California solicits comments on on-bill financing solutions to address barriers to low-income participation in the clean energy economy

In 2015, Senate Bill 350 mandated the California Energy Commission (CEC) to produce a Study of Barriers and Solutions to Energy Efficiency, Renewables and Contracting Opportunities Among Low-Income Customers and Disadvantaged Communities. The process of developing the report has been characterized by active stakeholder participation through listening sessions, workshops, and public comment.

In a full day workshop held by CEC in mid-August, stakeholders highlighted the upfront cost of clean energy solutions as a barrier for low-income households, and several specifically expressed concern about addressing that barrier with financing solutions that would impose a debt burden on households in a market segment where many would be considered subprime borrowers.

At a subsequent workshop in September, the Commission was addressed by Jeanne Clinton, the Governor’s appointed Energy Efficiency Advisor at the California Public Utilities Commission (CPUC). “The biggest barrier that we’re talking about here today is the fact that 64% of these households live in rental [housing] and don’t own the building and can’t make mortgage or loan commitments.” Continuing, she said, “If we do nothing else, the study should, I think, tackle the question of how do we deal with rental property?”

The Governor’s advisor reminded the CEC Commissioners of the scale of the solutions needed to reach the 5 million households in California that are low-income. “If you want to do deeper efficiency and put in $5,000 per home, which is certainly imaginable, then we’re at $20 billion. I think we need to pay attention to the order of magnitude here and what that should tell us about what kind of solutions we need to be looking at, and perhaps we need to start looking at alternatives to grants.”

The CEC heeded the Governor’s appointed Energy Efficiency Advisor in its development of Draft Recommendations, one of which raises on-bill financing as a solution to address barriers to low-income participation in the clean energy economy. In responsive comments, the CEC’s Draft Recommendation 2(a) drew attention from several key stakeholders, including Clean Energy Works as well as public interest advocates and investor owned utilities.

In the process of reviewing all public comments received by the CEC, Clean Energy Works compiled a summary of key statements along with excerpts of comments on the Draft Recommendation 2(a), annotating each with links to their full comments.

Each stakeholder that commented on item 2(a) called on the CEC to reconsider the approach articulated in its Draft Recommendation. Views expressed regarding on-bill financing varied depending on whether the stakeholder considered tariffed on-bill programs to be an option in California – as they are in states like Kansas, Kentucky, and Arkansas. Each of the stakeholders who understood inclusive financing to be an option expressed support for this approach, which does not impose a debt obligation on participating utility customers.

Dr. Holmes Hummel addressed the CEC Commissioners in person at the September workshop, recalling the staff finding that approximately one third of the households in the state are eligible for low-income programs. Dr. Hummel underscored that the California economy includes a multi-billion dollar clean energy sector, so it makes sense to focus attention on recommendations that have billion dollar potential for impact. “Thinking on a much larger scale will also highlight the importance of harnessing private sector capital to address the limits of public funding streams, the split incentives between renters and landlords, and the concerns about marketing debt to sub-prime borrowers.”

Comments submitted by Clean Energy Works provided additional information about the contrast between debt-based on-bill loan programs and tariffed on-bill programs, which have already demonstrated success in reaching customers in persistent poverty areas of other states.