by S. M. Smoller
PMLP Manager Joe Anastasi and the Peabody Municipal Light Commission were excited by the Inclusive Utility Investment (IUI) program presented on Sept. 26 by Ashley Muspratt, CEO of the Center for Eco Technology. (Video presentation starts at 5:20 on PAT Video of PMLC 9/26/24 – https://peabodytv.org/videos-on-demand/?vid=1334) The Town of Ipswich is rolling out a pilot of this program soon.
An Inclusive Utility Investment program is sometimes known as a tariffed on-bill program.
Core Tenets of an Inclusive Utility Investment Program include:
Utility Investment at the meter that avoids new customer debt, and the tariffed cost recovery charge remains with the meter, not the customer.
Site-specific energy and cost savings estimates that ensure modeled energy savings provide an accurate estimate on which to base the cost-recovery charge, see best practices for how to do this in consumer protections.
Positive cash flow: The tariff requires that the cost-recovery charge be lower than the estimated energy bill savings on an annual basis.
Well-designed Inclusive Utility Investment programs can help address important utility program needs and customer barriers including:
Need for Greater Savings: One major challenge utilities face as they adjust their energy efficiency portfolios to meet savings goals from more comprehensive retrofit measures (i.e., HVAC, water heating and related building shell measures) is achieving the volume they need to drive savings at scale. Established Inclusive Utility Investment programs have demonstrated that customers are much more likely to move forward with offers compared to debt-based offers, therefore increasing uptake of impactful retrofits and utility savings.
Availability or Access to Capital: More than one third of Americans report being unable to pay for a $400 emergency with cash savings, and 51% have subprime credit according to the U.S. Federal Reserve. Inclusive Utility Investment programs provide the up-front capital to move forward with retrofits that many Americans cannot afford or either cannot or will not finance through a loan. Credit checks are not necessary under this model. Participants assume no new debt. Some programs have used bill payment history to assess eligibility or identify customers in greatest need. The investment is made by the utility, and both the utility and the customer benefit from the upgrades, with cost-recovery from energy savings. If well designed and properly implemented, customers will pay less on their utility bills overall than before the upgrades (absent altering their usage habits or adding new load).
First Cost: When coupled with rebate and incentive programs, Inclusive Utility Investments can lower and, in some cases, may eliminate financial barriers that prevent customers from investing in energy efficiency upgrades. Programs operating today leverage existing rebates from other programs, if available, to help lower first cost. Homes with high energy usage and high energy intensity (high energy use per square foot) are most cost effective for this model and typically see the largest reduction in up-front and overall costs.
Mistrust & Complexity: Customers often do not trust the energy or monetary savings claims of trade allies who they perceive are motivated to close a sale. Consumers can be overwhelmed by the complexity of contracting. Exposure to high-pressure upselling and poor installation quality are major barriers that deter customer investment in efficiency improvements. To address these barriers, Inclusive Utility Investment programs ensure that adequate consumer protection protocols are in place to prevent participating Trade Allies from claiming inflated savings and to ensure high quality installations on 100% of jobs.
Split Incentives: The model can effectively address a common barrier to decarbonization efforts in rental properties known as the split incentive between landlords and tenants. Because the upgrades and cost recovery are tied to the property and energy bill respectively, rather than an individual, it only requires agreement from both parties to initiate, and the benefits are realized by both parties the renter who pays the bill and enjoys the improved comfort and the landlord benefits from the improvement to the property and tenant retention.
Underserved Sectors: Another challenge facing efficiency and electrification programs is making sure that all customer segments tap into program offerings. This is particularly challenging for low- to moderate-income households and renters, which make up about 36% of households. Some Inclusive Utility Investment programs prioritize marketing and outreach to these customers, targeting high energy users with high-energy intensity. Many utility efficiency programs offer additional incentives and services for low- to moderate-income households, so it is important that customers are notified they may be eligible to take advantage of no-cost upgrades and services, providing contact information so they may pursue those options first. Inclusive Utility Investment programs are not a substitute for grant- based, free home weatherization programs because they typically cannot serve households that are curtailing their energy use or have homes with structural or health and safety issues that prohibit investment in upgrades until they are remediated. Coordinating (also referred to as braiding or stacking) available incentives and services can be particularly valuable to serving underserved sectors. Programs operating today leverage existing utility rebates, philanthropic grants, and free offerings such as the U.S. Department of Energy’s Weatherization Assistance Program, if available, to help lower costs and eliminate co-pays.
