Minneapolis Clean Energy Partnership lays out next steps forward for Inclusive Financing

At the Minneapolis Clean Energy Partnership board meeting on June 17th, all parties of the Partnership (Xcel, Centerpoint and the City of Minneapolis) unanimously agreed to a motion that laid out a path forward for an Inclusive Financing Pilot project in or around Minneapolis.

The Inclusive Financing board motion “reaffirms the partnership’s commitment to explore in good faith and Inclusive Financing pilot program that provides a reasonably beneficial service to customers”. It also outlined a list of key features for the pilot program as well as a list of next action steps for the partners (Xcel, Centerpoint and Minneapolis Partnership) to take this year.  

This is treading new ground.

Currently existing inclusive financing programs around the nation have originated under rural electric cooperatives who serve much smaller constituencies than Xcel and Centerpoint. The East Central Co-Op in Minnesota had already implemented a program that is similar to PAYS.

 There is no precedent for Investor Owned Utilities making Inclusive Financing available voluntarily or for an Inclusive Financing program that serves urban areas.



The proper name for Inclusive Financing is Tariff-Based On-Bill-Repayment. Pay As You Save (PAYS) is a branded form of inclusive financing that has been gaining popularity in a number of rural electric cooperatives around the county.

Centerpoint Energy has been working on getting a loan-based on bill repayment program approved since 2016. But since loan-based programs require minimum credit score, it does not meet the Clean Energy Partnership’s definition (or Community Power’s definition) of inclusive financing as in being accessible to low-income and renters.

In a loan-based program, the utility acts as the middleman where the utility bill is the mechanism by which the customer pays back a loan that they took out to make a building energy improvement. But with a tariff-based program the utility invests the capital to make a customers’ building energy improvements and recovers those costs over time through a tariffed charge on that customers’ bill. It is a small- scale version of how energy utilities finance large coal and nuclear plants, which would be too expensive for customers to pay all at once.



Most of the presentation and discussion at June 17th CEP board meeting was about the long-awaited preliminary results of the inclusive financing feasibility study that Energy Transition Lab and Cadmus undertook. The main purpose of the study was on financial analysis. It did not focus on program design or consumer protection but those would be the next steps.  

The study relied upon utility data for the analysis. 5 Utilities participated, including a Municipal utility, a Co-Op utility and Investor Owned Utilities. The study was also supported by a robust stakeholder process with an advisory group of 26 experts who advises on inputs and assumption the study uses. On June 6th, the researchers presented preliminary results to this advisory group for feedback.

The study is not yet complete in terms of hard numbers to present. The results thus far are preliminary and are currently being refined with stakeholder input. They hope to wrap the report up by the week of July 15th.

This long-awaited financial analysis does reveal enough info to show a way forward for Inclusive Financing to help reach utility customers who had not been able to access previous energy saving programs.

For this reason of equity and access, Community Power has been working toward a goal where Energy utilities offer Inclusive Financing as an available option to their customers. The deeper questions the study evaluated are about which types of energy improvements in which types of buildings would yield enough dollar amounts in energy savings to pencil under inclusive financing in a way that is a win-win for customers. The energy improvement projects have to yield a high enough dollar savings in energy no longer consumed divided by the cost of the project to be paid off in a reasonable amount of time and for enough savings to be returned to the customers.  

Ellen Anderson laid out a standard for Inclusive Financing where the utility customers should be getting at least 20% of the savings from the energy improvement. (It is not a legislative mandate but a general standard.) For instance, if the customer did energy improvements that saved $50 per month for 10 years, then the utilities can recover up to $40 per month for 8 years and the rest of the savings will stay with the customer. According to one of the study presenters, this caps the investment to where there is a maximum financeable amount.

The households who would participate in a Inclusive Financing program like PAYS are different from typical average homes. Houses that are very low efficiency with poor existing insulation would be the best opportunities for real cost-effective savings under inclusive financing.

The preliminary results of the study showed attic and wall insulation (and the overall building envelope side) to provide the strongest savings.

At this point, the study found houses with electric heat to be found to be better prospects for Inclusive Financing than houses with gas heat. The PAYS programs that exist thus far have served primarily homes that have electric heat. In general, electric resistance heating is inefficient and excessive compared to gas. When natural gas prices go up again it would help energy saving projects in houses heated by natural gas to be much more viable for Inclusive Financing. The researchers acknowledged that the study needs to include price sensitivity analysis regarding the price of fuel.   In Minneapolis, low to moderate income and rental households disproportionately live in large multi-family housing and electric heated homes though the majority uses gas heat.

The study found some energy improvements such as Air Source Heat Pumps and Ground Source heat pumps, to work better in the Southeast than in Minnesota’s climate.


The results of the financial feasibility vary dramatically upon different cost of capital scenarios. In sum, one of the study presents suggested there is a tradeoff between how accessible a TBIF program is and how many subsidies would be required to cover the overall costs of a TBIF program.


Cadmus also did a legal analysis of whether new state legislation is needed to make an on-bill-repayment program in Minnesota be tariff based rather than loan based, a matter which different parties had differing interpretations on.

 Ellen Anderson with the Energy Transition Lab did not endorse any one legal opinion over another and did not want to weigh in who was right or wrong other than it is up to the PUC to decide how Xcel and Centerpoint can proceed on Inclusive Financing. Practically speaking, that clears the path for all parties of the Minneapolis Clean Energy Partnership (Xcel, Centerpoint, Minneapolis) to come forward to the PUC rather than having to wait another year for possible but far from guaranteed success at the state capitol.   

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