Energy Efficiency Loan Program Sacramento Municipal Utility District

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Vivian Shields
5 years ago
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Program Synopsis s seeks to reduce the overall load to the District through low interest loans to residential customers for weatherization, equipment upgrades and other efficiency related investments.

1 Program Synopsis s seeks to reduce the overall load to the District through low interest loans to residential customers for weatherization, equipment upgrades and other efficiency related investments. The program finances equipment replacement and upgrades to encourage ratepayers to invest in improvements likely to have lasting impacts in overall efficiency and load reduction. The program supports market transformation of high-efficiency central air conditioners, heat pumps and windows as well as resource acquisition efforts. The program uses contractors as a vehicle for providing financing to qualifying residential customers. The loan program supports the District s other efficiency goals by enabling efficient purchases. Program Type Incentive PrescriptiveRebates CustomIncentivesSPC BillCreditsRateDiscounts Services DirectInstallation FinancingLoansLeasing FreeMeasures InHousePlusSubs IncentiveOther Information and Training GeneralEducation MailAudit TelephoneAudit OnSiteAudit OnLineAudit DesignAssistance FeasibilityStudies EndUserTraining TradeAllyTraining Program Focus Primary Market Events Targeted AllMarketEventsTargeted NewConstructionRenovation ExistingConstructionAll ExistingConstructionRetrofit ExistingConstructionNaturalReplac ExistingConstructionEarlyRetire Primary Program Focus EndUser SupplySide EndUserAndSupplySide Residential End User Target Markets ResidentialALL SingleFamily MultiFamily MobileHome - 1

2 LowIncome ResOther Commercial/Industrial End User Markets Commercial All Offices Retail Restaurant Public (govt.) Facilities Grocery Store Health Care Education Lodging (Hotels/Motels) Warehouses some lighting and HVAC Industrial All Other Market Barriers End User Supply Side Information or Search Costs Performance Uncertainties Asymmetric Information and Opportunism Hassle or Transaction Costs Hidden Costs Misplaced or Split Incentives Product or Service Unavailability Externalities Non-Externality Pricing Inseparability of Product Features Access to Financing - 2

3 Bounded Rationality Organizational Practices or Customs Irreversibility Other End User Other Supply Side Supply Side Actors Targeted SupplySideActorNotProgFocus AorEFirms Manufacturers Realtors Developers Builders Contractors TradeAssociations WholesalersDistributors Retailers EnergyServiceCompanies NonProfitNotForProfitGroups Govt Other Types of measure/end use technologies ALL MEASURES HVAC High Efficiency DX/HP High Efficiency Chillers High Efficiency Room/Terminal Economizers Control Systems Variable Speed Drives Occupancy Sensors Duct Sealing and Balancing Equipment Testing/Tune-up Commissioning Lighting Compact Fluorescents Electronic Ballasts Reflector Systems Efficient Fluorescent Lamps (T-8, T-5, etc.) Lighting Controls Occupancy Sensors High Intensity Discharge Day lighting - 3

4 Retro-commissioning Space Heating Heat Pump Central Air Water Heating Load Control (Cycling) High Efficiency Insulation Blankets Low-Flow Showerheads Low-Flow Aerators Solar Assisted Motors High Efficiency Variable Speed Drives Industrial Process Compressed Air Motors Pumps Applicances Refrigerators Dish Washers Clothes Washers Clothes Dryers Office Equipment Plug Load Building Envelope Insulation Infiltration Control Glazing and Glazing Control Windows Refrigeration High Efficiency Controls Variable Speed Compressors Multi-Stage Compressors Commissioning Other (specify) - 4

5 Program Context The has been operating in one form or another in Sacramento since The began the program in 1981 as Watt Wise Financing and renamed it in Since 1996, an average of 5,000 SMUD customers annually have applied for energy-efficiency loans through the program, allowing them to finance efficiency upgrades and weatherization measures designed to reduce the overall kwh use of participating residential homes. The loan program supports the efforts of the other energy efficiency programs by offering financing for multiple measures. Like many financing programs, the loan program must respond to market conditions, including issues related to acceptable levels of risk, interest rates, and the impact of early payoffs. SMUD financing has historically been an attractive option for ratepayers seeking ways to increase the energy efficiency of their homes. Historically low mortgage rates over the past three years have challenged the program s loan pricing strategies - something that has shrunk the loan portfolio and related income. Program Components Program Management Loans are offered primarily through individual contractors. The contractors help prepare the loan application and loan documents for the customer. SMUD staff receives the completed application, underwrites and funds the loan. The program relies on strong relationships and partnerships with participating contractors and supports their ability to offer point of sale financing. Program staff describe the use of contractors as a cost-effective outreach, marketing and program delivery mechanism. Implementing Organization Utility Nonprofit Govt Private IOOther Implementation Structure InHouse TurnkeyContractor InHouseAndSubcontractors Other Reporting and Tracking The relies on standard lending practices for loan programs and tracks a variety of required financial information in its loan management system. The system allows the staff to manage the entire loan portfolio, including the number of loans and loan value, loan loss and other credit related information. Incorporating a lending function into a public utility required a separate system. Program staff report that managing the loan portfolio effectively requires having a different system than that used by utility management. Verification and Quality Control SMUD does not have any requirement/offer for a home energy review or audit linked to qualifying for financing or incentives, but does offer a home energy review customers can access electronically. The District documents what is being replaced where financing and rebates are offered. This information is captured by the contractors. - 5

6 Participation Process For residential customers, applying for financing is a simple process completed by the installation contractor. The program has 180 participating contractors offering District loans through an agreement with SMUD. Contractors must meet licensing and insurance requirements ($500,000 liability insurance) and are trained on how to complete loan documentation. Contractors can offer point of sale financing to their customers. SMUD receives a completed contract to review and approve, ultimately funding the contractor and billing the customer for the loan. Staff report a very loyal contractor base. Outreach, Marketing and Advertising Loan Program outreach and advertising is piggy-backed to other district efforts and is marketed with other energy efficiency programs as a tool for increasing participation. The program is advertised and promoted with the programs served by the Loan Program through information distributed at home and garden shows, in print media articles and advertising, through directresponse mailing, bill inserts, envelope & bangtail messages, the website, and through targeted direct mail. Installation and Delivery There are no installation and delivery issues related to this program. Program Evaluation SMUD produced a Program Review and Recommendations document for this program in 2003, but has not conducted any traditional DSM evaluations of the program. However, programs supported by the loan program are evaluated. The 2003 review of the recommended continuing the Loan Program, noting that the benefits outweigh any avoidance of risk achieved by terminating the program. The review recommended that SMUD grow the loan portfolio and sustain it at levels of 15,000-20,000 loans. The review recommended increasing the number of new loans, offering a reasonably competitive interest rates, increasing program marketing, and expanding the list of eligible measures. Other recommendations include: Waiting out the low mortgage rates low mortgage interest rates and high rates of refinancing will not continue indefinitely. Maintaining a low loss rate the program has been effective at this and likely will continue through current, effective policies on underwriting and collection. Adjusting program parameters to reflect market conditions reducing the interest rate to 8% (rate was actually reduced to 7.5%) and the cost of funds to 4.7% offers a competitive and valuable program to customers and reduces the District s risk. Maintaining all functions in house rather than through outsourcing SMUD offers excellent service and has experienced, competent infrastructure. Outsourcing can lead to potentially higher interest rates charged to customers, poorer quality customer service, reduced relationships with contractors and decreased participation Continuing to provide contractor reimbursement upon receipt of invoice avoiding contractor factoring of receivables, something that can ultimately drive up equipment and installation costs. Quantitative Data - 6

7 Program Year: 1/2002 to 12/2002 Participation rate is available Cost Breakdown is available Net Savings Breakdown is available Net-to-Gross is available Total Resource Cost Data is available Quantative Data Summary: The program has historically been cost neutral for SMUD, repayments on existing loans cover the program s expenses and fund the continuation of the program. The program is planned to operate at zero cost to the district. Measures covered by the loan program go through a separate cost effectiveness test to determine whether or not they will be eligible. In 2002 the program had 3,360 participants. In 2003 energy efficiency measures purchased and installed by customers will contribute 17% of the District s peak load reduction goals and 11% of the energy savings goals for the residential sector. The program s $2,361,418 budget is almost entirely administrative due to the nature of the program. In 2002, measures financed by the program saved 1254 MWh (net). Net to gross ratio is not calculated for the program itself and varies depending on the measures installed. District planning staff calculate the cost effectiveness of a variety of measures, some of which are eligible for financing through the Loan Program. List Of Key Sources SMUD Customer Strategy. SMUD Energy-Efficiency Loan Program. Program Review & Recommendations. June 3, 2003 (not publically available) Contact Information - 7

8 Name Title Company Phone David Gailbraith Program Manager (916) Ext. - 8

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