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On-bill Financing for Efficiency Improvements Helps Utilities, Their Customers, and the Environment

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Karen Marcus's picture
Freelance Researcher and Writer Final Draft Communications, LLC

In addition to serving as an Energy Central Community Manager, Karen Marcus has nearly 25 years of experience as a content developer within the energy and technology industries. She has worked...

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On-bill financing represents a way to increase the level of energy efficiency for large swaths of communities, resulting in greater efficiency for the local utility, reduced energy bills for customers, and a reduction in harmful pollution.

A Win-Win Idea

With on-bill financing, a utility company pays for efficiency upgrades to a residence or commercial building, and adds repayment charges to the customer’s utility bills. One of the big benefits of this system is that residential customers not eligible for other types of loans may be eligible for on-bill financing, so those who can’t otherwise afford to do home improvements can do it through this type of program. These customers are considered a low risk because, often, the energy savings due to the improvements offset the cost of the loan payment, keeping monthly payments affordable. Additionally, the utility can cut off their service if they fail to pay their bill.

For companies and institutions as well, on-bill financing can help them move toward greater energy efficiency, and significant cost savings. Even renters can get involved; property owners may undertake improvements, with the understanding that tenants will make the payments on their individual utility bills, and also benefit from the cost reductions.

Multi-state Success

The City of Holland, Michigan has established such a program, called the On Bill Loan Program. About one year old, the program included an initial investment of about $18,000 for each of the first 56 participants, who paid no up-front costs. The City worked with the Environmental and Energy Study Institute (EESI) to develop the program.

In a video posted by the EESI, Dave Koster, General Manager of Holland Board Public Works says one of the goals of the program was getting “deep energy retrofits in our housing stock.” Contractor George Clark of West Michigan Glass Block adds, “These homes need a lot of work…between weatherization, windows, appliances, HVAC equipment. And when you do all those things it just makes a tremendous difference.” Program participant Peter Christensen notes, “I expect my electricity bill will probably go down…and my summer cooling costs will go down a lot.” According to EESI, “Holland officials are pushing to expand the program, as they are hopeful the energy savings will free up to $10 million for the local economy.”

Similar positive results have been seen in Arkansas, with Ouachita Electric Cooperative and its Pay As You Save (PAYS) program. Given the percentage of renters, those living in mobile homes, and residents with low incomes, “It is the kind of area where efficiency upgrades could do the most good, significantly lowering bills and usage,” explains Robert Walton for Utility Dive. An initial assessment of the program showed that, in its first year, the coop’s investment in residential efficiency upgrades, as well as the number of customers reached, tripled. Walton quotes Ouachita General Manager Mark Cayce as stating, “Our goal would be to get to all of our permanent residences.”

Working Out the Kinks

Unfortunately, the idea has stalled in some areas of the country. Karen Uhlenhuth writes for Midwest Energy News, “Owners of about 57,000 low-income housing units located in about 1,100 structures are prohibited from utilizing efficiency subsidies that are provided for in the Missouri Energy Efficiency Investment Act. The bill expressly prohibits property owners who are collecting the state’s Low Income Housing Tax Credit from benefiting from utility sponsored energy-efficiency programs.” Uhlenhuth quotes Renew Missouri attorney Andrew Linhares as stating, “Under the law, they can’t participate in these programs that were designed for them.” Two bills before the Missouri General Assembly are meant to address this issue.

Still, given that energy efficiency is valuable for both utilities and their customers, on-bill financing programs are likely to become more prevalent, and continue to improve. 


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