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On-Bill Repayment Approved by California Public Utilities Commission

Last week the California Public Utilities Commission (CPUC) approved energy efficiency programs and budgets that include an innovative On-Bill Repayment (OBR) program.  The OBR program will allow commercial property owners to finance energy efficiency or renewable generation upgrades for their buildings and repay the obligation through the utility bill.  The program is ‘open-source’ and is designed to allow a wide variety of contractors, solar installers, and energy efficiency project developers to work with a range of financial institutions to design offerings that best meet the needs of their customers.

The CPUC approval was highlighted today in the New York Times.

In the decision, the CPUC reiterated their intention to have the OBR program operational by March 2013.  We understand that some of the utilities have expressed concern that this timeline is aggressive, but were pleased that the CPUC decision noted that the utilities have been aware of this timeline since the original CPUC decision last May. 

A predictable timeline for OBR implementation is critical as EDF is working closely with multiple market participants to create a pipeline of projects that can be executed as soon as the program is operational.  A successful launch will allow us to demonstrate to other states that OBR can create private investment and new jobs at no cost to ratepayers or taxpayers.  We believe that this is a message that will resonate across the political spectrum.

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On-Bill Repayment In California

Moving Forward with OBR for Commercial Properties

Earlier this year, the California Public Utilities Commission (“CPUC”) issued a decision requiring the state’s investor-owned utilities to establish several financing programs, including an On-Bill Repayment (“OBR”) program for commercial properties. 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.

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. 

EDF has also begun work to establish OBR programs in Ohio, North Carolina and Texas.  So far, the reception has been quite positive in each state and we are hopeful that OBR may be a market-based, clean energy solution that has appeal across the political spectrum.

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A Dynamic Approach To California Energy Use

Californians are poised for a more functional, data-driven model for setting the prices people pay for electricity. The new model will make the massive differences in costs of providing electricity during the course of a typical day more evident to us as energy users, thereby inspiring more efficient use of electricity resources.

The California Public Utilities Commission (CPUC) started a rulemaking to examine if the current rate structure for residential energy users is fair and equitable across customer classes and if it:

  • supports statewide-energy goals;
  • facilitating technologies that enable customers to better manage their usage and bills;
  • enables conservation and efficiency on the customer side of the meter; and
  • increases the reliance on non-fossil based generation to reduce overall greenhouse gas emissions.

We know already that the short answer is “no”, so CPUC is eyeing a transition to time variant (“dynamic”) rates. According to Pacific Gas & Electric (PG&E), with time variant, or what is often referred to as “time-of-use”, pricing – rates “will be higher during summer weekday afternoons when electric demand is higher, typically noon to 6 p.m., May through October. In return you’ll pay lower rates at all other times. This means that when you use energy is just as important as how much you use.”

EDF’s Energy team has been, and will continue to be, closely involved in the CPUC’s rulemaking, which will examine several facets of the current system. EDF has also been involved in the related smart grid proceedings, such as the deployment of smart grid infrastructure – which provides the ability to both measure energy use in real time and inform customers about the costs (and environmental impacts) of their choices to use electricity at different times of the day. This Advanced Metering Infrastructure (AMI) enables a smoother transition to dynamic rates for residential consumers.

EDF is very encouraged that the CPUC is considering time variant pricing because it will help consumers to be more thoughtful about their energy usage, particularly at times when demand is peaking and pushing electricity supply sources to their limits. This type of rate structure can encourage conservation and reduce peak demand while providing customers with more choices that can ultimately lower their monthly bills. For example, allowing consumers to see how much they can save on their electric bills by reducing their energy use during peak hours will encourage a shift of energy-intensive activities, such as washing and drying clothing and dishes, to off-peak (and less expensive) times of the day.

Because a dynamic pricing system will alleviate pressure on the electric grid during peak demand, it will also lead to a more stable, less expensive energy system that is increasingly resilient to extreme weather events. The economic motivation should also help to create an easy way for consumers to make decisions more efficiently, thereby lowering their electric bills and shrinking their environmental footprints.

Futhermore, dynamic pricing can help integrate renewables and electric vehicles into the electric grid by allowing utilities to respond to price signals more effectively. For example, time-of-use rates support electric vehicle charging at times when grid resources aren’t strained, such as late at night or early in the morning when most people are sleeping.

This new approach will facilitate conservation and energy efficiency, as well as an increase in the use of clean energy sources that avoid harmful greenhouse gas and urban air pollution. If adopted, the dynamic pricing model can be a common sense approach to saving energy and money, while promoting energy efficiency and a smarter, “greener,” electric grid country-wide.

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