New Opportunities to Help You Invest in Saving Energy

Do you want to upgrade your home or business to save energy but struggle with the upfront cost? Relief may be closer than you think since the California Public Utilities Commission approved several pilot programs yesterday that could help customers use (and pay for) less energy while getting the same services, like light and heat.

The commission’s decision on energy efficiency financing pilots is part of the 2013-2014 “transition period” where Commissioner Mark Ferron (the lead commissioner on energy efficiency) challenged stakeholders and utilities to experiment with new approaches that would save more energy, reduce pollution, and lower energy costs for customers. Since financing support is one of the many ways to help customers save energy, the commission approved almost $70 million for the utilities and local government networks to carry out pilot financing programs.

The commission also previously approved nearly $100 million to continue the successful “on-bill financing” program that offers direct loans for building efficiency improvements – such as advanced lighting controls and high-efficiency chillers - at a zero percent interest rate to commercial, institutional, and local government customers. These loans are funded in a similar manner to other efficiency programs (i.e., with funds collected through customer bills versus private capital) and are considered “revolving” as new loans can be made as previous loans are paid back via the utility bill.

What’s new for California?

In today’s decision, the commission approved a number of new efficiency financing pilot programs for all building types, to be facilitated by the state’s Treasury Office. We strongly support the commission’s effort to experiment with new ways to leverage private capital and capture energy savings, especially those program strategies that better reach the often-underserved low and moderate income, multi-family, affordable housing, and small business customers.

The pilot program loans can be used for any of the numerous energy efficient products or services included in the commission-approved efficiency programs (although you don’t have to participate in an efficiency program to be eligible for a loan). If you are a customer of a private utility (like PG&E) you will likely be able to check out the offerings on your utility’s webpage early next year.

The new residential pilot programs will: 

  • Provide loans for single-family home efficiency improvements and reserve one-third of the residential loan funds for low and moderate income customers;
  • Allow residential customers to pay back the loan through a line item on their utility bill (instead of through a traditional separate monthly loan payment); 
  • Reach the multifamily sector by offering lenders the ability to make loans to owners of multifamily buildings that could be repaid on the master utility bill; 
  • Offer lenders a “credit enhancement” (which means the program would cover some portion of an unpaid loan in the event the borrower defaults) to entice lenders to make home improvement loans for eligible efficiency measures. 

The new non-residential pilot programs will:

  • Offer credit enhancements to entice lenders to make loans to small businesses for efficiency upgrades and for equipment leasing;  
  • Offer commercial customers of all sizes the ability to repay a loan funded by a non-utility entity through the utility bill in the hope of enticing lenders to make such loans to fund efficiency improvements. 

How do we continue to scale-up efficiency?

Trying new financing strategies is a great way to give customers additional opportunities to invest in efficiency. However, financing is only one of many tools in the toolbox to increase efficiency achievements. The success of financing programs will depend in part on customer demand for more efficient services and buildings (meaning if some customers have reasons other than financing for not improving the efficiency of their buildings, the pilot programs won’t help them).

Therefore, we strongly support the Commission in continuing the various complementary programs to drive more efficiency upgrades and advance the market for more efficient products. Programs that incentivize design and construction of highly efficient new buildings, ensure customers see the most efficient option on the shelf at competitive prices, and train the growing workforce to ensure quality energy efficiency installation all support a growing efficiency industry and encourage customer action to reduce energy use.

Where to next?

We look forward to seeing how these new financing pilot programs could be expanded as concepts are “proven out.” We also expect these pilots will help determine how best to recruit private lenders to support scaling-up of efficiency. In the meantime, we hope to work with the Commission, stakeholders, and building owners to continue to strengthen the current successful programs (such as on-bill financing), while learning lessons from the approved innovative pilots.

These and other efficiency policies and programs have saved customers billions of dollars since the 1970s and helped reduce household electricity bills to 25 percent below the national average while avoiding the need for 30 large polluting power plants. Leveraging private funding to increase participation in traditional programs and support customers to reach even deeper energy savings will help all customers lower energy costs, reduce pollution, and support job growth in the local economy.