Managers from utilities Xcel and Centerpoint showed a more positive, forward-moving attitude toward inclusive financing at the May 30th Minneapolis Clean Energy Partnership Board meeting than they had in previous meetings.
The major step the Partnership board took was agreeing on a definition of inclusive financing:
"Inclusive financing allows direct investment in resources efficiency upgrades on the customer side of the meter through an on-bill approach regardless of customers income, credit score, or renter/ owner status. Under this definition, debt is not accrued by the customer."
This is a big step in bringing city and utility leadership on the same page about existing barriers and possible solutions. The Clean Energy Partnership has already formally identified Inclusive Financing as one of its next major priorities in order to make renewable energy and energy efficiency more accessible and equitable.
- In the coming 6 months, a "feasibility and market study" will be completed looking at Inclusive Financing potential in Minnesota. The funding was made possible by the utility franchise fee increase adopted in late 2017. Partners of the study include: 3 Minnesota cities, and subject matter experts like UMN Energy Transition Lab.
CENTERPOINT ENERGY'S ON-BILL LOAN PROGRAM
- CenterPoint Energy is on track to implement its first ever On-Bill Loan repayment program for energy efficiency improvements, with a "soft launch" in late 2018 and an full launch by early 2019. Center for Energy and Envirionment has been chosen to be the administrator of CenterPoint’s upcoming on-bill-loan repayment program. This program allows for multiple sources of money to be used for a list of eligible efficiency improvements. Because it is a loan-based program, CEE has issued some lending criteria.
- CenterPoint representatives on the Clean Energy Partnership acknowledge and understand that their On-Bill Loan Repayment program, though very useful in increasing customers' ease of use of loan systems, is not Inclusive Financing by definition because the loan and credit aspects remain.
Detailed, partial notes on the meeting...
THE ARKANSAS PAYS PROGRAM
Mark Cayce, an administrator of a successful and active PAYS program spoke to the Clean Energy Partnership board remotely and here are the takeaways of what he shared:
The Quachita electric Cooperative has used PAYS since April 2015. They applied for the tariff at the Arkansas PUC, who in turn regulates the program. It is not only great savings for consumers who directly participate. It is also great savings for the utility because their rates are connected to peak demand. In Arkansas, there is a need a lot for high efficiency cooling and it helps keep rates low. Lower peak demand means lower bills for customers because they buy power from another supplier.
In this way, energy efficiency is part of their basic service, as people have the ability to participate without having to do a credit check. Every member of the Co-Op is eligible. 80% of saving is used to recover the investment and 20% stays with the customer. In fact, they require 20% of savings to go to the customer.
No landlord has ever turned it down. If someone moves out of the house they did PAYS on, then they notify next occupant that this unit is under and energy efficiency tariff. If a home is unoccupied, payments are suspended until someone is living there again.
There are zero customers who have not paid back the tariff which is remarkable.
Schools have used PAYS to get LED lighting with pays of very quickly in energy saving. In addition, a tariff is something that does not have to go through the budgeting process so that makes it easy for schools and other institutions to play in. Schools and colleges have a hard time getting approval for energy efficiency projects in the conventional budget way.
That being said, some problems with buildings such as severe roof damage are beyond the scope of PAYS and some improvements need to be made before energy.
COST OF CAPITAL
There was a discussion about whether tariff-based Inclusive Financing could be a regulated asset that utilities incorporate into their rate base in the same way that they make any other capital investment. If that is the case, then utilities are allowed to recover those costs of the tariff with the same rate of return as any other capital investment. Because the state essentially guarantees utilities about a 10% rate of return, a TBIF program would have the equivalent of a 10% (interest) rate if the utility is the one investing capital into it. Contrast this 10% figure to the Quachita PAYS program that gets a 4.5% cost of capital.
CM Fletcher said he was surprised by the 10% cost of money loans and that it is the type of investment that should be lower risk.
CM Gordon advised not to get hung up on where the capital is since “We are in a partnership that has access to cheaper capital.” Likely noting that government entities can dedicate the capital where you can get it at a lower rate.
Adam Pyles of Centerpoint brought up that the cost of capital is important for making the program work for low income. The more interest rates go up, the most cost effective the building improvements have to be in order for the PAYS project to pencil.
CM Fletcher asked if there could be any profit-taking by landlords by using on-bill-repayments as a justification to increase rent.
OPEN DISCUSSION ON THE STATUS OF THE PARTNERSHIP
CM Schroeder stated concern if feels like a one-sided partnership where the City is putting down all the money toward it and that that there is no clarity on if CEP and XCEL are offering any new money toward partnership activities. CM Schroeder clarified that taking care of the City's most vulnerable people is the priority from the City's point of view.
Utility board members and staff offered statements that it is not a one-sided partnership, but rather they just do not have the hard numbers yet. Bridget Dockter of Xcel replied that she does not yet have the dollar figures associated with some big-ticket items. She mentioned Xcel's EV pilot and City of Minneapolis vehicle fleet transition and funds used towards the South Minneapolis Roof Depot site solar project. In May, Xcel Energy launched a small business refrigeration program focusing on small businesses, implemented by CEE.
Adam Pyles of Centerpoint said that they have abundant money in the CIP budget but have to take special measures get the dollars shifted to Minneapolis projects because they are technically not supposed to favor one part of their service territory over another with CIP. He also said something along the lines of the discussion and focus toward inclusive financing having taken up their staff capacity away from other was some things that they could have done for the partnership and that they have limited resources too. Having said that, Centerpoint Energy is on track to launch an Energy Data Aggregation tool project by the end of 2018 in order to facilitate energy benchmarking of multi-tenant buildings in ways that adhere to data privacy rules. Brad from Centerpoint said that the utility is a “good partner” because they have fully decoupled.
In a brief response to disagreement among Partnership board members and staff about Xcel’s activity at the state capitol, CM Schroeder recommended a conclusion that in beginning this year, the city and utilities needs to meet up before the next legislative session to ensure bills moved forward are positively impacting the partnership's work rather than the reverse.
CM Fletcher said the way to build trust in the partnership is to get some experience acting together (e.g. getting a pilot project going concurrent with the study). Fletcher offered an open door anytime utility reps wanted to come and discuss action together.