Missouri utility regulators instructed Evergy to run a one-year, $15 million pilot program using a “Pay As You Save” concept.
Kansas City residents will soon have a new option to pay for energy efficiency upgrades that doesn’t require borrowing, upfront payments or credit checks.
The program is expected to help put energy conservation within reach of renters and people with low incomes — groups that traditionally have not had easy access to home improvements aimed at reducing energy use.
Missouri regulators for a few years have been considering the on-bill repayment system known as Pay As You Save, or PAYS. Last week, they instructed Evergy to conduct a one-year pilot program sometime in the next three years. They approved a $15 million budget for the experiment as part of a package of energy efficiency features submitted by the utility, which serves the Kansas City area.
Evergy spokesperson Gina Penzig said the company hasn’t determined the launch date or any details of the on-bill option.
“I’m very excited to see that PAYS is included,” Commissioner Scott Rupp said during the Public Service Commission meeting. “I hope this is a sign of more to come.”
Meanwhile, Ameren Missouri, the state’s largest electric utility, has invited bids from companies that administer PAYS programs, according to Andrew Linhares, regional director and senior counsel for clean energy advocate Renew Missouri. He’s been working closely with the utilities on developing PAYS programs.
Linhares said several of the PAYS administrators were scheduled to make presentations last week to Ameren and the state’s three other major utilities.
While PAYS is in effect at about 17 utilities across the country, they are primarily small rural electric cooperatives.
Renew, along with the state’s Office of Public Counsel, has pressed hard for several years for the adoption of PAYS in Missouri.
“This is a way to unlock a whole bunch of energy efficiency measures — insulation, appliances, HVAC — things that can really avoid a big chunk of a bill, but have a high capital cost,” Linhares said. “We think it’s the ideal way to go.”
Under Pay As You Save, the utility provides the funds and owns the energy upgrades until they’ve been paid off, according to Harlan Lachman, one of the trademarked program’s designers and the president of the Energy Efficiency Institute. He said payments typically are spread out over 10 or 12 years and are incorporated into the utility bill. When a customer moves, the payments — along with the energy savings — accrue to the next renter or owner.
Renew Missouri and Geoff Marke, chief economist with the state’s Office of Public Counsel, lobbied regulators to require the state’s utilities to try it even though Evergy was not enthusiastic.
Regulators required the three utilities to pay for feasibility studies of Pay As You Save. In its analysis for Evergy, the Cadmus Group determined that the approach could “fill a gap in the financing market and increase residential uptake of energy efficiency improvements.”
Marke said he started trying to sell state regulators on PAYS about five years ago, after he was “blown away” by what he learned about it. Several small electric co-ops, including one each in Kansas and Arkansas, have reported success using PAYS to bring energy efficiency to more customers, especially those with lower incomes or living in rental homes.
There are a couple of reasons why PAYS lends itself to those groups. Ability to pay for improvements is assessed not on the basis of a credit check, but on consistent past bill payment. And only upgrades that pass a cost-benefit test are allowed, meaning that monthly payments for upgrades do not exceed savings resulting from insulation, more efficient appliances and the like.
State regulators approved the PAYS feature as part of a broader package of energy efficiency features Evergy submitted under the Missouri Energy Efficiency Investment Act. The benefits, with a budget of $96.3 million, would be in effect for about three years. It’s estimated that they will reduce needed capacity by 186 MW and collectively save customers about $234 million.
Significantly, they would expand other efficiency benefits available to residents of income-eligible multifamily structures, a “historically hard-to-reach” segment, according to James Owen, Renew Missouri’s executive director. The commission approved $10 million to fund the multifamily program for six years.
Benefits will include free building energy assessments with reports that will include recommended measures, estimated savings and payback periods, information on financing to cover the upfront cost, and a step-by-step walk-through for how to obtain rebates. Evergy also will offer free measures such as LED lightbulbs, low-flow shower heads, and air sealing kits, as well as rebates for HVAC and large appliances. Evergy will co-deliver measures with Spire Gas to help tenants and building owners save on both their electric and gas bills throughout the year.
With sufficient marketing efforts, Owen predicted a PAYS program would “greatly enhance participation in the companies’ energy efficiency efforts, provide greater earnings opportunity for the companies, [and] provide benefits for customers who often don’t see results” from these energy efficiency programs.
In their ruling on Evergy’s energy efficiency program, Missouri regulators made no comment about another innovation proposed by the state’s Office of Public Counsel. Marke sought $2 million to allow Evergy to explore ways it might use the state’s energy efficiency law to address Kansas City’s heat island problem. According to Climate Central, Kansas City is one of the hottest cities in the country relative to the nearby countryside.
Marke suggested using energy efficiency funds to subsidize the cost of planting trees and putting light-colored cool roofs on buildings, measures that have proven to lower the surrounding temperature.
Despite regulators’ lack of interest, Marke said he will continue to pursue the strategy, noting that PAYS didn’t get traction until five years after he began making a case for it.