Equitable Solutions to Rural Energy Burdens

Since 2010, EESI has been providing direct technical assistance to rural electric cooperatives and other utilities. EESI's Access Clean Energy Savings program provides no-cost help to rural electric cooperatives and public power utilities seeking to apply for RESP funds to launch renewable energy and energy efficiency initiatives. Please contact us at eesi@eesi.org if you'd like any additional information about the Rural Energy Savings Program, our partnership with NCBA CLUSA, our toolkits, or direct assistance in setting up clean energy programs. Access Clean Energy Savings brochure Video overview – Help My House in South Carolina Interactive Map of Utilities with On-Bill Financing Programs Report: Equitable Beneficial Electrification for Rural Electric Cooperatives

The Environmental and Energy Study Institute (EESI), the National Cooperative Business Association CLUSA International (NCBA CLUSA), and the National Rural Electric Cooperative Association (NRECA) held a briefing about innovative utility programs that are working to alleviate energy burdens faced by U.S. rural households. The briefing showcased how rural electric co-ops and other rural utilities can benefit from USDA funding opportunities, such as the Rural Energy Savings Program (RESP) that was renewed in the latest Farm Bill. This program enables co-op members to upgrade their homes and businesses to cut their energy costs, which, in turn, supports jobs and rural economic growth by keeping more dollars in the local economy.

HIGHLIGHTS

 

Doug O’Brien, President and CEO, National Cooperative Business Association CLUSA International (NCBA CLUSA)

• The National Cooperative Business Association CLUSA International (NCBA CLUSA) has promoted and advocated for a cooperative business model for more than 100 years.
• NCBA CLUSA is working with EESI on the Partnership for Advancing an Inclusive Rural Energy Economy (PAIREE). The goal is to put more money in the pockets of rural families and promote rural development.
• Mr. O'Brien thanked House Majority Whip James Clyburn (D-SC), who sponsored the briefing, for being one of the strongest advocates for rural constituents, especially low-income ones.

 

Rep. James Clyburn (D-SC), House Majority Whip

• Affordability and accessibility for all citizens is an important theme for any issue, including energy. Accessible and affordable electricity and broadband are high priorities in an age of developing technology.
• Rep. Clyburn has heard moving personal stories about how people are struggling to pay their energy bills in his constituency. The main problem is that many rural families face higher costs because they lack proper insulation, which they have to compensate for with excess heating and cooling.
• Round-Up programs in South Carolina utilities have rounded up energy bills to the nearest dollar. The additional funds can be pooled and then invested back into rural community projects. This inspired Rep. Clyburn to introduce the Rural Energy Savings Program Act in order to create a pool of funds at the federal level to be invested into rural communities. He first introduced the bill in 2010, and the Rural Energy Savings Program became a reality six years later.
• Broadband internet is needed to support education and healthcare in rural communities. Co-ops have brought broadband to communities before and can do it again for rural communities.

 

Rep. G.K. Butterfield (D-NC)

• Eastern Carolina has many rural counties that deserve attention on energy issues. Rep. Butterfield represents 14 counties and Roanoke is an integral part of his district.
• The National Rural Electric Cooperative Association (NRECA) is key in bringing energy to rural communities, but also broadband which is critical to low-income rural residents.

 

Rep. Sanford Bishop (D-GA)

• Rep. Bishop has a passion for rural communities; 26 out of the 29 counties he represents are rural.
• No child or family should be left behind or be prevented from actualizing themselves and no business should be unfairly treated by a policy because of their zip code or location.
• As chair of the House Appropriations Subcommittee on Agriculture and Rural Development, Rep. Bishop plans to do his best to make sure rural communities can get the resources they need on matters of energy. He strongly supports the Rural Energy Savings Program (RESP).

 

Curtis Wynn, CEO, Roanoke Electric Cooperative (NC); President, National Rural Electric Cooperative Association (NRECA)

• There are three key themes and changes that deserve attention within energy cooperatives:
  1. Policy has been playing catch-up to market forces
  2. The importance of efficiency and sustainability
  3. Grid modernization and flexibility
• The Roanoke Electric Cooperative was not growing as a utility cooperative and needed to learn how to adapt and survive, which was done by:
  1. evolving Roanoke’s business model to focus on efficiency and sustainability,
  2. bringing smart devices into consumer homes, and
  3. distributing energy resources all across the service area.
• Power cost is the biggest, yet most controllable expense at Roanoke Electric, meaning there is great potential for energy efficiency.
• Energy efficiency results in less electricity being sold, which wouldn't seem to be appealing to utilities; however, electricity Roanoke doesn’t sell is made up for three times over by electricity it doesn’t have to buy [most cooperatives don't own enough generation to cover peak demand, and so have to pay for additional electricity on the open market. Such peak electricity can be very expensive, and is usually sold at a loss to co-op members]. The result is more savings that can be used to launch more projects for energy efficiency, resulting in even more savings.
• Unfortunately, rural—especially low-income—citizens have difficulty investing in energy efficiency. Therefore, Roanoke Electric has brought in partners to help get enough funds to make the initial investments affordable. They are combining multiple projects, such Smart Energy Savings Devices and Roanoke Connect Broadband, to further lower costs.
• Roanoke Electric has been incorporating “smart systems” into homes to make the most efficient use of energy. This supports low-income citizens by reducing their costs, but also lowers the overall costs that the cooperative has to incur, creating a successful business model.

 

 

Mary Shoemaker, Senior Research Analyst, American Council for an Energy-Efficient Economy (ACEEE)

ACEEE Fact Sheets on Rural Energy Burdens and Energy Efficiency Alleviating Rural Energy Burdens with EE Reducing Up-Front Costs for Rural EE Transforming the Rural Energy Economy through EE and Distributed Energy Resources Supporting Rural Electric Co-op Members with Energy Efficiency

• Although it is not a silver bullet for the issues that rural communities face, energy efficiency is an important tool for improving rural prosperity.
• ACEEE’s rural energy initiative focuses heavily on equity in energy efficiency programs.
• A household’s energy burden is the percentage of annual household income spent on energy costs. Contributing factors to high burdens can be physical, such as the quality of the home, or social, like economic status.
• The average rural household has an energy burden of 4.4 percent, compared to a 3.1 percent average for metropolitan households. Rural families therefore spend about 40 percent more on energy than urban ones. Low-income rural households face a staggering 9 percent energy burden, and other demographics such as the elderly, renters, nonwhite, and multifamily households also pay above the rural average.
• Energy efficiency solutions can reduce the energy burden of rural households by 25 percent, up to $400 a year. They also provide other positive side effects such as job creation and public health improvements.
• Energy efficiency initiatives are important because simply lowering electricity rates does not result in affordable bills. “Cheap” options do not necessarily equate to affordable ones for rural families.
• There are still significant barriers for families to implementing energy efficiency efforts. That’s why utilities, state energy offices, and nonprofit programs can help members:
  • identify energy savings opportunities,
  • leverage funding to lower home improvement costs, and·
  • access technical resources to make home upgrades.
• The U.S. Departments of Agriculture and Energy each have programs to help fund upfront investments. These programs include but are not limited to:
  • Rural Energy Savings Program (RESP)
  • Rural Energy for America Program (REAP)
  • Energy Efficiency and Conservation Loan Program (EECLP)
  • Weatherization Assistance Program (WAP)
  • State Energy Program (SEP)
  • Industrial Assessment Centers (IACs)
• Federal resources can be partnered with private funding sources to conduct more energy efficient improvements.
• ACEEE will have a Rural Energy Conference on February 25, 2020, in Chicago, Illinois, to further discuss how clean energy initiatives can increase rural prosperity.

 

Chris McLean, Assistant Administrator, USDA Rural Utilities Service

• When dealing with utilities in rural America, costs for nearly everything are higher; therefore, there is a strong need to find savings.
• The Rural Energy Savings Program (RESP) reuses the value of energy savings to increase investments in the quality of life of a rural household.
• RESP is structured so that the Rural Utilities Service (RUS) gives a loan to an eligible borrower at 0 percent interest for up to 20 years. The borrowing utility can then create energy efficiency programs for consumers. Consumers pay the utilities back at an interest rate that cannot exceed 5 percent, and for a loan period that cannot exceed ten years. The eligible borrowing utility then pays back the loan to RUS.
• RESP allows for investments in the home that average $7,000, which is an incredibly high cost for most rural households to pay upfront. The loan program circumvents those high costs through its transfer system.
• RESP still has over $100 million available now for the rest of this fiscal year.
• There have been 14 large-scale loans made so far across the country in rural areas, for a total of $52 million.
• RESP is one of the youngest programs managed by RUS. Furthermore, it is a huge decision by utilities from a business perspective to decide to sell less energy while also taking out a loan. However, success stories from RESP recipients and cooperatives are helping to stimulate further interest in these programs.

 

Chad Lowder, the CEO of Tri-County Electric Cooperative, explains how rural electric cooperatives, such as his, are helping their members save energy, money, and the environment.

Chad Lowder, CEO, Tri-County Electric Cooperative (SC)

• Everyone in a cooperative pays the same utility rates; however, low-income citizens are using 2 or 3 times more energy due to insufficient insulation in their homes.
• There are many stories in rural communities of people struggling to pay utilities, including one of a single mother who called the cooperative crying because she couldn’t pay her power bill. When a co-op representative came to her house, they learned that she had been heating her house with the stove ever since her heating failed ten years ago (she could not afford to fix it).
• In 2010 the Tri-County Electric Cooperative, along with several other South Carolina electric cooperatives, created the Help My House program, which installed energy improvements in homes to save members money even after paying back the loans [EESI has been actively involved in the Help My House program]. The program will be relaunched at the end of summer 2019, with additional loan capital and other features.
• This program creates victories on multiple fronts:
  • the co-op member gets an upgrade to their home,
  • all members see a decrease in cost due to lower electricity usage during peak times, and
  • less energy production is environmentally positive.
• The only other issue that carries equal or greater weight is broadband accessibility. Whereas rural communities in the 20th century struggled to increase the accessibility of electric lighting, the current struggle in the 21st century is over the internet.

 

Mark Cayce, General Manager, Ouachita Electric Cooperative (AR)

• The Ouachita Electric Cooperative lost their largest industrial customer, which purchased 12 percent of their total energy production, a few years ago, resulting in the co-op’s need to change its business model.
• The co-op has suffered from a loss of jobs and decrease in population in the community over the past 20 years.
• The co-op readdressed their focus to basic efficiency and loans. They then decided to switch from a loan program (HELP) to a tariffed on-bill program (HELP PAYS) because many members were not eligible for loans. The tariff-based program eliminated the need for a credit check and based eligibility on membership in the co-op, making it much more accessible.
• HELP PAYS now provides an average of about $7,500 in upgrades to each participating household.
• Lowering power bills has resulted in money saved for rural households, while also providing additional savings to the utility on average of 15 percent. This surplus has allowed the co-op to invest in additional projects such as solar panels.
• In the short period of time that the co-op has had this program, it has been able to contact and assist over 10 percent of its total membership and complete more than 550 residential projects with no defaults (under the tariff model).

 

Q&A

 

Repower REC has tried to get their co-op to a tariff-based program and has found resistance because it would raise rates. This is a common rebuttal among co-ops, so how would you respond and how can we persuade them to pursue these projects?

The Roanoke Electric Cooperative has also had difficulties delivering the business case when talking to other co-ops; however, they have been working with private lending institutions such as the CSC to put in more comprehensive programs from a trusted organization. Two arguments in favor of tariffs is their positive financial impact and the potential investments they make possible.

 

Co-ops have shown how they help people on the micro-level, i.e. individual families. What is the overall policy and mission across the country on a more macro-level?

Co-ops are owned and controlled by members who use the business. Because of that dynamic, co-ops serve their members in a unique manner. From a policy perspective, that independence and autonomy are important principles. One important component of policy is elevating current models to put them on the radar of other co-ops; the USDA RESP program, for example, is incredibly valuable and needs to be promoted. State energy offices have also been thinking about how to serve rural communities, so there is another front from which these policies can be developed.

 

What are the default rates for these programs?

The tariff model in Ouachita has resulted in zero defaults. Even when people move out and others move into the homes, the tariff program is location-based, so it is not affected by moving.

 

There was a recent study out of Chicago which showed wealthier communities are actually subsidized by poorer communities because of their use of electricity at peak hours. Do these programs include any solutions for this issue?

If energy provision could be reduced at certain times of the day, it would certainly lower the wholesale power cost. However, currently, most utility rates are the same across the day. Hourly-type demand isn’t implemented right now, but that is changing. The rates communities are paying now were designed in 1940 when electricity was cheaper, but in the future utilities will switch towards time-based rates. Co-ops can educate their communities on when not to use their energy, and technology is a launching pad for this type of saving by being able to detect when less energy should be used. Co-ops will be able to see adjusted hourly rates on a monthly basis.

 

Rural residents face higher energy burdens than their metropolitan counterparts. Energy efficiency is a key strategy for alleviating these energy burdens. But utilities serving rural communities often face challenges funding and/or delivering these services for their members, and the upfront costs of energy upgrades are often unaffordable for their rural customers. RESP can help fill this funding gap for rural utilities by providing no-interest loans to fund cost-effective projects, which can be repaid by customers on their utility bills over time. Such projects include efficiency retrofits, on- and off-grid renewables, energy storage, and beneficial electrification. These programs are part of a broader effort by many co-ops and other rural utilities to play a greater role in rural economic development by providing their member-customers with a wider range of services, delivered equitably to members at all income levels.

EESI would like to thank The JPB Foundation, the New York Community Trust, the McKnight Foundation, and the Merck Family Fund for helping to make this briefing possible.