The California Public Utilities Commissions (CPUC) is working with the Environmental Defense Fund (EDF) to create a program with some similarities to solar power purchase agreements and PACE programs, enabling commercial and residential owners to pay for energy upgrades with the cost savings that those upgrades produce. Called On Bill Repayment, the proposed program differs from PACE financing in that loans would be tied to meters. So a building owner or tenant could leave a building and the loan would transfer to the new owner/tenant. Despite a financing fee, the total cost would be below current utility bill levels, and cost savings would grow as energy costs increase over time.
The main thrust of the program is to the residential market, where a monthly utility bill of $350 could be cut to $295, including payments on a 15-year, $20,000 investment loan at 6.25 percent interest, but I recently sat on a panel that discussed how the program might work at commercial properties.
While most panelists on most panels—finance companies, ESCOs, energy product vendors—were very positive about the program, I was more cautiously optimistic. The program is up for approval, and details such as the financing rate have not been settled. Tying to a meter rather than a property may allow this product to work for some tenants and owners, but it’s not a solution that would work easily for everyone.
For example, other panels discussed lighting upgrades as having easily calculated returns and 18-month payback, whereas I observed that many owners will self-fund projects like those. Where upgrades would require payback of two years or more, the financing rate and length of term could make or break deals. There was also a very healthy debate about how this could work for clients with leases, and Tom Poser was extremely helpful in providing me with the understanding to field those questions.
Greater details are in this PDF