Clean Energy Finance: On-bill Programs <&EPA
United States
Environmental Protection

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Man}' utilities offer programs that enable customers to
finance clean energy projects (energy efficiency and
renewable energy) over time via their utility bills. These
"on-bill programs" help expand access to clean energy to
customers who lack the capital to pay for projects
upfront. Because of their environmental and economic
benefits, local governments have supported these
programs by encouraging participation in them or
creating policies that enable utilities to develop on-bill
repayment options. Other local governments in
communities with municipally owned utilities have
established their own on-bill programs. This paper
describes what on-bill programs are, how they work, and
how some local governments have supported them.
An on-bill program refers to a unique method of
financing an energy efficiency or renewable energy
investment in which the utility bill is used as the vehicle
for repayment.1 Typically, a utility or third-party lender
funds customers' projects, who then repay investments
through additional charges on their regular utility bills.
As described on page two, repayments are usually made
through two methods: an on-bill loan or an on-bill tariff.
On-bill programs have a three-decade history of success
in the United States, particularly in the residential and
commercial sectors. This is primarily due to the relative
simplicity of the processes required for customers to
participate, and the flexibility of the programs" features,
such as the financing products they offer.
As of late 2016 there were approximately 45 on-bill
programs nationwide. These programs had made more
than 230,000 loans through 2014, with an average loan
size of approximately $8,000." Estimates by the
American Council for an Energy-Efficient Economy
(ACEEE) on the dollar value of energy efficiency
investments111 suggest these investments could yield
between $2.5 billion and $8 billion in direct and indirect
benefits. These benefits include avoided energy and
capacity costs, lower energy costs during peak demand
periods, avoided costs from building new power lines,
and reduced pollution.
On-bill programs have been found to help local
governments and utilities achieve their environmental and
economic goals because they:
•	Make clean energy more affordable. On-bill programs
can help remove financial barriers to clean energy
investments for customers who otherwise could not
afford them. For example, on-bill programs help
customers pay for the often high upfront costs of
energy improvements, which can be a barrier for some
households, and are particularly challenging for low-
income customers. In addition, some on-bill programs
allow renters to participate.
•	Reduce home energy costs and increase housing
stability. Energy efficiency upgrades help customers
save on their utility costs. This has been shown to lead
to more housing stability for populations at risk of
eviction or defaulting on utility payments."
•	Make clean energy investments more attractive for
private lenders. Loans issued through on-bill
programs are considered safer investments for third
parties when compared to typical loans. On-bill
program loans generally have low default rates
(typically 0~3%).u This is primarily due to customers
being accustomed to paying their utility bills on time,
and the fact that their energy bills are more affordable
because of the program.
•	Expand clean energy access to customers typically
ineligible for conventional financing mechanisms. The
decreased risk for investors enables utilities to offer
on-bill programs to customers who might not be
eligible for conventional financing. Programs are often
designed to use alternative underwriting criteria, such
as history of on-time bill payments, to assess
creditworthiness. This results in a wider range of
customers having access to clean energy.
In general, the local utility plays the central role in
establishing and implementing on-bill programs. Utilities
can usually design programs to suit their needs and
conditions, and they often combine these programs with
EPA-430- F-18-016
November 2018

On-bill Programs
other incentives, like rebates. On-bill programs differ
from one another in terms of:
•	Sources of capital. Utilities typically use revenues or
capital infusions from the public, ratepayers,
shareholders, private investors, federal agencies, or a
combination of funding sources.
•	Program administrators. Some utilities administer
their own on-bill programs, while others partner with
third-party administrators (e.g., nonprofit
organizations, state agencies). To bear the risk of
loans and better target underserved populations,
utilities sometimes partner with community
development financial institutions (CDFIs), which
focus on low-income and other disadvantaged
populations. Other potential actors include local
governments and charitable foundations that focus on
energy issues.
•	Clean energy measures that are covered. Most on-
bill programs focus on energy efficiency upgrades,
but some also support renewable energy installations
(e.g., the NY-Sun program in New York offers on-
bill repayment options to homeowners who purchase
solar equipment for their homes).v Some programs
have allotments for critical health and safety repairs,
such as mold abatement. These measures can be
particularly beneficial to low-income households.
•	Participation criteria. Some on-bill programs are
open to all customers, while others are restricted to
customers that meet certain creditworthiness
thresholds. In addition, most programs have project
requirements that must be met to qualify.
•	Mechanisms by which customers receive financial-
support and make payments. Repayments are
typically collected through one of two methods: on-
bill loans or on-bill tariffs (described below).1'11
•	Bill neutrality. Some utilities have designed on-bill
programs to be bill neutral, such that repayment
amounts are set at levels less than the property's
anticipated savings from the upgrades. A customer's
regular utility bill with the repayment amount
included will therefore be less than their original bill
before the energy efficiency upgrade. Even in the
absence of bill-neutrality requirements, customers'
savings over time are typically greater than the
cumulative charges added to their bill.
On-bill Loan Programs
On-bill loan programs finance clean energy projects
through low-interest (sometimes zero-interestV1) loans.
Depending on how they are capitalized, on-bill loan
programs can be one of two types:
1)	On-bill financing, in which the capital for the loans
can come directly from the utility, the lender.
2)	On-bill repayment, in which the capital comes from
non-utility sources. In such instances, the third-party
lender (e.g., banks) attracts public and/or private
capital, and the utility is a conduit for repayment.
On-bill loans are associated with an individual utility
account holder. This account holder is solely responsible
for the repayment and pays back the loan over time
through their utility bills. On-bill loans are not typically
transferable. This means that when a customer sells their
property, the utility or lender generally requires them to
promptly pay off the loan, regardless of whether they are
moving within or out of the utility's service area. Some
utilities, however, allow loans to "follow" the initial
borrower after a sale. In such instances, customers are not
required to immediately pay off the loan when they sell
their homes (though they will no longer benefit from the
energy efficiency improvements). Because of this non-
transferability, renters are typically not eligible to
participate in on-bill loan programs.
Disconnection Concerns
Some on-bill programs allow utilities to disconnect
service in the event of non-repayment. This can lead to
consumer protection concerns, especially for low-
income customers who are more vulnerable to having
their utility services terminated. To avoid these
situations, many program administrators have structured
on-bill programs such that non-repayment results in
collection proceedings that are independent of the
standard services the customer receives.
On-bill Tariff Programs
On-bill tariff programs add rates or charges to a
customer's utility bill and do not charge interest. These
programs are capitalized with either public or private
funds, or a combination. Unlike the loans described
above, tariffs are transferable because they are tied to a
property, not an individual utility account holder (i.e.,
when an individual moves, the new resident takes on the
remaining repayment). This allows for an expanded pool
of participants, such as renters that pay their utility bills.
A popular on-bill tariff program is the Pay-As-You-Save
(PAYS®)) model, which requires bill neutrality.™
PAYS®) programs are thus particularly effective for
municipalities looking to reach low-income customers.
Learn more about EPA's energy resources for state, local, and tribal governments:

On-bill Programs
Local governments support on-bill programs in various
ways depending on the type of utility that provides
services in their jurisdiction. The following sections
present ways in which local governments typically
support on-bill programs indirectly and directly.
Indirect Support
Local governments have supported on-bill programs by:
•	Raising awareness of on-bill programs available
through the local utility. For example, Fayetteville,
Arkansas, provides residents and businesses with
information about a local electric cooperative's on-
bill program on its municipal website for community
energy resources.
•	Capitalizing or backing an on-bill program by
investing public funds and creating, for example, a
loan loss reserve fund to mitigate risk for lenders.
Some local governments have used tax revenue to
provide capital to support on-bill programs. In
addition, local governments have assisted utilities
that are considering on-bill programs by facilitating
partnerships with potential private capital investors,
including local banks and financial institutions.
•	Creating policy or legislative incentives to promote
on-bill programs, such as city energy efficiency
•	Assembling stakeholders to support on-bill program
development or policymaking.
•	Collaborating with state governments to obtain
funding for on-bill programs through state clean
energy funds or other similar sources.
•	Working with utilities to target on-bill programs at
priority sectors, such as low-income residents.
•	Participating in on-bill programs offered by their
local utility, which can help legitimize the program
and encourage local residents and businesses to
Direct Support
Some communities with municipally owned utilities have
chosen to implement their own on-bill programs. Ways in
which local governments have directly supported utilities
in such instances include:
•	Engaging with partners to support municipally
owned utilities. Establishing and operating on-bill
programs can require a considerable amount of time
and resources. If the utility lacks the administrative
capacity or resources to establish and operate an on-
bill program, local governments have sometimes
assisted in engaging with other partners. For
example, the City of Holland, Michigan, worked with
the state's Michigan Saves program to help design an
on-bill program for its municipally owned utility.1X
• Training local contractors and service technicians.
Some utilities and local governments have trained
contractors and service technicians about local on-bill
programs, who can help raise awareness of the
programs when they perform regular service calls.
bill-primer for Michigan Utilities 560204 7.pdf
On-bill Program Primer for Utilities in Michigan 2017 On-
Department of Energy - On-bill Programs
Key Resources
EPA Clean Energy Finance Tool
I	ACEEE. 2016. Oil-Bill Energy Efficiency Toolkit. Available: Accessed 11/29/2018.
" Leventis, G., E.M. Fadrhonc.,C. Kramer, and C. Goldman. 2016. Current
Practices in Efficiency Financing: An Overview for State and Local
Governments. Lawrence Berkeley National Laboratory. Available: Accessed 11/29/2018.
ACEEE. 2014. Hie Best Value for America's Energy Dollar: A National
Review of the Cost of Utility Energy Efficiency Programs. Available:
Accessed 11/29/2018.
II	Oak Ridge National Laboratory. 2014. Health and Household-Related
Benefits Attributable to the Weatherization Assistance Program. Available:
content/uploads/pdf/WAPRetroEvalFinalReports/ORNL TM-
2014 345.pdf. Accessed 11/29/2018.
I	New York State Energy Research and Development Authority. LTndated.
Solar for Your Home - Incentives and Financing. Available:
Honie/Paving-for-Solar/Incentives-and-Financing. Accessed 11/29/2018.
II	National Conference of State Legislatures. 2017. On-Bill Financing: Cost-
Free Energy Efficiency Improvements. Available:
efficiencv-iniprovenients.aspx. Accessed 11/29/2018.
III	Clean Energy Works. LTndated. About PAYS®. Available: Accessed 11/29/2018.
IJ" City of Fayetteville. 2017. Climate & Energy Report Card. Available: Accessed 11/29/2018.
LX LUilenhuth, K. 2015. Utilities making efficiency upgrades easier with on-bill
financing. Available:
efficiencv-upgrades-easier-with-on-bill-financing/. Accessed 11/29/2018.
Learn more about EPA's energy resources for state, local, and tribal governments:

Example On-bill Programs
Ouachita Electric Cooperative - HELP PAYS® (Camden, Arkansas)
•	Established: 2013
•	Investments to date: $1.6 million
•	Program type: On-bill tariff
Average participant's cost savings: 20%
Sectors: Residential and commercial
The Ouachita Electric Cooperative piloted Arkansas's first on-bill financing program, the Home Energy Lending
Program (HELP), in 2013. Additional Arkansas cooperatives began adopting the program, and in 2016 the program
switched to an on-bill tariff model, renamed HELP PAYS®. By switching to a tariff model, the Ouachita Electric
Cooperative tripled both their participation rate (to just over 200 single-family, multifamily, and commercial
properties) and approved investments (to $1.6 million) by the end of 2016. The program caps the cost recovery
charge added to customers' utility bills at 80% of the energy savings for that month.
Nearly half of participants in the program are renters, a group left out of the original program. Residential properties
have seen an average monthly energy savings of 20%, resulting in an average payback period of approximately
12 years. In some instances, residents' monthly utility bills have been reduced by as much as 40% to 50%. The city
of Hampton, Arkansas, is a member of the cooperative, and has used the HELP PAYS® program to finance energy
efficiency upgrades at one of their own facilities.
For more information, see:
Seattle City Light On-bill Repayment Program (Seattle, Washington)
•	Established: 2011
•	Investments to date: $5 million
•	Program type: On-bill loan
•	Average participant's cost savings: 25%
•	Sector: Residential
Seattle City Light partnered with the local government and Craft3, a nonprofit CDFI, in 2011 to establish an on-bill
repayment program that supports residential energy efficiency upgrades in Seattle. The municipally owned utility
acts as a conduit between customers and Craft3, which originates, underwrites, and services the loan portfolio with
capital raised from third-party, non-utility sources. Repayment for the loan is accomplished with a line item on the
property owner's Seattle City Light utility bill. In reviewing applications, Craft3 considers applicants' credit scores
and bill payment history; a low credit score can be offset by a strong payment record.
At the time of writing, the program's standard interest rate for loans is 4.49%. A lower interest rate option (3.49%) is
available for low-income households due to a subsidy from the City of Seattle. The maximum loan term is 20 years,
and the maximum value is $30,000. On average, participants save 25% on their electricity bills after implementing
the energy efficiency upgrades.
For more information, see: www.craft3.orq/Borrow/home-enerqv/home-enerqy-loans-in-washinqton
Tallahassee Energy Efficiency Loan Program (Tallahassee, Florida)
Established: 1983
Investments to date: $130 million
Program type: On-bill loan
•	Average participant's cost savings: Not available
•	Sectors: Residential and commercial
The Tallahassee, Florida, Energy Efficiency Loan Program provides on-bill financing for residential and commercial
energy efficiency and solar projects. The program was capitalized using public funds raised through the municipal
utility's rate payment structure. The utility raised these funds for several years before beginning to offer loans. Loans
have interest rates up to 5%, and maximum terms of up to 5 years for energy efficiency upgrades and cool roofs
and 10 years for solar projects (e.g., rooftop photovoltaic systems and solar heaters). Customers can borrow up to
$10,000 for energy efficiency upgrades ($20,000 for rooftop solar and cool roofs). Loans are made only to property
owners, and the borrower must be the account holder.
Over the course of the program's history, the default rate has been very low (approximately 1%). The program
credits its success to the utility's engagement with contractors. When contractors perform service calls, they provide
customers with information about the on-bill financing program. In part because of this marketing approach, 18% of
customers are participating in the on-bill program.
For more information, see:
Learn more about EPA's energy resources for state, local, and tribal governments: