On-Bill Financing and PAYS Programs

Nationwide, people have expressed support for clean energy and healthy communities. One of the most promising approaches is energy efficiency retrofits.  But financing is a huge hurdle as basic retrofits can cost from thousands to over ten thousand dollars depending on the house. Another hurdle is the renter/owner financial split – the owner pays for energy efficiency equipment, but the tenant benefits form the utility bill savings.  

To overcome these hurdles, Public Utility Commissions need to actively restructure and reform the energy industry so that investor owned utilities will develop and market Pay As You Save (PAYS) or On Bill Financing programs for energy efficiency retrofits.  PAYS is a great way to enable all residents to participate in energy conservation that will save them money on their utility bills while also improving the comfort and efficiency of their homes.  PAYS programs have the potential to significantly increase customer investment in energy efficiency. 

Pay As You Save (PAYS) / On-Bill Financing 

Pay As You Save (PAYS) programs enable buildings to be retrofitted with no up-front payment and no customer debt obligation.  After an audit, the occupant selects a qualified contractor to perform the energy upgrades and the cost of the upgrades is paid on the occupant’s monthly utility bills.  This is also known as On-Bill Financing because the cost of the energy upgrades is recovered from the utility bill through special rate financing.  The occupant pays a special tariff charge on their utility bill until all costs, including financing costs, are paid off.  The investment offers customers a PAYS because the surcharge on the utility bill is less than expected energy savings. Payment obligations are assigned to the meter rather than the customer, so there are no barriers for individuals or businesses with debt issues and the bill stays with the property when the occupant moves.  

Availability

PAYS programs are generally open to all utility customers (in eligible customer classes) who apply for the program, have been through an energy audit, and have agreed to have the recommended efficiency measures installed in the space.   

Advantages of Pay As You Save (PAYS) System  

• Customers do not need capital to restrofit their building, as measures are financed through the utility provider and the entire cost is paid for in montly installments on their utility bill.
• Customers need less technical expertise because the products eligible for PAYS will work and that savings will be guaranteed.
• Concerns about their duration of occupancy and obligation to pay for the long-life measures are mitigated because the payment obligation stays with the property not with the customer.
• The split incentives barrier is solved because the property owner does not pay for the retrofits. The occupant who receives the savings will pay for them. The building owner benefits because the building is worth more.
• Savings from energy efficient technologies will be more likely to continue over the life of measures. Both the original occupant and any subsequent occupants will be more aware about maintaining energy savings since they will be paying the charges each month.