Use of Creative Financing for Energy Efficiency Improvements Can Greatly Increase Penetration

Public power utilities who are interested in energy efficiency should consider the experience of Ouachita Electric Cooperative. This Arkansas co-op is using the Pay As You Save® (PAYS) tariff-based financing model for energy-efficiency improvements and has seen much greater penetration than with the on-bill debt-financing model. Upon introducing PAYS, Ouachita Electric Cooperative saw a 100% increase in participation during a three-month period with renters, rather than homeowners, accounting for one-third of the new participants.

Key Details:

  • On-bill debt-financing models and tariff-based financing models incentivize residential energy-efficiency investments by eliminating up-front costs for customers
    • The utility recovers the installed cost through monthly charges on customer bills
    • Customers benefit from reduced energy needs, which is designed to enable repayment of the efficiency investments without increasing total monthly costs
    • These programs have been shown to improve home values and customer satisfaction
  • On-bill debt-financing models employ loans where the customer is assigned the repayment
    • Loans may be contingent upon customer credit qualifications and the program administrator’s debt limitations
    • These programs may not require regulatory approval
  • Tariff-based financing models (like PAYS) employ voluntary tariffs where the meter is assigned the repayment
    • This model incentivizes improvements with homeowners and renters alike through decreased monthly payments over longer periods. Customers only pay the fee while they reside in the property
    • Some member-owned utilities pursing this model have used grants or financing through the Rural Utilities Service or Energy Efficiency & Conservation Loan Program
    • These programs require regulatory approval if pursued by regulated utilities and are often voted into effect by members of cooperatives

Implications:

Energy efficiency continues to be an important and cost-effective tool for meeting our energy needs. Tariff-based financing models provide utilities with a method to both expand and increase customer participation in existing energy-efficiency programs while also reducing aggregate peak demand, lowering customer bills, and increasing the value of homes in their service areas.

More information:

Ouachita Electric Cooperative: HELP PAYS (Pay As You Save – Energy Efficiency Program)
Roanoke Electric Cooperative: Sharing Insights of Our Experience with Pay As You Save® (PAYS®)
Public Utilities Fortnightly: Investor-Owned and Public Power Can Learn From Co-ops
UtilityDive: Pay as You Save: Co-ops are reaching new customers with a novel way to pay for efficiency
ACEEE: On-Bill Financing for Energy Efficiency Improvements: A Review of Current Program Challenges, Opportunities, and Best Practices

Additional Contributing Author: Chris Becker

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