Front Porch Blog

Turning down the heat: A collaborative effort to reduce energy bills

This piece was co-authored by Jen Weiss, a senior finance analyst at the Environmental Finance Center at the University of North Carolina-Chapel Hill.

The North Carolina On-Bill Working Group seeks to facilitate the development of programs that educate homeowners about energy efficiency and put financing easily within reach for all income levels.

The North Carolina On-Bill Working Group seeks to facilitate the development of programs that educate homeowners about energy efficiency and put financing easily within reach for all income levels.

There’s no doubt about it. June was HOT.

While extreme temperatures can make outdoor activities unbearable, they can also send electric utility bills skyrocketing across most of North Carolina and place high demands on the state’s electric utility infrastructure.

As heating and cooling equipment are pushed to the max, the demands are made even more significant due to inefficiently insulated and poorly weatherized houses that lose cool air as quickly as it is generated. But the cost to weatherize a home can make energy efficiency improvements unaffordable — particularly for homeowners who are already burdened with basic housing costs that can outweigh their limited income.

With the aim of providing these homeowners with a solution that will reduce their energy bills and improve home comfort, a collaborative working group was recently been formed by leading energy advisors in the Southeast. Working with multiple stakeholders across the state, the North Carolina On-Bill Working Group seeks to facilitate the development of programs that educate homeowners about energy efficiency and put financing within reach for all income levels.

The Challenge: High Energy Costs

High energy costs can be particularly challenging for lower income Americans. According to the U.S. Energy Information Administration, the average North Carolinian spends $3,714 annually on energy costs. With a median household income of $46,334, this equates to 8 percent of the average residents’ annual income. This is nearly three times the national average of 2.7 percent in 2012. In rural communities where median household income tends to be much lower, averaging $22,000, energy expenditures as a percentage of household income can be as much as 17 percent or higher.

This situation is only going to get worse as it is predicted that energy costs will continue to rise in coming years. Energy efficiency improvements for North Carolinians can alleviate the impact of current and future energy costs. Unfortunately, many homeowners cannot afford the upfront cost to weatherize their properties or purchase energy-efficient appliances that will reduce their energy bills. North Carolina residents of all income levels need access to streamlined and simple energy efficiency finance programs that can help make energy more affordable.

A Solution: Utility On-Bill Programs for Energy Efficiency Financing

Fortunately, proven models exist that expand access to financing for energy efficiency improvements for everyone, including people who may not qualify for loans under traditional underwriting criteria. Known as “on-bill” programs, these financing models provide a mechanism whereby the upfront cost of energy saving improvements and equipment is funded by the electric utility or a third-party financier, and ratepayers are able to pay down the cost through a monthly payment on their electric bill.

Depending on the structure of these programs and the initial source of capital used to finance the program, on-bill programs offer a number advantages to participants, particularly low-income consumers. Advantages include performance-based repayment schedules that align the monthly payback with projected savings achieved, creating a net savings for the consumer. In other words, even with the new charge added to their electric bill, the customer will still pay less on an annual basis than they would have without the improvements. Additionally, on-bill programs can be structured so that they are available to renters and businesses.

Partners in Efficiency: North Carolina’s Rural Electric Member Cooperatives

Together, North Carolina’s 26 electric member cooperatives (co-ops) serve roughly 937,000 members, provide electric service to rural areas in 93 of the state’s 100 counties, and account for 23.7 percent of total electric sales in the state. Many of the state’s electric co-ops and municipal utilities serve communities characterized by ratepayers with lower than average median household incomes and limited access to low-cost financing.

A 2014 study of census data found that these utilities serve the highest concentrations of low-income communities across the Southeast, making co-ops and municipal utilities key stakeholders and powerful allies in addressing this issue. Dedicated to improving the lives and communities of those they serve, many co-ops have developed or are exploring energy efficiency finance programs. It is the goal of the North Carolina On-Bill Working Group to support all of North Carolina’s electric co-ops who are interested in developing an on-bill program for their own members.

Benefits to North Carolina Residents

  • Expanded access to capital for ratepayers at all income levels including homeowners, renters and businesses.
  • Performance-based repayment schedules that align the monthly payback with energy savings.
  • Low- to no-cost opportunity to improve energy performance and home comfort.

Benefits to North Carolina Utilities

  • Reduced complaints from customer regarding high bills and problems paying electric bills.
  • Enhanced customer satisfaction.
  • Reduced need to build new generation facilities by reducing peak demand.
  • Helps to achieve energy efficiency and/or renewable energy goals

About the North Carolina On-Bill Finance Working Group

The North Carolina On-Bill Finance Working Group — a partnership of Appalachian Voices, the Environmental Defense Fund, the Environmental Finance Center at UNC-Chapel Hill, and the Southeast Energy Efficiency Alliance — has been formed to work with North Carolina co-ops and other community stakeholders to provide the education and support resources needed to establish on-bill programs and expand access to energy efficiency programs for residents across the state.

As the Working Group ramps up its efforts, we will be reaching out to electric co-ops, community partners and other stakeholders to identify the needs and challenges faced by co-ops, and to work toward solutions that facilitate the development of new on-bill programs throughout North Carolina. If you are interested in learning more about the North Carolina On-Bill Working Group or supporting our efforts, send an email to NCOnBill@seealliance.org.

Rory is an energy policy and finance wonk with over a decade of experience working on energy policy and planning in Appalachia. He joined Appalachian Voices in spring 2013 as Energy Policy Director to head up our Energy Savings for Appalachia program. His dog, Hobo, is our official Boone office mascot.


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