On-bill Financing / Repayment Loan Program

What is on-bill financing/repayment?

Under an “on-bill energy financing” program, residential electricity customers can apply for financing from their electric utility to pay for comprehensive energy efficiency improvements and appliance upgrades in their home. Once the improvements are made, the residential customer repays the utility over time through an additional charge on their monthly electric bill. If the resident moves away or sells their home, the next owner or occupant takes on the repayment obligation while benefiting from the efficiency improvements.

The intent of on-bill finance programs is to eliminate the up-front money needed to make efficiency upgrades to a customer’s home, effectively removing a significant cost barrier, particularly for low-income residents. Additionally, the savings achieved on a homeowner’s power bill as a result of the improvements exceed the annual repayment, providing a net savings to the resident. This may not be the case for every home, but it is a goal most on-bill finance programs strive for.

Who provides the financing, and what can it pay for?

On-bill finance programs are generally provided by a customer’s electric utility, and funded either through existing revenues, a new tariff collected from all of a utility’s customers, or from federal sources such as the U.S. Department of Agriculture, which offers a funding program for rural electric utilities specifically for this purpose.

Home energy improvements that are eligible for funding through an on-bill financing program may vary. Some utilities finance only a single item, such as a new heat pump. Others offer financing for a more substantial set of improvements and appliance upgrades. Eligibility is typically determined by cost-effectiveness through an energy audit. Improvements under a comprehensive finance program might include (but not be limited to):

  • replacing electric baseboard heating systems or old heat pumps with new energy efficient heat pumps
  • sealing air leaks in the home, such as through roofs, crawl spaces, fireplaces, entryways, windows, etc.
  • reducing leaks in air ducts
  • insulating attics and floors
  • tuning up HVAC systems

Who would be eligible for financing?

Ideally, an inclusive on-bill finance program program would allow all residential (or even commercial) customers to apply, and would cover all types of housing, including manufactured homes, single-family homes and even rental properties.

However, on-bill financing programs are typically tailored to residents who have high electricity bills due to inefficient housing and appliances and are unable to cover the costs of energy improvements themselves. The utility offering the program determines eligibility based on the customer’s history of bill payments and the savings potential of the home.

What characteristics would an ideal program have?

In general, the characteristics of an ideal on-bill financing program for home energy efficiency would include:

  • a low interest rate, typically in the range of 0-5%
  • sufficient financing to cover a comprehensive set of improvements and appliance upgrades, preferably up to $10,000 or more
  • a repayment period of 10 to 15 years
  • certified savings from efficiency improvements, with the savings equaling or exceeding the amount repaid by the customer on an annual basis
  • repayment of the efficiency investment on the customer’s monthly utility bill
  • the use of a customer’s bill payment history in lieu of a credit check when determining borrower eligibility

Are there good examples of these programs out there?

To date, more than 30 electric utilities across the US offer on-bill financing or repayment programs, and some states are offering full-scale programs as well. These programs vary in scope and design, and it is difficult to determine whether one program is better than the other. However, some good models include:

How can I get my utility to offer an on-bill financing program?

Through our Energy Savings for Appalachia campaign, we are working to promote on-bill financing programs through rural electric cooperatives in Appalachia. If your utility does not currently offer a comprehensive home energy efficiency finance program, you should ask them to develop one (and also get as many of your friends and neighbors to do the same).

  • Send a letter or fax to your utility asking them to provide comprehensive financing for energy efficiency using our Energy Savings Action Center