The Securities and Exchange Commission (SEC), in its implementation of the Dodd/Frank Financial Reform legislation, has inadvertently defined energy service companies (ESCOs) as municipal advisers when they provide cash flow analysis of building energy efficiency projects for states, counties, local governments, and subdivisions of these governments. Defining ESCOs as municipal advisers places them under SEC jurisdiction, which subjects the companies to expensive record keeping and compliance obligations, as well as an as yet unquantifiable fiduciary risk.
The definition is embodied in a temporary rule that has been extended for almost two years beyond its original deadline. If this definition is contained in the final rule, some ESCOs may opt out of doing energy efficiency work for non-federal governments, costing the nation’s economy hundreds of thousands of jobs and millions of dollars in lost energy savings at multiple levels of government, not to mention the lost opportunity costs to ESCOs.
Resolving this matter involves working with the SEC, communications to the SEC by key members of Congress and, perhaps, federal legislation. The firm has the lead on all of these activities.