Legislation spurs a boom in public sector financing plans. (financing for energy conservation projects)

PITTSBURGH--Alternative financing for energy conservation projects in the public sector has increased dramatically over the past year, spurred largely by recent state and federal legislation that has relaxed restrictions on long-term contracts for such projects, according to users, vendors and industry sources.

In the past 12 months, at least nine states have passed legislation making long-term contracts permissible for state and municipal agencies, and at the federal level, legislation authorizing contracts for up to 25 years for energy efficiency projects has cleared both the House and the Senate and is expected to be enacted into law by the end of this year, sources noted.

Also contributing to the increased public sector activity are:

* A continuing dearth of dollars for needed capital improvements at all levels of government, spurring public sector administrators to seek other financing possibilities.

* Rising utility rates in many states, resulting in an increased urgency to conserve energy in public buildings as soon as possible.

* Uncertainty about changes in the tax laws discouraging investment in the private sector. The public sector is also perceived as more stable than the private sector and less subject to fluctuating market factors that effect long-term energy usage, and hence return on investment.

* Increased public sector confidence in the legitimacy of the alternative financing strategies after initial skepticism and reports of unsatisfactory installations.

Generally defined, alternative financing schemes allow a user to make energy improvements with little or no investment of cash. An energy …