1. Frank Spasaro CPUC Financing Conference November 16/17, 2010
On-Bill Financing
Frank Spasaro
CPUC Financing Conference
November 16/17, 2010

2. What is On-Bill Financing?
On-Bill Financing (OBF) provides easily accessible, zero interest, on-the-utility bill financing for purchasing and installing qualified energy efficient equipment. It is targeted to overcome the barriers of capital constraints, administrative and/or time burdens.

3. Research
A growing number of Utilities are doing/have done some sort of program over the years
Multiple versions
Fewer than a handful say they are (or were) “successful.”
Loan defaults were the key problem

4. Legal and Regulatory Issues
Lending Laws: State and Federal
Federal Truth in Lending Act
Equal Credit Opportunity Act
Fair Credit Reporting Act
and the full panoply of federal and state laws which deal with privacy and the safeguarding of information about consumers.
DOC Licensing
Disclosures
Regulatory – Rules, Tariffs and Billing…Reporting!
Credit checks

5. SDG&E/SCG Program Design: 2010-2012 Program Overview
Businesses only (commercial, industrial, taxpayer-funded, and non-owner occupied MF).
Customers receive both an OBF loan and a rebate/incentive from an energy efficiency program.
Energy savings covers the loan installment
Zero-percent interest, unsecured, non-transferable
Minimum loan $5,000; Maximum $100,000 / $250,000
Loan term is tied to the payback period: cap of 10 years for taxpayer-funded, 5 years for all other businesses (or useful measure life).
Monthly loan payment is included on the utility bill
Loan Default = Meter shut-off

6. SDG&E/SCG PROGRAM DESIGN: Current Eligibility/Rules
Project:
Must qualify for a utility rebate/incentive program (business programs)
Lighting-only projects 3-year max term.
Credit:
Applicant’s account must be in good standing
Applicant must be a customer of the utility (active account) for at least 24 months in the same business, with at least 12 months of energy usage data at the current location.
Other Requirements:
Audit; pre-/post-inspection

7. SDG&E On-Bill Financing – Step by Step
Vendor reserves program rebates/incentives
Vendor or Account Executive submits OBF application on customers’ behalf
STEP 2:
SDG&E pre-inspects site and determines if project savings/payback, scope meets guidelines
OBF contacts customer/vendor on project financing approval
STEP 3:
Customer/vendor sign SDG&E loan agreement – SDG&E clears for installation
Contractor performs installation and submits final invoice and rebate applications

8. SDG&E On-Bill Financing – Step by Step continued
SDG&E performs post inspection and adjusts loan terms if required
Customer signs new loan term
Rebate and OBF project checks issued to customer or contractor
STEP 5:
OBF staff enters loan information into system module
Nightly interface with customer billing system allows for line item to display on next billing statement
STEP 6:
Loan installment amount appears on customer scheduled bill

9. SCG On-Bill Financing – Step by Step
STEP 1: Interested customer contacts Account Executive or contractor or OBF Staff
STEP 2: SCG reviews customer payment history and determines if customer’s account meets OBF credit requirements. If yes, continue to Step 3
STEP 3: Account Executive or contractor or OBF Staff prepares energy savings projections to be reviewed and approved by SCG’s Engineering Support Services
STEP 4: OBF Staff determines if project savings/payback and scope meet guidelines. If yes, SCG contacts Account Executive/customer/contractor on financing approval

10. SCG On-Bill Financing – Step by Step continued
STEP 5- Customer/contractor sign SCG loan agreement. SCG clears for installation.
Contractor performs installation. Upon completion, customer submits final invoices and notifies SCG to inspect project
STEP 6: SCG performs post-installation inspection and adjusts loan terms if required
Customer signs true-up letter with new loan terms. OBF loan check issued to customer or contractor
STEP 7: OBF staff enters loan information into system module. Nightly interface with customer billing system allows for line item to display on next billing statement
STEP 8: Loan installment amount appears on customer’s scheduled bill

11. Program Status (thru Oct 2010):
# of Loans Amount($) Avg. Loan ($)
SDG&E: ,240, ,430
SoCalGas: , ,267
Defaults: ,571

12. Program Status (thru May 2010):
# of Loans Amount($) Avg. Loan ($)
Institutional: ,158, ,090
Public Schools ,720, ,004
Governments - Local , ,739
- State , ,814
Non-Institutional: ,817, ,891

13. An OBF Example
Customer: A business customer of The Gas Company who manufactures aluminum castings.
Size: Approx. 30,000 therms a year
Project: Replacing existing inefficient 900-lb crucible with a new high efficiency one equipped with precise temperature control, small pilot (as opposed to the log gas flame pilot in existing equipment) with convection flow to transfer heat, and insulation.
Project Cost: $43,264.55

14. An OBF Example (Continued)
Estimated annual energy savings: 7,169 therms or $8,256.54
Business Energy Efficiency Program (BEEP) Incentive amount: $7,169
Loan amount: $36, (project cost minus BEEP incentive)
Simple Payback period: years
Loan Term = 53 months (4.37 years in months plus one month)
Monthly payment: $681.05

15. Lessons Learned
Understanding applicable laws/regulations is key.
Expect the unexpected! Be nimble with IT and program design.
Working with contractors is a challenge.
Manage expectations—OBF is not a panacea!

16. Getting Started is Easy!
SoCalGas:
Call (select option 6) or to contact The Gas Company’s On-Bill Financing Program Staff
SDG&E:
Call SDG&E Energy Information Center at or to inquire about
On-Bill Financing