After considering a variety of proposals by investor-owned utilities (IOUs), and other stakeholders, the California Public Utilities Commission (CPUC) has issued Decision 23-08-026 approving new mechanisms for financing non-residential customer investments in clean energy technologies.
Expanded On-Bill Financing
Currently the IOUs’ on-bill financing (OBF) options are limited to investments in energy efficiency (EE) upgrades. Decision 23-08-026 authorizes the large IOUs (Pacific Gas and Electric Company, Southern California Electric Company, San Diego Gas & Electric Company and Southern California Gas Company) to expand their OBF programs to support “comprehensive clean energy technologies and projects beyond EE.” This, according to the CPUC, is a “progressive step to further support and help accelerate achievement of the state’s clean energy and climate goals.”
The expanded OBF programs will build on existing utility tariffs, and will only be implemented after approval from the California Department of Financial Protection and Innovation (DFPI), which regulates lending. Other program requirements adopted in Decision 23-08-026 include:
- Customers will need to meet existing credit eligibility requirements;
- OBF will only be available for new projects that would not have been undertaken otherwise;
- Utilities will have discretion to impose a bill neutrality requirement or other safeguards for prudent administration, but since OBF default rates have been low the expanded program will not mandate bill neutrality or additional risk mitigation requirements;
- OBF can be applied to any technology that supports clean energy policies, including reduction of GHG emissions, building decarbonization, transportation electrification, resiliency, and distributed energy, subject to CPUC review and approval;
- Existing loan caps and terms will apply, subject to conditions, and the expanded OBF program will continue to provide customer loans with no interest, finance charges, or prepayment penalties;
- Loans will continue to be non-transferable;
- Customers will not be required to participate in another incentive program, but if an incentive or rebate is available for the project, the IOU may require the customer to seek funding from that source, in order to ensure the most efficient use of OBF funds;
- The expanded OBF programs will be funded through the same funding mechanisms IOUs are using for EE projects;
- IOUs will report annually on authorized and issued loans, repayment, defaults, and customer/technology metrics.
The IOUs and Silicon Valley Clean Energy each proposed a tariff on-bill (TOB) mechanism (which allows customers to pay for EE/clean technologies without incurring debt through a transferable payback obligation). The CPUC did not authorize TOB, but provided guidance in response to proposals and ordered further development and implementation of TOB through a joint working group process that will commence within 45 days.
California Alternative Energy and Advanced Transportation Financing Authority (CAEATFA) GoGreen Proposal
CAEATFA currently provides credit enhancement funding to support EE and demand response measures through its GoGreen financing programs, which are funded through the California Hub for Energy Efficiency Financing. The GoGreen programs facilitate better than market-rate financing terms for residential, small business and affordable multi-family housing customers of the IOUs. Borrowers pay 100% of their own project costs via private capital and benefit from ratepayer-funded credit enhancements provided by participating credit union lenders.
Decision 23-08-026 authorizes expansion of the GoGreen programs to support clean energy technologies such as on-site generation, solar domestic hot water, solar lighting and fans, combined heat and power, battery storage, electric vehicle charging infrastructure, hydrogen fueling infrastructure, and microgrids. The CPUC noted that expanding eligibility beyond EE and DR to enable financing for comprehensive packages could both induce additional EE investment and aid in the reduction of GHG emissions and provide participating customers with bill reductions. CAEATFA will determine specific program parameters through its own rulemaking process.
Contact: Brian Biering