Report for Connecticut Questions Utility Shutoff Policy to Collect Bills for Home Efficiency Improvements

In 2010 New York pioneered an “on bill” energy efficiency improvement financing program called the Green jobs, Green NY program.  It is carefully tailored to enable homeowners to finance proven, cost-effective energy reduction measures by agreeing to put the charges on their utility bills.  In theory, if the measures work, the utility bills will be lower than otherwise, and even lower once the costs are paid off.  The attraction for investors was to assure collection of the loans for the improvements by having the utility shut off service if payments are not made.  The law provides for NYSERDA certification and oversight of contractors and for a hearing process if there are problems.

Connecticut passed a similar law with a study provision in it, before implementing the program.  As summarized in a required report for the Connecticut Energy Efficiency Board:

In Connecticut, during the 2013 legislative session, the Connecticut legislature passed Public Act 13-98, “An Act Concerning Implementation of Connecticut’s Comprehensive Energy Strategy and Various Revisions to the Energy Statutes.” Section 58 of this act called for the Connecticut Energy Efficiency Board (EEB) and the Clean Energy Finance and Investment Authority (CEFIA), in consultation with the state’s electric distribution and gas companies, to establish a residential clean energy on-bill repayment program.  The  Act also authorized disconnection for nonpayment by the customer of any financing repayment amount under this program, with certain exceptions. In light of these provisions, the EEB has asked its financing consultant to provide information and analysis to allow it to evaluate any residential loan program in which a utility termination may be effected.  The underlying question that this analysis is intended to inform is whether the joint developers of the new on-bill program should avail themselves of the authority granted to them under the legislation and implement disconnection for nonpayment as a feature of this loan program.

The report, Disconnection and On‐Bill Repayment, An Analysis of Risks and Benefits, by  Chris Kramer, Consultant to the Connecticut Energy Efficiency Board, examined on bill financing programs, including New York’s, and recommended against adopting a service termination policy to collect unpaid charges.

The report concludes that shut-off for non payment of utility charges for energy efficiency improvements should not be allowed:

The question presented for this report was whether any identified benefits in terms of cost of capital or default rates outweigh the risks to consumers associated with a utility termination.  The preceding discussion indicates that at this point, there is little evidence regarding what benefits allowance of utility termination may have in terms of securing lower cost capital or reducing default rates.  On the other hand, the report highlights the many known risks to residents associated with utility termination, as well as costs and risks to ratepayers, utilities, and other program administrators.  Given the uncertainty around benefits and the well‐stablished risks, it is not possible at this time to assert that the risks are outweighed by the benefits. Further, the report highlights the fact that there are several viable alternatives to accessing secondary markets that do not involve the implementation of disconnection.  Indeed, rating agency feedback thus far suggests that disconnection may not be a sufficient mechanism to achieve an investment‐grade rating.  Some of the alternative routes, such as securitizing direct‐bill loans, may be available with few if any existing program changes, while others, such as partnering with a state agency such as DEEP, could be facilitated by the close working relationship among relevant Connecticut agencies that exists today. Given the uncertainty of the benefits, the certainty of the risks, and the availability of several viable alternatives, it is not possible to recommend that disconnection of utility service for nonpayment of on‐bill loans be operationalized at this time.

Gerald Norlander

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