I have written a few times before at this blog, including here and here, about an innovative financing proposal called on-bill repayment (OBR), which would eliminate the upfront cost of energy improvements.
The proposal was presented to the California Public Utilities Commission (CPUC) by Brad Copithorne, an Energy and Financial Policy Specialist with the San Francisco office of the Environmental Defense Fund (EDF). Different models of OBR have been launched in Oregon and New York, but Copithorne customized the concept for the California market.
In an April 29 post, I reported on two developments that made it much more likely California would launch an OBR program as expected in January 2013. California’s program would be the first statewide OBR program for energy efficiency and renewable energy upgrades to be financed entirely by third parties.
First, the CPUC had released a proposed decision directing the state’s major utilities to develop OBR programs for commercial properties in their service territories. In a May 18 decision (PDF), the CPUC upheld the proposed decision, directing the utilities to proceed with program development. Because the CPUC does not believe it has the authority to direct utilities to establish a similar program for the residential sector, EDF had sponsored legislation, introduced by Senator Kevin de León, SB 998 (PDF), which would authorize the CPUC to compel utilities to develop OBR programs for homeowners.
The bill was passed out of the Senate Energy, Utilities, and Communications Committee on April 24 and passed with an unanimous vote in the Senate Appropriations Committee on May 21 – but there it remains. As today is the last day of the legislative session, OBR for residential customers will have to wait until the Legislature reconvenes next year.
In an August 30 blog post, Brad Copithorne notes that the utilities’ commercial OBR proposal is slated for release on October 1. He also describes what EDF plans to do next to reach a residential OBR solution:
EDF has been working closely with the utilities, environmental groups, financial institutions, project developers and other key stakeholders to craft a program that provides low-cost financing for retrofits, does not require ratepayer subsidies and has maximum flexibility to allow vendors and investors to decide how best to serve their customers’ needs. We are cautiously optimistic that the utility proposal will meet these objectives when it is released to the public on October 1, 2012.
The CPUC, however, believes that they currently do not have the regulatory authority to extend the OBR program to residential properties. EDF has been pursuing legislation to grant this authority to the CPUC, but, at this time, we do not expect that it will pass in the 2012 legislative session. EDF plans to re-introduce the residential-focused legislation in 2013 with a broad range of supporters, including several key members of the legislature.
Here’s how on-bill repayment would work, from my March 28 post:
After performing an energy audit of the home or commercial building, or assessing the suitability of the rooftop for solar, a contractor recommends improvements to the building owner. Improvements could include attic and wall cavity insulation, high-efficiency windows and appliances, duct-sealing, or rooftop solar. The contractor presents an estimate of the upfront cost of the improvements. If the building owner agrees to the upgrades, the contractor sends a loan request to participating banks for approval. The loan is repaid through the customer’s monthly utility bill.
“Whatever the savings would be on the project, they would be required to exceed what you have to pay each month on the loan,” said Copithorne. He offered an example. A homeowner pays an average of $300 per month for utilities. The package of energy upgrades recommended by the contractor will save $200 monthly. After the monthly loan payment, say $180, represented as a line item on the utility bill, the customer’s bill drops from $300 to $280. If the property is sold, the loan stays with the meter and would be taken over by the new tenant.
