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Open Access Publications from the University of California

Utility investment vs. consumer loans: Getting to yes on energy efficiency through inclusive financing for all

The data associated with this publication are within the manuscript.

Since 2001, eighteen utilities in eight states have received approval from their utility regulators or oversight boards to offer tariffed on-bill programs for energy efficiency upgrades. Tariffed on-bill programs facilitate site-specific investment with site-specific cost recovery, and they are accessible to all residential customers, regardless of credit score, income, or renter status of the customer. Although most of these utilities serve relatively small service areas in rural regions, they have deployed more than $40 million for thousands of cost effective energy efficiency upgrades with a cost recovery rate averaging above 99.9%, even in persistent poverty areas. This utility business model has produced key performance indicators that diverge from loan-based on-bill financing programs. Factors such as doubling the eligible population, higher offer acceptance rates, and deeper savings have a compounding effect resulting in much higher growth in investment compared to programs that depend on unsecured consumer credit products. These results produce a striking picture of consumer choice when customers are faced with options between taking out a loan and accepting an offer of utility investment, which does not entail a means test for participation and assignment of a personal debt obligation. Because tariffed on-bill programs have succeeded in multiple areas of persistent poverty, the high velocity of investment observed would contradict the notion that certain customer segments are "hard to reach" or "difficult to serve." Instead, tariffed on-bill programs are generating data that show the customer response is robustly positive when utilities are able to make investments and provide a pathway to ownership for customers based on the cost effectiveness of efficiency upgrades rather than the credit of individual consumers.

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