California Utilities Announce Innovative Financing For Energy Efficiency Retrofits
Recently, several California investor-owned utilities announced the development of an On-Bill Repayment (OBR) program using third-party capital to finance energy efficiency retrofits in commercial properties. Property owners would be able to access low-cost capital to finance upgrades and repay the investment through their utility bill. The OBR program will contain three essential design elements:
- The obligation will ‘run with the meter’ upon change in ownership or occupancy including via foreclosure. This both improves the credit quality of the obligation and allows investment in longer-payback retrofits.
- Partial payments will be allocated pro rata between energy and financing obligations. The utilities will also use all standard collection procedures for unpaid obligations. These features insure that the obligation will be treated similarly to existing utility bills.
- The program will provide flexibility for vendors, contractors, project developers, lenders and other investors to design retrofit solutions, go-to-market strategies and financing products that meet the needs of their customers.
Over the next 10 years, experts estimate that OBR could generate $6 billion of private sector investment in commercial energy efficiency activities. During the next few years, the utilities hope to expand this initial program to additional states, and to cover residential properties. This OBR program is expected to be operational in California by the end of March 2013.