Implementing Energy Efficiency Programs in Rural America

Rural Communities, Climate, and COVID-19 Recovery
Find out more about the briefings in this series below:
June 16	Implementing Energy Efficiency Programs in Rural America
June 17	The Bioeconomy’s Role in COVID-19 Recovery and Climate Solutions
June 18	Rural Communities Rise to the Challenge of Dual Disasters

The Environmental and Energy Study Institute (EESI) held a series of one-hour online briefings about rural communities, climate change, and COVID-19 recovery. The briefings explored the challenges rural communities face, including high energy costs, a struggling agriculture industry, and low investment in resilient infrastructure, as well as the solutions rural communities have developed in the face of these multiple stressors.

In rural communities, families pay on average about 40 percent more for energy compared to their urban counterparts. This briefing explored how more than 60 electric cooperatives and public utilities across the country are using an innovative financing mechanism—on-bill financing—to fund clean energy upgrades for homes and small businesses to reduce these burdensome energy costs.

HIGHLIGHTS

 

Rob Ardis, President and CEO, Santee Electric Cooperative

• Santee Electric Cooperative is based in South Carolina. They have about 36,000 members and 45,000 accounts. Most of their members use electric heating, so Santee Electrics’s peak season is during the winter.
• Santee Electric got involved in the Help My House (HMH) program to help members who couldn’t afford major improvements to their homes. HMH enables members to finance projects for necessary home improvements, providing a convenient way to improve energy efficiency in existing homes that also saves money for the homeowner.

 

Jay Kirby, Vice President of Public Affairs, Santee Electric Cooperative

• Help My House is convenient because it uses an on-bill financing (OBF) model. OBF allows members to receive a low-cost loan, made available by a utility, to pay for their energy efficiency upgrades. This loan is then paid back by the member as a line item on their utility bill over the span of several years. OBF legislation was passed in South Carolina in 2010.
• Help My House increases the energy savings of participating households.
• Santee Electric ensures consistent quality by using trained, qualified Building Performance Institute contractors. Santee Electric conducts audits at the beginning of the program (to check for air infiltration, leaky ductwork, etc.), as well as hiring a third-party to conduct another audit after the improvements, to provide quality assurance and quality control.
• To ensure affordable financing, HMH loans have a four percent interest rate and are tied to the home’s meter, rather than the member. If the home is sold, the loan is either settled in closing or transferred to the new buyer.
  • Members are not required to put money down, and Santee Electric does not conduct credit checks.
• Through the HMH program, Santee Electric also offers improvements such as sealing and insulating the home and duct work, replacing electric furnaces with heat pumps, and repairing or replacing old heat pumps.
• The HMH pilot program was launched in 2011, with eight of twenty electric co-ops in South Carolina participating. The pilot program weatherized 125 homes and, a year after home improvements, saw on average a 30 percent decrease in energy usage.
  • Participants saved $200 per year on average from their home utility bills after loan repayments.
  • Over 90 percent of participating households reported being satisfied with the co-op and their post-retrofit electric bills, as well as being more comfortable in their home.
• To date, Santee Electric has weatherized 289 homes, with an average loan amount of $9,900 and a zero percent loan default rate.
• Santee Electric previously used its own funds and Rural Economic Development Loan and Grant (REDLG) funds, but ran out of these funds in 2018. However, they recently received a loan of $2.5 million from the Rural Energy Savings Program (RESP) to continue financing their program.
• Santee Electric restarted their Help My House program on June 15, after shutting down in March due to the COVID-19 pandemic, and currently have 47 households on their waiting list.
  • They are offering limited services at the moment, focusing on HVAC and ductwork. They have also delayed the auditing process, except for walk through audits, in order to ensure the safety of their members and employees. Santee Electric asks participants to sign COVID-19 release forms, stating whether anyone in their household has recently been sick.

 

Kate LaTour, Director of Government Relations, National Cooperative Business Association CLUSA International (NCBA-CLUSA)

• Founded in 1916, NCBA-CLUSA is the oldest and largest U.S. national association for cooperatives. They represent co-ops from all sectors of the economy.
• In the United States, co-ops provide 2 million jobs and $75 billion in annual wages. About one in three people are members of a co-op.
• Co-ops exist to meet community needs that government services are not fulfilling. They are especially beneficial to the local economies they serve, as they have a greater incentive to invest in the local community than conventional businesses.
  • Electric co-ops power 20 million homes, businesses, and schools across the United States.
  • Any money not reinvested in the co-op is returned to members.
• On average, rural Americans spend 40 percent more on energy bills than their non-rural counterparts. This disproportionately affects elderly and low-income people.
  • Rural Energy Savings Program is an example of co-ops investing in their communities, while also addressing community needs.
• Electric co-ops, like Santee Electric, manage projects from start to finish with no payments on the front end. In addition, all payments are tied to the home, rather than the individual.
  • When people are satisfied with their cooperative, they are more likely to stay in their current home and in that community.
  • When people save money on energy, they have more discretionary income to invest in themselves and/or recirculate that money into the local economy.
• The COVID-19 crisis provides an opportunity to rebuild a more stable economy. Cooperatives help build an inclusive, equitable, and sustainable economy, which, in turn, makes them more resilient during economic downturns.
  • For existing businesses that have found themselves at risk due to the crisis, a succession plan offers an opportunity for local people to pay fair market value for the business rather than letting the business be bought out by a big box store. This way, the money stays invested in the community.
  • The housing sector is one of the main ways that people generate wealth. Manufactured houses are often homes to low-income residents, who pay rent for the land on which they live. There have been increasing efforts to help residents purchase their land to form resident-owned communities.
  • Other sectors to focus on are construction, heating and cooling, child care and home care, as well as food and grocery stores.
• The COVID-19 crisis further demonstrates how co-ops have been an integral part of supporting rural communities. Co-ops provide an opportunity to close the gap between rural and urban areas.
  • With everyone working from home, access to broadband is crucial for educational purposes as well as to boost economic development and entrepreneurship. It is important for co-ops to update their services to capture this economic potential.

 

Q&A Session:

 

We spoke about how the Help My House program is adapting to COVID-19. Can you talk a little about how the virus has impacted your co-op more broadly, and how you are responding to this incredible challenge?

• Ardis: This has been a priority for Santee Electric, since a lot of our members have lost their jobs or seen a reduction in their income, making it harder for them to pay utility bills. The South Carolina governor made a request to all providers to suspend disconnects while people are sheltering at home. This has disrupted one of our programs where we allow people to prepay for electricity: they can buy $10, $20, $50 worth of electricity in advance. However, people who usually pay their bills in small increments are now seeing $100 to $1,000 balances.
  We are trying to work with these members. We’ve had to adapt. We are also keeping our crews separate from each other, and we’ve shut our lobby down so no one can come into the building. People can instead use our drive through or mobile app.

 

The Help My House program design, particularly around eligibility requirements, would seem to make energy upgrades possible for most of Santee Electric's membership. Why was that important for you, and how has broader accessibility played out in practice? What are some other steps co-ops are taking to build a more inclusive economy?

• Kirby: We’ve had programs in the past, typically rebate programs or loan programs, with higher interest rates on loans and credit checks, but we felt that we were missing a large part of our membership who were at the poverty level or below. Help My House and the Rural Energy Savings Program helped us reach those people, especially those with high usage.
• LaTour: To answer the co-op question more broadly, it’s in the nature of co-ops to increase participation. Especially for people who may not be able to afford bigger expenses, being a member of a co-op offers more accessible buy-in, where you can still have an ownership stake in the business. Looking at electric co-ops and energy issues, increasing participation is critical to building an inclusive economy. Beyond on-bill financing and the Rural Energy Savings Program, electric vehicle charging stations are a new way for rural communities and co-ops to participate in the energy economy. BARC Electric also started a community solar project that not only supports families and businesses, but also local schools. They worked on innovative financing for the schools and implemented broadband and solar energy. They’ve also implemented a STEM program in schools where students learn about energy efficiency. This shows how innovative co-ops can increase participation.

 

What is the current funding available for the Energy Efficiency and Conservation Loan Program and the Rural Energy Savings Program (RESP) at the U.S. Department of Agriculture's Rural Utility Service? What is the importance of RESP to Help My House and Santee Electric?

• LaTour: For the most recent fiscal year, the Rural Energy Savings Program (RESP) gave $12 million in loans and, to date, over $80 million have been invested in RESP programs covering 20 different rural communities in 14 states.
• Kirby: The RESP program allows us to reach more members. As I mentioned earlier, we previously had to use our own funds, which are limited, and a Rural Economic Development Loan and Grant loan. Having access to $2.5 million means that we can plan better and it gives our contractors more security knowing that we won’t run out of funds. This way we can reach out and change the quality of life for a lot more members.

 

How can electric co-ops potentially work with other types of co-ops (agriculture, finance, etc.) to pursue energy efficiency savings or renewable energy?

• LaTour: Co-ops are founded on seven principles, the sixth of which is co-ops supporting co-ops, so that is ingrained in the nature of all cooperative businesses. There has been support from electric coops and farm credit financing to support development. One essential thing to development is making sure people can afford their utilities, which is especially important in rural communities. In the renewable energy space, it's holistic. Electric co-ops are adapting to help businesses stay open, and they are dedicated to making these communities thrive. State associations are also incredibly important and serve as economic and co-op developers. In North Dakota, for example, they are using the co-op model as a way to solve food security issues with a hyper-local focus by supporting local farmers and the local economy.

 

You mentioned the average loan amount that Santee Electric provides; how long do customers have to repay a loan of that size? Is there a maximum, minimum or average?

• Kirby: Loans can range from a thousand dollars to fifteen thousand dollars. There’s a four percent interest rate, and the term to repay it is up to ten years.

 

When you’re talking about loan amounts of that range, how do you ensure customers are getting the highest savings possible? What do you tell customers about which individual energy efficiency measures they should have in their homes?

• Kirby: We look at their past energy usage, as well as doing an up-front audit. We try to pick the measures that will give them the best payback, because we don’t want to put our members in any financial hardship. For a $10,000 loan, people generally pay around $100 a month. In peak winter and summer months, the savings usually equal or exceed $100, but sometimes there are lower savings in lower-usage months.

 

Can you talk about your community solar program, and how the goals of that program pair with the Help My House program?

• Ardis: Co-ops in South Carolina decided to work together through a generation and transmission co-op to form a solar community program. Each participating co-op aims for around 250 kW of community solar somewhere in their system, and Santee's is spread across two sites. We have homeowners who have solar on their roofs or in their yards, and we have rates for people who have installed their own solar. But oftentimes, like for Help My House, people can’t afford the large upfront expenses of solar or don’t have a tax liability worth getting credit for. For those members, rather than putting the solar panels on their roofs or in their yards, we have a small solar farm that they can buy into and receive the energy their panel generates. This also allows us to put the solar farm near the middle of the system grid. This saves money, compared to other programs where the solar panels are far from the existing bulk power system.
• Kirby: We sell solar in 1 kW blocks and it costs $50 upfront. Members pay an additional $14 per month, and the owner gets $0.10 back per month for every kW that the block generates.

 

We've talked a lot about the impact of COVID-19, and there are increasing conversations about what a post-COVID economic stimulus would look like. Does NCBA-CLUSA have any stimulus priorities that would help these programs?

• LaTour: The USDA has an extensive history with co-ops and provides critical support by ensuring that other agencies are helping co-ops. It serves as an important lifeline for the entire business model. We are supporting the asks of our members, such as simplified forgiveness in the Paycheck Protection Program. In any future programs, agencies should make sure that co-ops are eligible for programs. We can also help preserve businesses through employee and consumer buyouts, and help similar types of businesses form purchasing cooperatives to reduce overhead. We can use the current situation as an opportunity to reshape how we view and value ownership in terms of data, homes, and businesses. We can look to increase the average person’s ownership in society and strengthen that foundation through greater economic security.

 

What advice would you give to another co-op looking to take on an on-bill financing program?

• Kirby: I would highly recommend that they look into Rural Energy Saving Program (RESP). I have seen a lot of other cooperatives that only offer heating improvements for homes, but do not focus on ductwork, for example. If you don’t look at the house as a whole system, then you will miss out on ways to save energy more efficiently. Whether you use the Pay As You Save (PAYS) Program or the Help My House model, RESP has lots of loans that are incredibly helpful.
• Rob Ardis, Santee Electric Cooperative’s President and CEO, and Jay Kirby, Vice President of Public Affairs, discussed the co-op’s Help My House on-bill financing program in South Carolina. Kate LaTour, Director of Government Relations for the National Cooperative Business Association CLUSA International (NCBA-CLUSA), then described the value of including on-bill financing in any upcoming economic stimulus package to encourage cost-effective energy efficiency and renewable energy projects that will deliver immediate and long-term, self-sustaining benefits.

 

Highlights compiled by Maia Crook and Grace Linhares