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corresp

June 14, 2005

Mr. Donald C. Hunt

Attorney-Advisor

Division of Corporation Finance

United States Securities and Exchange Commission

450 Fifth Street N.W.

Washington, DC 20549

    Re:

    Electric City Corp.

Amendment No. 1 to Registration Statement in Form S-3

Filed April 15, 2005

Amendment No. 1 to Form 10-K for the period Ended December 31, 2004

File No. 001-16265

Dear Mr. Hunt:

This letter is in response to your letter of May 9, 2005 in which you provided comments to the
above referenced filings.

Attached is a copy of the second amendment to our Annual Report on Form 10-K, marked to show
changes from the first amendment to our Annual Report on Form 10-K filed with the SEC on April 13,
2005. We expect to file an amendment to our Registration Statement on
Form S-3 shortly.

The following are our responses to the comments contained in your letter relating to our Annual
Report on Form 10-K:

    Your

    Comment #

    Comment/Response

    11

    Please include your correct commission file number (1-16265)
on future periodic filings.

    We will use file number 001-16265 on future periodic filings.

Mr. Donald C. Hunt

June 14, 2005

Page 2 of 13

    Your

    Comment #

    Comment/Response

    12

    Please expand your description of your building control and
automation business. See Item 101 of Regulation S-K.

    We have expanded our description of the building control and
automation business as requested.

    13

    Please expand your disclosures to address the marketing hurdles
references on page 7.

    We have expanded our disclosures to provide additional
information on the marketing hurdles referenced on page 7.

    14

    Revise your disclosure to include all material terms of your
distribution agreements. We note, for example, your disclosure
on page 11 that some of these agreements may be terminated by
your distributors upon 30 days’ notice.

    We believe that all material terms of our distributor agreements
are disclosed on page 5.

    15

    Revise your disclosure to state the number of distributors that
have violated the terms of their distributor agreements for
failing to meet quotas and are delinquent in payments due to you.

    We have revised our disclosure to indicate that all of our
distributors are currently in violation of their quota
requirements and that one distributor is in violation of its
payment terms.

    16

    Revise your disclosure to identify all customers who contribute
ten percent or more of your net sales and the percentage of total
revenue attributable to each one.

    Our disclosure of customers who contribute ten percent or more of
our net sales is complete, but we revised the disclosure to
indicate the percentage of total revenues attributable to each
customer.

    17

    Tell us supplementally whether there is any relationship between
Electric City of Pennsylvania and you other than that disclosed.

Mr. Donald C. Hunt

June 14, 2005

Page 3 of 13

    Your

    Comment #

    Comment/Response

    Electric City of Pennsylvania is an independent distributor of
our products. Neither the Company nor any of the Company’s
significant shareholders have any direct or indirect ownership of
Electric City of Pennsylvania. The Company recently notified
Electric City of Pennsylvania that it is terminating its
distributor agreement as a result of its failure to meet its
quotas.

    18

    Please expand your disclosure to address the hurdles to
implementing your VNPP program with Commonwealth Edison
referenced on page 12.

    We have expanded the disclosure of the hurdles to implementing
the VNPP program with ComEd as requested.

    19

    Provide us supplementally with the basis for your belief that the
EnergySaver “has the largest installed base of any lighting
control power reduction system of its type.”

    This statement is based information about competitive products
that we have gathered as part of our day to day activities in the
market for lighting controllers. Since there is currently no
independent source to verify our assertion, we have elected to
delete the statement.

    20

    Please revise your disclosure to detail your plans to outsource
manufacturing.

    We have no current need to outsource manufacturing, however, we
have expanded the disclosure to provide additional information as
requested.

    21

    Please expand your disclosure to address the manufacturing
hurdles referenced on page 7.

    We have expanded our disclosure of manufacturing hurdles
referenced on page 7.

    22

    We note that a number of risk factors identified in your Form S-3
referenced above (e.g., risks related your auditor’s going
concern opinion and risk related to your planned acquisition of
Maximum Performance Group, Inc.) are not included here. Please
advise or amend to include the appropriate risk factors.

Mr. Donald C. Hunt

June 14, 2005

Page 4 of 13

    Your

    Comment #

    Comment/Response

    We have revised the risk factors in the Form S-3 (which will be
filed shortly) and Annual Report on Form 10-K to make them
consistent and substantially identical.

    23

    Tell us supplementally the nature of the advertisement that is
the subject of this litigation.

    Our investor relations firm, the StockPage, prepared a one page
information sheet regarding the Company in which it described the
Company’s products, markets and key financial information. While
the information contained in the document was extracted from the
Company’s public filings, the document was not reviewed nor
approved by the Company prior to distribution.

    24

    Tell us supplementally the basis for your belief that the
liability from this litigation is not material.

    The Company had no direct involvement in this investor relations
program, the program was designed, managed and implemented by the
StockPage, an independent investor relations firm. Prior to
authorizing this particular investor relations program, the
Company asked for and received written assurances from the
StockPage that all recipients of the faxed material
pre-authorized the receipt of such material. The Company relied
on this statement in authorizing the program. The Company has
filed a motion for summary judgment based on these facts seeking
to have the matter dismissed as to the Company.

    25

    Please include in this section a discussion of any material
trends or uncertainties that could materially affect the
company’s financial condition or results of operations. For
example, we note your disclosure on page 8 that you may be
required to reduce the prices of your products in order to
increase sales. We further note your disclosure on page 9 that
due to potential overbuilding of power generation stations,
wholesale power prices may decrease in the future. For guidance,
please refer to “Focus on Material Trends and Uncertainties” at
Section III.B.3 of Release No. 33-8350 (December 19, 2003).

Mr. Donald C. Hunt

June 14, 2005

Page 5 of 13

    Your

    Comment #

    Comment/Response

    We have added a new section to the Management Discussion and
Analysis section to discuss material trends and uncertainties,
consistent with Section III.B.3 of Release No. 33-8350. We have
not included the risk that we might need to reduce prices of our
products in order to increase sales, or the risk that wholesale
prices might decline in the foreseeable future because we do not
believe either of these risks are significant at this time,
though we feel that both of these possible events are potential
risks that our investors should be aware of.

    26

    We note your disclosure in the carryover paragraph at the top of
page 23. Please state your reasonable belief as to the time of
the amendment to your agreement with ComEd.

    We have modified our disclosure to provide our estimate on the
timing of the ComEd agreement.

    27

    Revise your disclosure to state the amount of legal expense
referenced in this paragraph.

    We have modified our disclosure to provide additional information
on the legal expenses referenced in the indicated paragraph.

    28

    We note your disclosure that management has concluded that your
disclosure controls and procedures are effective “and designed to
ensure that material information related to the Company and its
consolidated subsidiaries is made known to them by others within
the entity.” The language that is currently included after the
word “effective” is your disclosure appears to be superfluous,
since the meaning of “disclosure controls and procedures” is
established by Rule 13a-15(e) of the Exchange Act. However, if
you do not wish to eliminate this language, please revise future
filings so that the language that appears after the word
“effective” is substantially similar in all material respect to
the language that appears in the entire two-sentence definition
of “disclosure controls and procedures” set forth in Rule
13a-15(e).

    We have modified the disclosure to eliminate the superfluous
language as requested.

Mr. Donald C. Hunt

June 14, 2005

Page 6 of 13

    Your

    Comment #

    Comment/Response

    29

    We note your disclosure that “there were no significant changes
in the Company’s internal controls..." Please revise your
disclosure in future filings to remove the word significant and
to discuss all changes in your internal control over financial
reporting that have materially affected, or that are reasonably
likely to materially affect, your internal control over financial
reporting, as required by Item 308(c) of Regulation S-K.

    We have modified our disclosure to remove the word significant.
There were no changes in our internal controls over financial
reporting.

    30

    We see from disclosures on page F-11 that you recognize revenues
on long-term contracts under the percentage of completion,
cost-to-cost method of accounting. It is not clear to us how
this is consistent with disclosures on page 21 which state
“effective January 1, 2003, due to your limited experience in
estimating the profitability on long-term building automation
control contracts, you elected to begin to defer profit on all
long-term building automation control contracts until completion
of the job”. Supplementally and in the future filings, please
clarify what your revenue recognition policies are and how your
accounting for long-term contracts complies with SOP 81-1.

    We currently utilize the percentage of completion method of
accounting for our long term building automation control
contracts in conjunction with the cost-to-cost method of
measuring the extent of progress toward completion. Effective
January 1, 2003 we elected to begin using a zero estimate of
profit as provided for in SOP 81-1 paragraph .25(c) due to our
limited experience in estimating the profitability of these
contracts. If we determine a loss is likely for a particular
contract we will record a provision for the loss in the period
the loss becomes evident. As we gain more confidence in our
ability to properly estimate profitability of these contracts we
will begin to account for our long term building control projects
using the method described in SOP 81-1(a).

Mr. Donald C. Hunt

June 14, 2005

Page 7 of 13

    Your

    Comment #

    Comment/Response

    31

    Please tell us more about your contract for the Virtual
“Negawatt” Power Plan. Specifically address the following:

    •

    Tell us the significant terms and conditions of these
agreements, including cancellation, right of return, etc.

    •

    Tell us how your customers notify you that they are
utilizing the demand reduction.

    •

    How you determine the amount of revenue to recognize.

    •

    Why you have not recognized revenue from these contracts
to date.

    •

    Please tell us how you determine your revenue recognition
policy and what accounting guidance you relied.

    •

    Confirm you retain ownership of any utilized equipment.
Why it is it appropriate to depreciate the energy saver units
over the existing contract life and not over the useful life of
the asset?

    We may have further comments after reviewing your response.
Revise future filings as necessary based on our concerns.

    Our agreement with ComEd was signed on September 9, 2003 and will
expire on September 31, 2015. Under the agreement we are
obligated to develop a VNPP system to curtail power at
participating customer sites (“Customer Hosts”). The system is
to provide real-time control, measurement and verification over
an Internet based software system. As part of the Agreement we
are to select curtailment candidates, enter into contracts with
these candidates to participate in the program and install and
maintain the necessary equipment in order to curtail up to 50
megawatts of demand responsive load reduction. We are also
required to operate the VNPP system to reduce the amount of load
to the amounts requested (up to the installed capacity) whenever
ComEd requests a curtailment. Such requests for curtailment will
be made at least 15 minutes in advance of the start of the
required load reduction. In exchange, Electric City will be paid
a fixed fee on a quarterly basis for the amount of curtailment
capacity it makes available for ComEd’s use. Electric City will
retain ownership of all the equipment installed as part of the
VNPP program.

    Either party may terminate the agreement upon the occurrence of
an event of default. Events of default include:

    (i)

    Either party fails to make any payments required pursuant to
the Agreement and such failure shall continue uncured for a
period of 10 days after written notice from the other party that
such payment is overdue.

Mr. Donald C. Hunt

June 14, 2005

Page 8 of 13

    Your

    Comment #

    Comment/Response

    (ii)

    Either party makes an assignment of the Agreement in
violation of Section 11 of the agreement.

    (iii)

    Either party fails to comply with any other material
provision of the Agreement, and such failure shall continue
uncured for 30 days after written notice thereof by the
non-defaulting party.

    Since Electric City is retaining ownership of the equipment,
there is no issue related to right of return. The Customer Host
may return equipment under certain circumstances, in which event
we will seek a replacement Customer Host for the balance of the
ComEd contract.

    We communicate with the curtailment equipment that is installed
in the Customer Hosts’ sites via the Internet or dial up modems.
All equipment operation, monitoring and performance verification
is done remotely. The Customer Host does not need to operate the
equipment and very often does not know when we are putting the
equipment into curtailment mode.

    In December 2004 we signed a non-binding memorandum of
understanding with ComEd regarding an amendment to our contact.
ComEd requested the amendment to change the structure of the
contract to more easily permit it to seek cost recovery for the
cost of the program. As part of this memorandum of understanding
we agreed to suspend the payment requirements of the contract
until we complete the amendment or June 30, 2005, whichever
occurs first. We completed negotiating the specific terms of the
amendment during the first quarter of 2005. ComEd is currently
seeking internal approval of the amendment and we hope to have it
signed by the end of June. Since one of the terms subject to
amendment is the method of calculating our compensation, we felt
the most conservative thing to do would be to defer recognizing
revenue on any installed capacity until the earlier of June 30,
2005 or the date we complete the amendment. As currently
proposed, the amendment will change the contract from a capacity
contract, in which we are paid for providing curtailment
capacity, to an energy resource contract under which we will be
paid for the actual hours of operation of ou