California Energy Commission recommends utilities introduce inclusive financing

The California Energy Commission has issued the landmark SB350 Low Income Barriers Study ordered by state law SB350 because too few of the billions of dollars in rate-payer and taxpayer funded programs for energy efficiency and renewable were actually reaching people in disadvantaged communities.

The CEC study recognized the majority of low-income residents in the state are renters, and it identified the split incentive between landlords and tenants as a primary barrier to investment in cost effective energy efficiency upgrades.  In its consideration of solutions, the CEC wrote:

“Under this model [tariffed on-bill investments], the utility finances the energy installation and recovers the cost by fixing a charge to the utility bill that is less than the projected energy savings. The major advantage of this approach is that it is debt-free for the customer, as well as it eliminates obstacles for low-income renters to submit to and pass a credit check.  The Existing Buildings Energy Efficiency Action Plan calls for evaluating the potential for on-bill financing pilots.

“This program would require the utility to finance the upgrade investment cost or facilitate capital commitments for those investments. A reserve fund established by the State could be useful to insure utilities against charge-offs of uncollectible program service charges billed to participants for cost recovery. Any upgrades would likely require permission from the landlord, but there would be no landlord debt obligation or property lien.”

And in its final recommendations, the California Energy Commission concluded that every type of energy utility in the state (for-profit IOUs, municipal utilities, public utility districts, and cooperatives) should introduce a pilot program for tariffed on-bill investment:

“The State should continue developing a series of energy upgrade financing pilot programs to evaluate a variety of models to improve access and participation of low-income customers, including those in disadvantaged communities. The pilot programs would include the cost of health and safety measures required to accomplish energy efficiency upgrades. Possible pilots include:

  • The CPUC should consider developing a tariffed on-bill pilot for investments in energy efficiency that targets low-income customers regardless of credit score or renter status, and that do not pass on a debt obligation to the customer. Utilities could use the program to make energy upgrade investments and recover the cost through the bill, so long as the recovery charge is less than the estimated savings. The Energy Commission should encourage and provide technical assistance to POUs and other load-serving entities seeking to implement a tariffed on-bill pilot.”

The CEC’s full report, SB350 Low-Income Barriers Study, and documentation of extensive stakeholder consultation that informed their deliberations are posted online.