USDA unveils new no-interest efficiency loan program for rural utilities

Informational webinar July 12, 2016
Letter of intent due Aug. 5, 2016

The Rural Utilities Service (RUS), an agency of the Department of Agriculture (USDA), has opened the application process for its new Rural Energy Savings Program (RESP).

Under this new program, rural electric cooperatives and other rural energy providers have access to $52 million in zero-percent loans for relending to homes and small businesses to make cost-effective energy-efficiency improvements. Participants repay their utility for these improvements over time through a fixed charge on their monthly utility bills. RESP loans can be used for a wide variety of energy-efficiency measures, providing the utility can justify the cost-effectiveness of the measures for the consumer.

Utilities across the country have successfully implemented this on-bill financing model and it is part of an ongoing initiative by Environmental and Energy Study Institute You are leaving (EESI) to help families make home energy upgrades with no upfront costs.

To be considered for this initial round of RESP loans, utilities must submit a letter of intent to RUS by Aug. 5. RUS did not provide any information regarding the size or number of loans it plans to make. USDA and the Department of Energy will co-host a free webinar You are leaving on July 12, 12 to 1 p.m. Mountain Time, to discuss the program. The webinar will provide an overview of the program and cover evaluation, measurement and verification methods used to assess an energy-efficiency program or project.

“We view the Rural Energy Savings Program as a real win for rural electric co-ops and their members, as well as for other rural utilities,” said EESI Executive Director, Carol Werner. “We hope that these utilities will move quickly to tap the program.”

Source: Environmental and Energy Studies Institute, 6/21/16

On-bill financing moves to the mainstream

Editor’s note: This story is the first in a series on overcoming barriers to energy-efficiency improvements, and originally appeared in the February 2012 Energy Services Bulletin.

Of all the factors preventing consumers from upgrading the inefficient systems and equipment that run up their utility bills each month, financing may rank as Number 1. It’s certainly hard to argue with a lack of money—if you don’t have it, you don’t have it. Moreover, the people who could benefit most from energy-efficiency improvements often have the least available cash to pay for them. One solution that  many utilities around the country are exploring is on-bill financing.

How it works
This financing mechanism rolls the loan payment for the energy-efficiency measures into the customer’s monthly utility bill. Utilities may service the loan themselves or partner with state energy offices, financial institutions or other third-party providers. The sources of capital, program design, target market and implementation strategy vary widely, depending on the utility’s specific situation and goals.

The American Council for an Energy Efficient Economy (ACEEE) recently published a report listing many advantages to on-bill financing:

  • The loan is secured through an existing relationship with the utility, instead of a (potentially unfamiliar) financial institution.
  • Monthly utility bills decline, even though the loan payments are included.
  • The customer’s payment history can be used to establish creditworthiness.
  • Utility bills showing reduced energy use create a clear link for participants between their energy-efficiency investment and the resulting savings.
  • Rebates and incentives available through the utility can be bundled with the financing to improve the terms of the loan.
  • Capital investors see on-bill programs as a more secure investment since they are based on an established payment relationship.
  • Loans can be tied to a rental property’s meter, so the renter benefit from lower utility bills and greater comfort while occupying the unit, and landlords benefit from increased property values.

Of course, when a program has so many moving parts, it is difficult to pin down the precise elements that are most likely to ensure success. Utilities launching a first-time program will also have to deal with administrative challenges such as:

  • Identifying or setting aside capital to use for loan funds
  • Up-front costs if billing systems need to be modified
  • Diverse utility and regulatory structures
  • Specific needs of different communities
  • Differing state and regional legal regulatory landscapes

What’s in it for utilities
In spite of the challenges and drawbacks, the number of utilities exploring on-bill financing programs is growing. Just as no two programs are alike, the reasons utilities offer them are just as diverse.

Case studies from the ACEEE report show an early on-bill program in Wisconsin saving 1.8 GWh and 93,000 therms over the life of the investments. According to KW Savings, a South Carolina nonprofit, its significant investment in an on-bill pilot offset the cost of building additional generation to meet current demand. Clean Energy Works Oregon uses on-bill repayment not only to reduce energy waste, but also to create green jobs and make efficient technologies more affordable.

As far back as 1997, Delta Montrose Electric Association (DMEA) was using on-bill financing to move its customers from expensive propane heat to geoexchange heat pumps. First with the Co-Z Energy Plan and now with its Geothermal Loop Tariff, DMEA has been building its electrical load while improving its customers’ comfort and saving them money.

Midwest Energy created How$mart in 2006 to convert energy audits into actual energy-efficiency improvements and to reach the underserved tenant market. To date, 650 customers have taken advantage of the program to fund measures in the program’s free energy audits. The utility estimates that measures implemented under How$mart have saved 2,000 kilowatt hours annually for electric projects and 260 therms per year for natural gas.

Want to know more?
Obviously there is much for a utility to investigate before undertaking an on-bill financing program: capital sources, administrative logistics, local regulations and legislation, technical support, consumer protection, and program design. But for all of the complexity and potential risk, on-bill financing offers utilities a way through one big barrier to energy efficiency improvements.

Western would like to help our customers explore this tool. If you would be interested in participating in a workshop or webinar on on-bill financing, contact Energy Services Manager Ron Horstman at 720-962-7419. Also, if your utility has explored or implemented a program, share your experiences with Energy Services Bulletin.