Missouri Utilities Consider Program to Pay for Efficiency on Customer Bills

WRITTEN BY Karen UhlenhuthFebruary 7, 2019

PHOTO BY Brendan Wood / Flickr / Creative Commons

The Pay As You Save program puts energy efficiency projects within reach for renters and lower-income customers.

Missouri utilities are studying a potential program that would let customers pay for energy efficiency projects through their monthly bills.

Pay As You Save, or PAYS, has been primarily used by rural electric cooperatives, but it has supporters in Missouri and Iowa who think it could be a valuable tool to put energy efficiency upgrades within reach for more customers. A consultant recently analyzed the program’s potential for all three of Missouri’s investor-owned utilities.

Many utilities offer rebates on efficient appliances and light bulbs, but they still require property owners to pay upfront for savings later. An alternative financing model, Property Assessed Clean Energy, is available to homeowners in Missouri but is not an option for renters.

“The big thing with energy efficiency is how to get nonparticipants moving,” said Geoff Marke, chief economist for Missouri’s Office of Public Counsel, which represents the interests of ratepayers in utility matters. “There are a lot of households that don’t have a couple thousand dollars lying around. Their credit isn’t necessarily good. They can’t make a financial investment that makes sense.”

When he listened to a webinar four years ago about Pay As You Save, Marke said he was “blown away.”

“I really, really tried to find something wrong with it,” he said. “But the more I found out about PAYS, the more I liked it and realized that this is really attractive for renters and working-class families.”

Now, he’s one of the people lobbying Missouri’s large investor-owned utilities to make the program available to customers. Each of the three utilities hired the Cadmus consulting firm to conduct a feasibility study. And in all three cases, the consultant concluded that PAYS would provide an important option for renters and low-income customers.

Brian File, senior manager of products and services at Kansas City Power & Light, said the utility hasn’t proposed on-bill repayment but is talking to stakeholders “to make sure this is a solution everybody can agree upon.”

He pointed out that KCP&L already offers free energy walkthroughs and an array of low-cost improvements such as LEDs and power strips. Its efficiency program now before the Public Service Commission would allocate $10 million over six years to bring greater efficiency to low-income customers.

The Missouri Public Service Commission has indicated support for PAYS. At the end of an earlier rate case, the commission ordered Kansas City Power & Light to consider incorporating PAYS into a demand-side management program, Marke said.

Ameren Missouri did not include PAYS in its latest energy efficiency program because, when it issued a request for proposals, no vendor entered a bid to operate such a program, according to Bill Davis, Ameren’s director of energy efficiency and renewables.

“We recognize there is interest in the program and … other financing opportunities,” Davis said in an email, adding that the company will “explore additional savings opportunities which could impact the 2019-2021 programs or provide a foundation for new programs in the future.”

‘It breaks down barriers other programs have. … From what I have seen, any utility customer could benefit from this.’

The Empire District Electric Co., another of Missouri’s three investor-owned utilities, is “continuing to look into it,” according to the company’s energy efficiency coordinator, Nate Hackney. Last summer Cadmus completed a feasibility study for Empire and concluded the program could be applicable. The company would need permission from state regulators to recover costs associated with the program, Hackney explained, and it would need to attract a critical mass of customers.

He said the company is evaluating “how attainable that would be.”

In Iowa, Matt Ohloff for three years has urged the two major investor-owned utilities, MidAmerican Energy and Interstate Power & Light, to start offering PAYS. Recently, the climate justice organizer for Citizens for Community Improvement made a pitch for the program in Interstate’s energy efficiency proposal, now before the Iowa Utilities Board.

Pay As You Save “can provide efficiency upgrades to a lot more people at a much lower cost because it acts like revolving loan fund,” he said.

Phil Fracica, a policy associate with Renew Missouri, has also advocated for the program since learning about it in 2017. Investor-owned utilities can earn a profit on what they invest, he said, and he can find no downside for customers.

“It breaks down barriers other programs have,” he said. “That’s why I like this program. From what I have seen, any utility customer could benefit from this.”

Under PAYS, the utility provides the funds and owns the energy upgrades until they’ve been paid off, according to Harlan Lachman, one of the program’s designers and the president of the Energy Efficiency Institute. He said payments typically are spread out over 10 or 12 years and are incorporated into the utility bill. When a customer moves, the payments — along with the energy savings — accrue to the next renter or owner.

The program requires that the financial savings of energy upgrades exceed the cost enough so that the average monthly utility bill is about 20 percent lower than previously.

“You’re not only getting an upgrade; you’re getting money off your bill,” Ohloff said.

Pay As You Save — and on-bill repayment generally — has been slow to gain momentum, especially among investor-owned utilities. According to the Environmental and Energy Study Institute, about 110 utilities across the country offer on-bill repayment. Of those, 22 are investor-owned utilities, including three in Illinois and one in Minnesota.

There have been notable successes. The Ouachita Electric Cooperative in southern Arkansas is one. Last month, the American Council for an Energy Efficient Economy cited it and 52 other energy efficiency initiatives nationwide for innovation and effectiveness.

About 400 of the co-op’s 8,000 members have received efficiency upgrades with the help of PAYS. And in nearly all cases, the promised savings have materialized, according to Leslie Holloway, the utility’s PAYS program administrator. She put the average bill savings at about 22 percent.

She pointed out that reducing energy sales has reduced the utility’s cost for wholesale power. The peak summer demand determines the utility’s year-round cost, Holloway said, meaning that lowering peak energy demand has reduced the utility’s energy bill.

The utility, which Holloway said intends to start marketing PAYS soon to its large energy users, has made some substantial upgrades for some of its industrial and commercial customers. Holloway said the program has provided upfront funds for hundreds of thousands of dollars worth of efficient lighting in industrial buildings.

A law enforcement training academy with a growing training class used PAYS to upgrade some long-unused dormitories in a 14,000-square-foot building with no insulation. The utility installed mini-splits and tankless water heaters before the building opened last summer for a class of new recruits. “When we got all that work done, they were like, ‘Can you do this other dorm?’”

ABOUT KAREN UHLENHUTH

Karen spent most of her career reporting for The Kansas City Star, focusing at various times on local and regional news, and features. More recently, she was employed as a researcher and writer for a bioethics center at a children’s hospital in Kansas City.