California Investor-Owned Utilities: On-Bill Financing Evaluation

Cadmus applies industry expertise and 30 years in energy-efficiency program evaluation to provide guidance to California’s investor-owned utility financing programs.

California has long been a leader in energy efficiency—the state ranks among the lowest in per capita energy use in the United States. By developing and administering energy policy and programs to serve the public interest and comply with the state’s statutory mandates, the California Public Utility Commission (CPUC) Energy Division promotes a sustainable energy future for the people of California.

Challenge

Since 2005, the CPUC has been interested in expanding the availability of financing to enhance the energy-efficiency programs offered in California. To help the state meet its energy-efficiency goals, in 2007 the CPUC directed each of the large investor-owned utilities (IOUs) to offer zero percent interest on-bill financing (OBF) to nonresidential customers making rebate-eligible energy-efficiency improvements. It later approved the IOUs’ OBF programs for the 2010 to 2012 program cycle.

The purpose of OBF was to drive participation by eliminating the up-front cost barrier and make repayment convenient for customers. In June of 2011, the CPUC Energy Division hired Cadmus to conduct a process evaluation of the statewide OBF programs and to perform a market assessment that would provide insight into the current OBF offerings and guide future program cycles.

Solution

Cadmus studied the effectiveness of the OBF programs offered by four utilities: Pacific Gas and Electric (PG&E), Southern California Edison (SCE), San Diego Gas and Electric (SDG&E), and Southern California Gas (SoCalGas). The evaluation focused on:

• Identifying key program and participant characteristics that drove success
• Understanding methods used to disburse limited loan funds
• Determining OBF’s effectiveness in increasing participation in energy efficiency programs
• Understanding how OBF interacts with other utility programs
• Examining strengths and weaknesses of current OBF delivery channels
• Identifying ways that OBF can support comprehensive retrofits

To collect and analyze the data necessary to prepare this evaluation, Cadmus conducted primary and secondary data-gathering. In gathering primary data, we interviewed program managers, trade allies, utility account managers, and an intervenor representing small businesses; surveyed participating businesses; and conducted focus groups with nonparticipating utility customers. Obtaining input from a full spectrum of stakeholders allowed us to assess the success of various program designs with a balanced perspective.

We also conducted secondary data gathering, applying our expertise in data analysis and over 30 years’ experience working with utility program evaluations. Using all of these data, we produced a strong analysis and actionable recommendations for program improvement that the California IOUs could use in reviewing their existing OBF programs.

Results

Cadmus found that nearly three-quarters of participating customers surveyed said they could not have proceeded with their energy-efficiency project without the OBF program. We also identified three key success factors for the program—zero percent financing, simple and straightforward offerings (for both customers and utilities), and bill neutrality (where the estimated energy savings would cover the loan payments). We determined that several issues needed to be addressed, such as trade ally support, application errors, and difficulty in calculating project savings.

Using the findings of the evaluation, the California IOUs were able to identify program strengths and weaknesses and proceed to their next program cycle with confidence. In fact, Cadmus’ research and findings were so helpful that the California IOUs later hired Cadmus to conduct a comprehensive review of 15 national and international financing programs to help inform the design and evaluation of seven new statewide energy efficiency financing pilot programs.