Energy Efficiency: Finance Programs

Background

In 2008, the California Energy Efficiency Strategic Plan identified the critical role of financing in achieving California’s energy efficiency goals. In July 2011 the CPUC issued a Report that broadly assessed the potential of energy efficiency financing with recommendations on developing financing tools in all market sectors. The CPUC initiated a public stakeholder process with lenders, efficiency finance experts and implementers, local governments, and consumer and environmental advocates. In May 2012, the CPUC issued a guidance document Decision for planning 2013-2014 Energy Efficiency programs, including criteria for developing financing pilots that would incorporate:

  • Credit enhancement strategies for the single family residential and small business markets.
  • No on-bill repayment for the residential market.
  • Combined credit enhancement and on-bill repayment strategy for the multifamily residential market.
  • On-bill repayment strategy for all non-residential customers.
  • All finance products should have standardized statewide terms and procedures.
  • New financing program shall have an administrator, credit enhancement manager, capital providers, lenders, originators and service agents, and a clearinghouse for data flow between lenders and relevant parties.

In October 2012, SDG&E/SoCalGas submitted its Proposal for initial statewide financing pilots. In December 2012, the CPUC issued a Ruling requesting additional feedback from stakeholders on the proposed pilots.

In September 2013, the CPUC issued its final Decision establishing statewide Energy Efficiency Financing Pilots that would use ratepayer funds to leverage private capital from banks, credit unions, and other lending sources to expand the availability of financing for costly energy efficiency measures. The CPUC approved as pilot administrator the California Alternative Energy and Advanced Transportation Financing Authority (CAEATFA), based within the California Treasurer’s Office. Of the approximately $200 million budget allocated to the Financing Program, the CPUC allocated $65.9 million to new pilots in the residential, commercial, and industrial sectors.  

On November 27, 2013, the California Joint Legislative Budget Committee did not approve CAEATFA’s budget through an expedited process, requiring it to wait for results of the regular 2014-2015 budget approval process to receive the funding it requires to administer the pilots. This is expected to delay financing pilot implementation till at least June 2014. 

 

ORA Position

ORA supports leveraging private capital to expand the availability of financing for energy efficiency measures, particularly in the residential and small commercial sectors. Financing dramatically lowers the initial cost faced by customers interested in investing in energy efficiency measures and spreads that cost over a set period of time.  The removal of the initial cost hurdle is expected to attract greater interest in energy efficiency. The CPUC adopted a number of positions advocated by ORA including:

  • Assignment of CAEATFA as an experienced state agency to administer the program.
  • Rejection of risky finance proposals that involve secondary capital markets or the potential for residential energy service disconnection due to energy efficiency loan default.
  • Selection of an evaluation approach that uses verifiable data and statistically robust methods to determine the value of energy efficiency financing.

ORA further advocated that the financing pilots should:

  • Target program geographically and test them prior to statewide expansion.
  • Negotiate loan rates and terms upfront and post them on a user-friendly, customer-facing website.
  • Allocate funds fairly across sectors.

The success of Energy Efficiency Financing Programs will depend upon customer/market willingness to adopt energy efficiency measures. Towards that end, greater focus should be placed on market research and the dynamics of consumer demand for energy efficiency. The CPUC should also investigate strategies that have successfully motivated customers to seek financing for energy efficiency improvements.

See ORA’s August 5, 2013 Opening Comments on the CPUC’s Proposed Decision.

See ORA’s August 22, 2013 Reply Comments.

See ORA’s December 14, 2012 Opening Comments on proposed financing pilot.  

See ORA’s December 21, 2012 Reply Comments.

 

Proceeding Status

See the Proceeding docket.