FCSG Comments on On-Bill Financing of Energy Improvements

Based on remarks made at City Council Meeting on April 19, 2011

Many home and commercial building retrofit projects would save a significant amount of energy in the long run, but never get implemented.  Why is this? Often, projects aren’t implemented because the investment required is either too high, or doesn’t offer as good a financial return as other, competing investment opportunities.

Utilities, including Ft. Collins Utilities, recognize this problem and attempt to address it by offering rebates both to homeowners and to commercial customers.  These rebates offer cash back for implementing a wide variety of energy retrofit measures.  Nationally, these rebates typically offset somewhere in the range of 5% to 20% of the cost of qualifying measures.  The rebates in the extensive menu offered by Ft. Collins Utilities appear to fall in this range as well.

On-bill financing, on the other hand, offers a way for building owners to offset 100% of the cost of a given energy retrofit.  Here’s how it works: the utility performs an energy audit to determine what work should be done, the owner approves the project he or she wishes to have done, and the utility pays for the project.  The owner or tenant then repays for the work through his or her utility bill.  Payments are structured so that the money saved on energy costs pays for the upgrades and generates small additional monthly savings.  Once the investment is repaid, the utility customer realizes much larger savings.  Financing attached to the utility meter (electric and/or natural gas) automatically transfers to a new homeowner or tenant, allowing for longer-term financing.  Presently, utilities in over ten states offer on-bill financing.  The capital is usually raised through bonds, grants, or bank loans.

FCSG believes that if on-bill financing were available and well-marketed, more energy retrofit work would be done here than is done currently with the help of rebates.  This would benefit the following groups of people:

  1. Homeowners and rentersIn both new and especially older houses energy auditors find holes in insulation, underperforming heating and air conditioning equipment, and sub-standard weatherization.  Conservation improvements save on bills, increase the value of the house, and make a more comfortable home. By financing through the electric bill, landlords can make these improvements without paying for them, and tenants can save on bills and live in more comfortable housing.
  2. Commercial customers – On-bill financing can reduce business expenses and frees up capital without affecting credit.
  3. Government and other public building owners – Improvements can be made without raising taxes or impacting other budget areas.
  4. Houses of worship – Improvements can be made without increasing costs to congregation members.
  5. Contractors – More financing would help support building contractors who do things like install insulation, seal window and door frames, replace inefficient HVAC equipment, and install solar thermal and electric systems.

The community would also benefit economically, to the extent that contractors pay sales and property taxes, and employ local residents to do the important work of improving energy efficiency.

Finally, on-bill financing of energy retrofits would be a powerful tool to help the community reach the greenhouse gas emissions reduction goals included in the Fort Collins Climate Action Plan.  Progress toward the 2012 and 2020 goals has been good so far, but as the pace of the local economy picks up, it will be important to find new ways to reduce energy use and the attendant greenhouse gas emissions.  We encourage City Council to give serious consideration to adding on-bill financing to the set of programs currently in place to support the goals of the Climate Action Plan.  Doing this would support a healthy local economy as well.

Author: Rick Casey

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