Published September 4, 2020
In a June 5, 2020 blog post, CUB raised the following question: Could financing through your utility bill help people make home energy efficiency improvements? We have continued to think about this question when reviewing a $50 million pilot program proposed by the City of Minneapolis to offer a tariffed on-bill financing (“TOBF”) option to Minneapolis residents. The City is requesting that the Public Utilities Commission approve the pilot program as part of an ongoing CenterPoint Energy natural gas rate case. If the program is approved, eligible CenterPoint customers residing in Minneapolis will have the option to finance, using TOBF, the installation of certain energy efficiency upgrades in their homes or businesses. CUB filed comments in the CenterPoint rate case docket (Docket# 19-524) supporting the pilot program while noting a few outstanding concerns, questions, and requests for additional details that we believe the City should address.
Energy improvements financed through TOBF are paid off via a utility “tariff,” which is an extra line item on a customer’s utility bill. The tariff stays with the utility bill regardless of who lives at the property where the improvement is made. If the customer moves, it is taken up by the next resident until the cost of the improvement is paid for. The tariff is designed to cost less than the energy savings that result from energy efficiency improvement. For example, a customer might add insulation to their home and pay an extra $50 per month on their utility bill but save an average of $60 per month. Their bill would then be $10 less per month thanks to the improved energy efficiency of their home. Once the cost of the improvement is fully paid off, the customer’s bill should be even lower as they enjoy the full savings afforded by the improvement.
Despite the good intentions of the pilot program, there remains disagreement on whether TOBF is an appropriate option to implement in Minneapolis. Other filing comments in the CenterPoint rate case docket have raised important concerns about potential risks to participants in TOBF programs—particularly low-income consumers, who often already face significant challenges overcoming debt. We believe it is important for the City and the Commission to take seriously these concerns, and to ensure that adequate consumer protections are put in place to minimize potential risks to participants in the program.
That said, CUB is encouraged by the pilot program, as we believe TOBF presents a positive opportunity for more Minnesota consumers to participate in and benefit from energy efficiency improvements. This is particularly true, we hope, for Minnesotans who face barriers to traditional financing options— barriers too often linked to a consumer’s race, national origin, zip code, or other factors outside his or her control. If the Commission allows the pilot program to proceed, we intend to continue working with the City and other stakeholders to address the remaining concerns, questions, and suggestions we and others raise to give the program the best chance of succeeding for Minnesota consumers as possible.
Below are a few of our initial questions and suggestions, which are explained in more detail in our filed comments:
- The City/participating utility should provide to potential participants a notice outlining eligibility requirements for other free or low-cost energy efficiency improvement programs to help ensure participants have the opportunity to make an informed decision about TOBF;
- Participants should have the option to pre-pay remaining charges due on a TOBF improvement; or, if prepayment is not an option, the City/participating utility should provide a notice fully explaining what participants must do to disclose the tariff when they move or sell the property;
- The City/participating utility should clarify how renters can participate in the TOBF, and what the renter must do to coordinate with the owner of the property in order to participate;
- The City and Commission should review and account for the potential power imbalance between the utility and a customer if a dispute arises regarding damage to a TOBF-financed improvement and responsibility for costs of repair;
- The City should explain in more detail where and how it will obtain funding for the pilot program;
- The City should explain in more detail what types of upgrades are eligible for TOBF;
- The City and participating utility should ensure that the program is marketed responsibly in a way that is not likely to mislead consumers as to the benefits vs. risks of participating in the program;
- The City should explain in more detail how the program will be administered, and by whom;
- The City should identify metrics (such as those CUB proposes in our comments) for evaluating the success of the pilot program.
After CUB filed comments noting the above suggestions, the City filed an updated stipulated agreement with CenterPoint outlining additional details for the pilot program. We are pleased to note that the City appears to have addressed some of our suggestions in the stipulated agreement.
On Wednesday, September 9, 2020, an evidentiary hearing will take place to formally receive previously efiled items into the hearing record and to obtain testimony on the TOBF issues that remain in dispute. As CUB is not a party to this proceeding, we will not participate in the hearing; however, we look forward to providing additional input as appropriate if the Commission approves the pilot program to move forward.
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