Seattle City Light ↴
Seattle City Light is a municipal electric utility that serves more than 350,000 customers. In 2011, Seattle City Light partnered with the City’s Office of Sustainability and the Environment and Craft3, a non-profit community development finance institution (CDFI), to create an on-bill financing program for residential energy efficiency improvements. By making repayment convenient and lowering up-front costs through low-cost financing, the project aims to increase energy retrofit upgrades for low-income households.
In the program, Seattle City Light acts as a pass-through entity, and directs interested applicants to Craft3, which provides and services the actual loans. Once Craft3 approves the loan and the work is completed, loan payments are added to the customer’s Seattle City Light monthly utility bill as an itemized line item.
Loans provided by Craft3 are available for up to $30,000 at interest rates of either 3.49% (for lower income households) or 4.49% APR. The loan terms are up to 20 years, with no other additional fees or pre-payment penalties. The loan is attached to the meter and can be transferred to the next occupant when the house is sold, or bought-out at closing.
Loans are made for energy efficiency projects in single-family homes and small multifamily units, with allowances for low-income households and long-term renters. Eligible upgrades include heat pumps, attic and floor insulation, air sealing and other weatherization measures. Seattle City Light also provides rebates of $1,200 for heat pumps, $250 for water heaters, and $250 for weatherization measures.
Since 2011, the program has financed 376 on-bill loans totaling approximately $5 million. Project participants have seen an average of 25% electricity savings. Electrically-heated homes generate 56% of total electricity savings to-date and represent 44% of the borrowers. Also, 30% of Craft3’s loans qualified for the 3.49% subsidized interest rate.
For the loan underwriting, Craft3 uses a hybrid method that factors in the applicant's bill payment history and a credit check. Customers with credit scores as low as 590 may be eligible to participate if the applicant has a good bill payment history. In case of non-payment, Seattle City Light has authority to proceed with utility disconnection, and Craft3 has the power to pursue legal action to obtain any funds that are not paid. With these measures in place, there have been no defaults to date.
The Craft3 loan program is part of the city's broader Community Power Works (CPW) energy efficiency program, which includes efficiency rebates and free weatherization grants for low-income households. The City of Seattle and Seattle City Light received a $20 million grant from the DOE Better Building Neighborhood program, which provided the seed money for CPW. The CPW program, which embeds the Craft3 loan product as part of its portfolio, serves as the overall program administrator, and manages contractors and quality assurance.
City of Tallahassee Utilities ↴
Program name: City of Tallahassee Energy Efficiency Loan Program
The City of Tallahassee Utilities (Florida) has been running a successful on-bill financing program since 1983. The program has enabled the utility’s customers to perform energy efficiency retrofits and other energy projects to their homes with no up-front costs. Over the program’s lifetime, it has loaned $130 million for 17,000 retrofits, averaging 550 retrofits and $4 million in loans each year. This translates into an 18 percent participation rate among 97,000 utility customers.
The utility raised several million dollars in capital for the program before and after its launch through the utility’s ratemaking process. When setting the rates for the following year, the utility would set rates higher than its forecasted need, creating an overage. These overage funds were used to capitalize the on-bill loan fund.
Customers may borrow up to $10,000 ($20,000 if solar PV or cool roofs are included) at a 5 percent interest rate plus 1 percent processing fee, which help build the revolving loan funds. The loans are then repaid through the monthly utility bill as a differentiated line item over 5 years (10 years if solar PV or cool roofs are included). The utility’s loan is secured with a property lien recorded at the County Courthouse, and the loan must be paid in full if the house is sold – the debt is not transferable. The default rate for the on-bill program has been very low, at about 1 percent.
Eligible upgrades include HVAC replacement, appliances, clothes washers, weatherization measures, pool pumps, room ACs, water source heat pumps, and electric vehicle home charging stations. Free home energy audits are available, but not required for participation.
Tallahassee’s on-bill loan program has no income eligibility requirements or traditional credit checks. Instead, residential participants must have one year of good bill payment history. A customer’s eligibility to participate in the loan program is determined in part by the “utility credit rating” for that customer’s utility account. A perfect Tallahassee Utility credit rating is 1,000 points, and most customers have that score. Points are deducted for late payments, returned checks, unfulfilled payment plans, and cut-offs for nonpayment. Points can be earned back with each on-time monthly payment. Late payments cost 200 points per incident, which requires 24 months of on-time payment to completely earn back. Generally, a score of 800 is required for loan eligibility; if the customer’s payments are made via Bank Draft, a score of at least 499 is required. Loans are denied for any applicant that has declared bankruptcy or faced foreclosure within the past seven years.
For rental properties, retrofits can be financed through loan payments on the meter of the property owner’s primary residence. Participation among manufactured housing communities has been low, likely due to the home ownership requirement.
A key to the program’s success is the participation of trained contractors and installers, as there is minimal direct program marketing from the utility. When a customer calls a contractor to replace a broken HVAC system, for instance, the contractor informs the customer about the on-bill financing program. If the customer decides to participate, the contractor has them sign the promissory note, detailing the interest rate and terms. The utility then pays the contractors once the energy efficiency retrofits have been installed at the customer’s property and the final inspections have been passed.
Eugene Water and Electric Board ↴
Program name: EWEB Energy Efficiency Loan Program
The Eugene Water and Electric Board (EWEB), the electrical municipal utility of Eugene, Oregon, has operated an on-bill financing program since 1995. The Energy Efficiency Loan Program (EELP) covers energy efficiency improvements, water conservation, water line failures and septic tanks failures. The program offers a wide array of zero-interest energy efficiency loans for residents, renters, multi-family housing, and small businesses. The loans are then repaid as part of the recipient’s utility bill.
The EELP is part of the City of Eugene efforts to drastically reduce CO2 emissions by 2050. In 2010, Eugene’s city council approved a Community Climate and Energy Action Plan. The Plan mandates the city to reduce community-wide greenhouse gas emissions 75% below 1990 levels by 2050, to reduce community-wide fossil fuel use 50% by 2030, and to identify strategies that will help the community adapt to a changing climate and increasing fossil fuel prices. While 90% of EWEB’s electricity generation is hydropower, climate change is expected to reduce summer hydroelectric power generation capacity (due to lower snow pack levels and lower stream flows in the summer). At the same time, increases in average summer temperatures will produce greater energy demand. By reducing energy consumption in existing buildings, the city and EWEB are preparing themselves for this more challenging environment.
Through the EELP’s residential program, EWEB offers five distinct 0% interest energy efficiency loan packages: water heater, pool water heater, weatherization, heat pump & duct sealing (ductless heat pumps are also eligible), and new high-performance window installation. Each loan package has a $4,000 maximum loan amount, which must be repaid in 5 years. A participating customer can combine multiple loan packages, for a maximum possible loan of $20,000. The loans are a supplemental offering to energy efficiency rebates that have been available from EWEB since the early 1980s. Successful loan applicants are also eligible for a $600 cash discount for domestic water heaters and $0.40 per square foot rebate for insulation.
The original source of capital for the program was a $200,000 seed allocation from utility revenues, with additional capital from conservation bond refinancing. Today, EWEB’s loan pool is a “fixed” revolving fund that recycles as participants pay the loan principal. Additionally, EWEB uses its own utility loan borrowing authority to borrow capital for the program. The interest on the utility loans is always lower than the interest applied to the commercial EELP, which currently is at 4%. The initial allocation and the interest on the commercial loans allows for EWEB to keep the residential EELP rate at 0%.
Since 1995, EWEB has financed approximately $50 million across all of its loan programs and has typically made between 500-1,000 loans per year. In 2014 alone, 1,000 residential loans were approved. The EELP also financed 15-20 small commercial loans, all of which are larger than the residential loans.
Eligibility for the residential and commercial programs is based on ownership. The owner of the property needs to be the point of contact for EWEB and must assume the loan through the utility meter once work is completed. Eligible properties are detached single family dwellings, duplexes, triplexes, and quads. For multi-family rental properties of four units or more, EWEB provides a $4,000 loan for the first rental unit, and $500 per additional unit for a cap of $20,000.
For the loan underwriting, EWEB uses a hybrid method that factors in both credit score and bill payment history for the prior 12 months. There is no minimum credit score to qualify, but rather a range of scores depending on the customer’s bill payment history. EWEB retains the authority to shut-off service for non-payment of the on-bill loans, according to municipal code. The power of disconnection provides incentives for participants to continue repaying the loans, and thus, the utility feels there is no need for a loan-loss reserve fund. Additionally, loans are secured through a property lien, filed through Lane County offices. The threat of disconnection coupled with the loans repaid through the meter has kept the delinquency rate under 1%.
EWEB reports that engagement with the contractors and their customers has been crucial in high participant participation and satisfaction rates, which has led to good word of mouth. EWEB has a contractor administrator who serves as the participating contractors’ point-of-contact and approves interested contractors to be part of the list that EWEB provides to EELP loan recipients. EWEB does not recommend or endorse contractors EELP participants as a way to maintain barriers between contractors, customers, and the utility.
Please click on each public utility for information about their respective on-bill financing programs:
(Please check back for additional case studies)