This commentary was originally posted on the EDF California Dream 2.0 Blog.

Next week, the California investor-owned utilities – Sempra, Southern California Edison and Pacific Gas & Electric – will be hosting a workshop to announce their proposals for energy efficiency financing programs as mandated by the California Public Utilities Commission (“CPUC”) in their May decision. The proposals are being developed by Harcourt, Brown and Carey (“HBC”) and are expected to include an On-Bill Repayment (OBR) program for commercial and other non-residential properties.

As I’ve mentioned before, OBR programs allow property owners to finance energy efficiency and/or renewable energy projects with third-party banks or other investors. Property owners repay their loan via their utility bill and that obligation stays linked to the meter upon a sale of the property.

Based on conversations with HBC and other stakeholders, EDF is optimistic that the program will be the first on-bill program in the country that funds energy efficiency retrofit projects entirely with private capital at no cost to ratepayers or taxpayers. The program will be flexible enough to accommodate a wide variety of property types, retrofit measures, financing structures and customer acquisition models.

The workshop will be open to the public and held from 9:00am-5:00pm on Tuesday, October 2^nd in the Auditorium at the California Public Utilities Commission (505 Van Ness Avenue, San Francisco, CA).

By: Jessica Feingold, EDF Financial Policy Fellow

EDF believes that On-Bill Repayment (OBR) can do for efficiency what the third-party finance model has done for solar.

A recent post on efficiency.org, entitled ‘Solar is for the wealthy? Not anymore!’ highlights the growth of residential solar projects in middle-income markets (areas with median incomes of $50k-$100k) at the same time that financing became widely available from the private sector.  While wealthier people have always been more likely to be able to afford the upfront costs of a solar installation, the introduction of solar leases and Power Purchase Agreements (PPAs) has extended the opportunity to a much wider range of consumers.  This increase was described in detail in the 2012 California Solar Initiative Assessment.  The success of solar among middle income households – achieved by eliminating upfront costs and allowing for monthly repayment through a solar lease or PPA structure – lends support to the notion that low-cost financing will be critical to making similar advancements in energy efficiency.

EDF has been working to create an OBR program in California that would provide financing for energy efficiency and renewable energy upgrades.  OBR uses private capital to finance these clean energy upgrades at no upfront cost to consumers.   However, OBR differs from the existing clean energy financing models in that it allows for repayment of a clean energy investment on the customer’s monthly utility bill.  This reduces the administrative burden of an additional bill, while at the same time strengthening the credit of the loan by leveraging historically strong utility payment history. Thus, OBR would provide low-cost capital to consumers for clean energy upgrades.

Middle-income earners, in particular, stand to benefit from OBR, since they otherwise do not have access to low-cost, unsecured financing.  Middle-income households are highly price-sensitive and likely do not have sufficient savings or home equity available to make clean energy investments that would reduce their utility bills, resource use and reliance on grid power.  That is precisely why private sector financing was critical to promoting solar among middle-income households.  Energy efficiency projects, on the other hand, have not yet attracted the low-cost private capital needed to achieve such widespread success.

OBR is an innovative financing solution that would allow middle-income households to realize the long-term benefits of energy efficiency, and provide more affordable financing for renewable energy projects as well.