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The California Nonresidential Standard Performance Contract (NSPC) program represents a bold experiment in non-utility delivery of energy efficiency that has been consciously designed to advance the energy efficiency and market transformation objectives of the California Public Utilities Commission. The program has received broad support from the California utilities, the energy services company industry, and some environmental groups as a model for one type of future ratepayer funded energy-efficiency programs. In the NSPC program, energy-efficiency service providers or customers enter into a standardized, pay-for-performance agreement with a program administrator in which they receive payments for delivered energy savings from high-efficiency measures installed at customer facilities based on a posted price. This paper discusses the origins of the program concept, the policy rationales for key program design features in the NSPC program, and major issues that must be considered in evaluating the "success" of the program in providing energy-efficiency services to the nonresidential retrofit/replacement market and transforming and strengthening the energy-efficiency services industry overall. Early results suggest that the NSPC program will be successful in saving energy cost-effectively and in providing a stimulus to California's private sector energy-efficiency services industry. Project sponsors have responded favorably to end-use-specific pricing signals as non-lighting measures account for 50 to 80 percent of the savings reported to date. However, the ultimate impact of the program in transforming markets will not be known for some time.