Energy > AG Speaking Energy > CPUC Approves On-Bill Repayment Financing for Non-Residential Energy Efficiency, Distributed Generation
21 Oct '13

On September 19, 2013, the California Public Utilities Commission (“CPUC”) approved a pilot program intended to help attract private capital for investment in energy efficiency retrofits, distributed generation, and demand response projects for nonresidential customers.  The program allows nonresidential utility customers to repay third-party lenders through the customer’s utility bill, a financing mechanism called “on-bill repayment” (“OBR”).  By bundling repayment of the third-party loan with the customer’s energy costs on its utility bill, the CPUC hopes to reduce the event of loan default or delinquency, thus attracting new private capital and lowering borrowing costs for clean energy projects in the commercial/industrial sector.

Under the CPUC pilot program, California’s large, investor-owned utilities will post on their websites a list of eligible energy efficiency measures, distributed generation, and demand response projects.  The utilities’ nonresidential customers may then obtain private capital for eligible projects with repayment of such capital made through an OBR mechanism.  The program requires the utilities to use their existing bill collection practices for delinquencies and defaults and allows for termination of service for nonpayment of the OBR obligation.  Any partial payments made by customers will be distributed pro rata between the energy charge and the repayment to the third-party lender.  The program will not charge fees to the participating financial institutions, nor will it provide any ratepayer-funded credit enhancements.

Notably, the CPUC declined to require OBR obligations to remain attached to the utility meter for a participating property in the event of a subsequent sale, lease, or other transfer of the property before full repayment of the obligation.  Some parties, including financial institutions and project developers, had advocated for an OBR mechanism with a tariff-based charge that would survive changes of ownership.  Indicating a reluctance to affect the rights of future property owners, landlords, and tenants, the CPUC decided instead on a “written consent” approach, under which subsequent property owners and tenants must give their written consent for the obligations to transfer.

The program is expected to boost demand for energy efficiency, distributed generation, and demand response projects at nonresidential properties in California.