The objective of the proposed research is to develop techniques that would allow a building equipped with an energy management system to be operated in a cost efficient manner. These techniques would be implemented in the energy management system and automatically utilize operating data to perform a number of important functions including on-line optimal control, performance monitoring and fault detection. Methodologies for optimal control strategies would be developed to allow the plant to operate at minimum cost. These methodologies would involve development of simulation models for the plant and the components, with parameter estimation techniques employed that utilize operating data. Fault detection would allow assessment of changes in plant performance and identification of the sources of the change. Both analytical and experimental approaches will be employed to test the validity of the methodologies. The results of the research will be algorithms that can be directly incorporated in energy management systems.