Phoenix Federal Correctional Institution in Arizona, the Federal Bureau of Prisons (FBP) completed a 1,584 m(2) (17,040 square feet) parabolic trough solar water heating system financed installed and operated under an Energy Savings performance Contract (ESPC) with Industrial Solar Technology Corp (IST). The ESPC was developed under a Cooperative Research and Development Agreement with the National Renewable Energy Laboratory (NREL). The system incorporates a 87 m(3) (23,000 gallon) storage tank. The system delivered 1,161,803 kWh (3,964 million Btu) of solar heat from March 1, 1999 to February 29, 2000. This energy would have cost $77,805.74 if purchased from the utility (based on the monthly average $/kWh cost). Sale of this energy to the prison provided $70,025.18 in revenue to IST (a rate negotiated at 90 percent of the monthly average $/kWh utility cost). Thus, the prison saved $7,780.56 (the remaining 10 percent). A photograph of the collector system is presented in Figure I. Results show that the system delivers hear reliably, with only minor operational problems which are listed and discussed. The system delivered a minimum of 80,315 kWh (274 Btu) in January 2000 to a maximum of 130,979 kWh (447 Million Btu) in October 1999. The prison pays IST for energy delivered by the solar system at a rate equal to 90 percent of the monthly average utility rate (10 percent guaranteed savings), over 20 years. Details of the establishment of the payment structure and the cost savings to the prison are discussed. Annual Emissions Savings are estimated by EPA multipliers [1] for Arizona as 627,374 kg/yr of CO2, 2,324 kg/yr of SO2 and 2,297 kg/yr of NOx. Other benefits to the prison are also discussed, such as reduced operations and maintenance on the electric water hearers and a greater capacity to deliver hot water. [S0199-6231(00)00704-8].