaling over $700,000 in 2012. 

[36] [hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1]. 

[37] GSA region 6 includes Kansas, Missouri, Nebraska, and Iowa, and 
GSA region 8 includes Colorado, Montana, North Dakota, South Dakota, 
Utah, and Wyoming. We did not review the availability of demand-
response programs in these states or specific regions, but utilities 
in some of these states offer demand-response programs that may or may 
not be available to the GSA buildings located there. 

[38] As a part of GSA's Annual Performance Plan and Report, one of 
GSA's performance goals is to improve customer satisfaction with 
government-owned and leased space. This performance goal is under 
GSA's strategic objective to enhance relationships with customers, 
suppliers, and stakeholders. GSA regional officials noted that 
impacting tenant comfort could impact their ability to meet this GSA 
performance goal. 

[39] [hyperlink, http://www.gao.gov/products/GAO-04-844]. 

[40] GAO, Managing for Results: Enhancing Agency Use of Performance 
Information for Management Decision Making, [hyperlink, 
http://www.gao.gov/products/GAO-05-927] (Washington, D.C.: Sept. 9, 
2005). 

[41] 10 U.S.C. § 2913 was interpreted by DLA as permitting military 
sites to accept financial benefits directly from their utility for 
participation in demand-response programs, among other things, as well 
as providing specific authority to accept financial benefits directly 
from an aggregator. The subsequently enacted statute, 10 U.S.C. § 
2919, provided explicit authority for military sites to accept 
financial benefits directly from an aggregator. However, 10 U.S.C. § 
2919 requires that financial benefits received from a utility or 
aggregator be received as a cost reduction in the utility bill for a 
facility or deposited into an Energy Savings Financial Incentives Fund. 

[42] GSA's authority is provided in 40 U.S.C § 592. 

[43] The Army has developed draft policy that aligns with 10 U.S.C. § 
2919, but according to Army officials, this policy will not be 
finalized until late in fiscal year 2014. A draft version of this 
policy specifies that Army sites can participate in demand-response 
programs under certain conditions and that financial incentives shall 
be received either as a cost reduction in the utility bill for a 
facility or received directly and deposited into an Energy Savings 
Financial Incentives Fund for use, to the extent provided for in an 
appropriations act, by the military department, Defense Agency, or 
instrumentality receiving such financial incentive for energy 
management initiatives. 

[44] In the past, under DOD Financial Management Regulation Chapter 12 
and 10 U.S.C. § 2912 installations that chose to receive a direct 
payment from the utility company could accept the funds and treat them 
as operations and maintenance dollars. However, that is no longer the 
case. Under more recent legislation, if an installation receives a 
direct payment, it must be turned in to the U.S. Treasury for deposit 
into the Energy Savings Financial Incentives Fund. Funds deposited 
into the Treasury must be reappropriated by Congress in order to be 
available for expenditure and there is no guarantee that funds 
generated by one installation will make it back to that installation. 

[45] [hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1]. 

[46] GAO, DOD Financial Management: Actions Under Way Need to Be 
Successfully Completed to Address Long-standing Funds Control 
Weaknesses, [hyperlink, http://www.gao.gov/products/GAO-14-94] 
(Washington, D.C.: Apr. 29, 2014), and DOD Financial Management: 
Effect of Continuing Weaknesses on Management and Operations and 
Status of Key Challenges, [hyperlink, 
http://www.gao.gov/products/GAO-14-576T] (Washington, D.C.: May 13, 
2014). 

[47] GAO, High-Risk Series: An Update, [hyperlink, 
http://www.gao.gov/products/GAO-13-283] (Washington, D.C.: February 
2013). 

[48] [hyperlink, http://www.gao.gov/products/GAO-14-576T]. 

[49] DLA officials told us that, because of limited resources, they 
are not involved in negotiating the share of financial benefits 
retained by military sites. Rather, sites are responsible for 
negotiating these terms directly with the aggregator. DLA has 
developed standard demand-response agreements that establish general 
terms for installations' participation, such as the roles of the 
aggregators and installations, but not specific terms such as the 
program type or share of financial benefits. 

[50] The aggregator or utility facilitating the program would retain 
the remainder of the financial benefit. 

[51] [hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1]. 

[52] [hyperlink, http://www.gao.gov/products/GAO-04-844]. 

[53] [hyperlink, http://www.gao.gov/products/GAO-14-73]. 

[54] The following are some of the service-level offices responsible 
for issuing and implementing energy policy and guidance to 
installations: the Naval Facilities Engineering Command which provides 
facilities engineering support to the Navy and Marine Corps; the 
Office of the Assistant Secretary of the Army for Installations, 
Energy, and Environment which establishes policy and provides 
strategic direction on all matters pertaining to Army energy and 
environmental programs; and the Air Force Installations, Environment 
and Logistics office which provides policy and oversight for 
environmental issues. 

[55] Because the 11 GSA regions include the entire population of GSA 
buildings, this information is generalizable to GSA broadly. Our 
sample of 20 DOD installations was a nonprobability sample, the 
results of which cannot be used to make inferences about a population. 

[56] Our sample of DOD installations was a nonprobability sample, the 
results of which cannot be used to make inferences about a population. 

[End of section] 

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