There’s at least one bipartisan piece of legislation moving through Michigan’s lame-duck session: A streamlined loan program for residential customers looking to install renewable energy or efficiency systems on their property.
The Municipal Utility Residential Clean Energy Program Act is modeled after the state’s Property Assessed Clean Energy financing law of 2010, bringing to homeowners a similar loan program that until now has only been available to commercial and industrial property owners.
However, the law would apply only to residential customers of municipal utilities — about 260,000 households, according to the Michigan Municipal Utility Association. The law would apply to residents in cities such as Lansing and Traverse City after local governing board approval.
“It gets down to the fact that energy efficiency is common sense: It reduces energy waste and saves money,” said Jack Schmitt, deputy director of the Michigan League of Conservation Voters. “This legislation allows for and promotes greater opportunities for energy efficiency throughout Michigan.”
The legislation has strong support in Holland, population 33,500, which is served by the Holland Board of Public Works. It is also the home district of the bill’s sponsor, Republican Joe Haveman.
Holland’s Home Energy Retrofit Task Force predicts it will be easy for residents to acquire loans because debt is tied to the property.
“The ability to borrow the capital needed for deep energy retrofits would ideally end up saving more funds in monthly energy efficiencies than the monthly debt repayments required,” Holland City Manager Ryan Cotton told the task force.
The bill would help Holland in its community energy plan, which aims to cut energy use 50 percent by 2050. The city will likely serve as a test site for other municipalities, said Jim Weeks, president of the Municipal Utility Association.
“If it is a model that in the end does what we think it will — which is empower homeowners to make investments in saving energy they otherwise wouldn’t make — others would follow suit,” Weeks said.
A municipality’s governing body would first need to approve a clean energy district. Home energy audits are also tied to the legislation, helping property owners determine the most cost-effective upgrades. Loans would be available through a trust set up by the municipality and could include the utility, nonprofits or commercial lenders. If the economics work, loans could also go toward renewable energy systems.
The bill received near-unanimous support (108-2) in the state House in June and unanimously cleared a Senate committee earlier this month. Supporters expect it to pass the full Senate before the end of December. The governor’s office is listed as one of 13 formal supporters.
The Michigan Conservative Energy Forum, a group supporting “conservative solutions to Michigan’s Energy Future,” submitted testimony in September that the bill “addresses a significant shortfall” in the 2010 PACE law by including residential customers.
Larry J. Ward, the Conservative Energy Forum’s executive director, wrote to a Senate committee that the bill is a “truly market-driven approach to expanding energy efficiency programs by utilizing a funding system that includes private institutions.”
Ward also wrote that it’s a “creative energy solution that invokes some of the conservative principles that the Michigan Conservative Energy Forum espouses: Local Control, Community Involvement, and, most importantly, a Voluntary system that works for the community and residential customer.”
Ward also credits the bill for addressing the “split incentive” issue for residential property landlords. “Through the ‘on-bill financing’ provision of the bill, HB 5397 would allow for Energy Efficiency incentives where both the Landlord and the Tenant would benefit from home improvements.”
The “on-bill” financing aspect of the law allows customers to pay back the loan through savings on their electric bill. A House Fiscal Agency analysis says that about 20 other states allow for on-bill financing.
While Schmitt said there are always opportunities for homeowners to get loans from banks through home equity, “This is such an important program because it allows you to work directly with your provider of electricity. … The intent is to make it as easy and streamlined as possible.”
The Michigan Environmental Council called it “good, common-sense policy that would help homeowners get over the upfront investment needed for long-term energy savings, which can be a significant barrier for some.”
PACE-like financing for residential properties hit a stumbling block in 2010 when the Federal Housing Finance Agency said that loans on such properties created risk for those in the mortgage industry. The programs have since rebounded, and two years ago the Brookings Institution issued a report urging Congress to enact laws facilitating its growth.
State efficiency program saving millions of dollars
Meanwhile, the Michigan Public Service Commission reported late last month that the state’s energy efficiency program for utilities is exceeding targets established under the 2008 renewable energy law.
The report showed that each dollar spent by electric and natural gas customers under a utility’s efficiency program results in $3.75 worth of savings by eliminating waste. The report is issued annually, and for 2013, savings totaled 1.3 million MWh of electricity, or roughly 121,000 households’ annual electric usage.
Statewide, $253 million was spent on the Energy Optimization program, which will result in savings of $948 million over the lifetime of the installations. Electric utilities hit 132 percent of the savings target last year, while natural gas utilities hit 121 percent.
“Once again, Michigan’s energy optimization programs have proven their worth to utility customers large and small,” MPSC Chairman John Quackenbush said in a statement.
Michigan’s energy efficiency program was established under Public Act 295 of 2008 and requires utilities to design programs to save customers money. The programs are meant to defer or reduce the need for new generation plants, “the cost of which is allocated to all customers, whether or not they have participated in the EO program,” the report says.
The Michigan Environmental Council is a member of RE-AMP, which publishes Midwest Energy News.