Midwest Energy’s How$mart® program is one of the longest-running energy investment programs using Pay As You Save® financing. After making more than 1,300 investments totaling $7.7 million over 7 years, Midwest Energy has a charge-off rate of less than 0.1%, a figure that is 30 times lower than the national average for consumer lending.
Through the How$mart program, Midwest Energy has prepared energy efficiency assessments for more than 2,300 customers, and when those customers have been offered energy upgrades using the terms of PAYS® financing, more than half have agreed. This conversion rate is about 5 times higher than the prevailing rate of customer conversion in utility-sponsored home energy upgrade programs.
As a result of its investments, Midwest Energy has helped its customers achieve cost-effective efficiency savings of over 3 million kWh per year and 350,000 therms of gas per year. Customers pay for their savings through a How$mart charge on their bill that allows the utility to recover its costs, and the average How$mart charge is $41 compared to savings worth an average of $49.
Midwest Energy enjoys high customer satisfaction ratings, with 85% of customers rating the utility 8-10 on a 10 point scale (average 8.88). By comparison, the customer satisfaction among participants in the How$mart program is even higher, with an astounding 97% of participants giving Midwest Energy an 8-10 score. The average scores were higher as well, with the general customer base indicating a customer satisfaction level of 8.88 compared to the average rating by How$mart participants of 9.22.
In addition to customer satisfaction, Midwest Energy also surveys its customers on value perception. The utility earned high scores (8-10 on a 10 point scale) from approximately 2/3 of the general customer, and among customers participating in the How$mart program, that figure rocketed to 96%. The average value perception scores were also higher, with the general customer base rating the utility at 8.07 compared to 9.18 for customers in the How$mart program.
Brian Dreiling, Energy Services Manager for Midwest Energy, shared this performance data for the utility’s How$mart investment program when the Energy & Environment Study Institute (EESI) and Midwest Energy Efficiency Alliance presented an online discussion of experience with on-bill financing among electric cooperatives.
Eastern Illini Electric Cooperative and a representative of cooperatives in South Carolina also presented on their programs in the same session, which offered a helpful frame for comparison. Both of those programs require participants to be homeowners, and the Eastern Illini program required homeowners to have a FICO credit score of 700 or higher before it would make an investment. With PAYS financing, Midwest Energy did not need to disqualify renters, which Mr. Dreiling noted was an important factor for the utility.
Both Midwest Energy and the cooperatives in South Carolina had tapped federal financing to make their investments in energy upgrades at customers sites, while Eastern Illini made its investments using cash on hand, without drawing on an external source to raise capital. The cooperatives in South Carolina secured its capital through the Rural Economic Development Loan & Grant (REDLG) program of USDA, which has a maximum loan size of approximately $1 million. Midwest Energy has also tapped the REDLG program as well as working with the state energy office of Kansas to secure additional investment funds.
Credit: How$mart® program logo is presented here by permission from Midwest Energy.
Upgrade to $ave is a new offering from Roanoke Electric to customers who seek debt-free financing for efficiency upgrades to their homes and businesses. In a well-attended online session hosted by the Southeast Energy Efficiency Alliance, CEO Curtis Wynn offered insights of experience as an executive striving to deliver effective efficiency solutions to customers who can benefit the most.
CEO Wynn opened his remarks by explaining that Roanoke Electric’s service area covers several counties that are all in the top tier for economic distress in North Carolina. The persistence of poverty in the region has taken a toll on the quality and energy performance of homes and commercial buildings, leading to wasted energy that drives up energy bills during the winter and summer seasons. CEO Wynn described making multiple attempts to reach customers most in need – low-income households and renters, ultimately finding that barely a handful of his top 1,000 highest users could benefit from a loan-based program the utility launched through a partnership with a bank.
Roanoke Electric found that the Pay As You Save system was working well for the economically distressed area of eastern Kentucky, where the Mountain Association for Community Economic Development (MACED) had launched the How$mart KY program in partnership with multiple electric cooperatives. Those utilities in Kentucky had themselves gained confidence in the approach based on the success of How$mart program launched by Midwest Energy in Kansas.
While Roanoke followed the cooperatives in Kentucky and in Kansas in using PAYS, it is the first utility in the country to use the new federal Energy Efficiency & Conservation Loan Program to offer customers debt-free financing for investments in cost effective energy upgrades to their homes and businesses. CEO Wynn reiterated the invitation in his open letter encouraging executives of other cooperative utilities to take advantage of Roanoke Electric’s work to develop a business plan that the Rural Utilities Service found to be cost-effective for the utility.
In addition to circulating the video and slides through the Southeast Energy Efficiency Alliance, Roanoke Electric also provided an extensive set of questions and answers based on inquiries submitted in writing by online participants.
At the Bloomberg New Energy Finance Summit in New York, delegates selected PAYS among four high impact innovations to speed up the provision of finance for clean energy. The FiRe team recognized PAYS as a “financing solution showing promise for expanding clean energy in the U.S. and around the world.”
Winners of the Finance for Resilience (FiRe) competition in 2015 were among 52 ideas submitted to FiRe, and have the potential to scale up the financing of clean energy and climate solutions by at least an additional $1bn within the first three years.
Michael Liebreich, chairman of FiRe and of the advisory board of Bloomberg New Energy Finance, said: “It’s thrilling to see how FiRe is building momentum. This year we had more than twice as many entries, and the quality was great. I’m looking forward to working with our four 2015 winners and want to thank everyone who has lent their support.”
Hilary McMahon, director of research at Carbon War Room and a member of the FiRe challenge panel, commented: “The participants took the attendees on a journey from the genesis of the idea, to the positive impact that the idea could have and the strategy for getting there. The winning projects therefore represent opportunities for investment that we can all get excited about.”