Readiness Many Army installations are facing significant and increasing monthly costs in their utility accounts for energy and water services. Utility bills have been rising for several reasons, such as commodity price increases and distribution system improvements under utility privatization (UP) contracts. At the same time, installations are under pressure to reduce costs and are tasked with finding ways to maintain operations and even enhance installation readiness with declining budgets. In recent years, fewer appropriated funds have been available for facility infrastructure operations and maintenance, more risks have been taken in operations and maintenance accounts, and energy efficiency and energy security mandates and goals have increased. In response, the Army has turned more toward energy performance contracting financed by third parties, such as Energy Savings Performance Contracts (ESPC) and Utility Energy Services Contracts (UESC), to help renew its infrastructure and support mission requirements. However, the use of third-party financing mechanisms to fund energy and water efficiency projects also lowers flexibility within the utility budget during the repayment period.Thus, in addition to finding ways to reduce installation utility bills, the Army is trying to determine what level of third-party energy and water project investment (such as ESPC, UESC, and UP) is sustainable within the utilities budget, so that installations retain sufficient flexibility both to support competing mission requirements and to lower utility costs when budgets decline or when market conditions change. At the request of the Assistant Chief of Staff for Installation Management (ACSIM), now called the Army Deputy Chief of Staff, G-9 Installations (Army G-9), RAND Arroyo Center researchers identified installations with a high level of contractual commitments to repay investments in energy and water projects and assessed different ways that installations could reduce their utility bills while maintaining or enhancing energy and water security and installation readiness.Installation utility costs have two main components: The first is bills from electricity, natural gas, and water providers. This component includes commodity payments (which depend on the price per unit of water or energy and the amount consumed), fixed charges, and sometimes charges based

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is a not-for-profit research organisation that helps improve policy and decisionmaking through research and analysis. To learn more about RAND Europe, visit www.randeurope.org. Research IntegrityOur mission to help improve policy and decisionmaking through research and analysis is enabled through our core values of quality and objectivity and our unwavering commitment to the highest level of integrity and ethical behaviour. To help ensure our research and analysis are rigorous, objective, and nonpartisan, we subject our research publications to a robust and exacting quality-assurance process; avoid both the appearance and reality of financial and other conflicts of interest through staff training, project screening, and a policy of mandatory disclosure; and pursue transparency in our research engagements through our commitment to the open publication of our research findings and recommendations, disclosure of the source of funding of published research, and policies to ensure intellectual independence. For more information, visit www.rand.org/about/principles. RAND's publications do not necessarily reflect the opinions of its research clients and sponsors.