Missouri’s largest gas and electric utilities are all forging ahead with new programs that will finance customers’ energy efficiency upgrades and in many cases even decrease their monthly bills.
Evergy is the state’s latest utility to launch a Pay As You Save (PAYS) program, in which the full upfront cost of energy efficiency projects — along with their savings — are rolled into the customer’s monthly bill.
The Kansas City-based company began offering the program in September and was aiming to hear from 200 interested customers within a month. Within 10 days, 250 customers had indicated they wanted to move ahead with a brief energy audit, the first step in the process.
“We’re off to the races in Evergy territory,” said James Owen, who as executive director of Renew Missouri had pushed hard for the program for several years.
Pay As You Save is a trademarked riff on the broader concept of on-bill financing, which allows utilities to collect payments on large customer expenditures over time as part of a regular bill. It’s a sort of cousin to Property Assessed Clean Energy, in which project costs are bundled and repaid through property tax bills instead of utility bills, though the two have other differences.
The program was designed by Vermont-based public policy experts Harlan Lachman and Paul Cillo. A utility covers the upfront cost of improvements such as heating and cooling systems, insulation and air sealing. By carefully selecting only projects that will generate large savings, it can actually lower some customers’ monthly bills while they pay off an investment typically of $7,000 or $10,000 within a decade. The utility owns the improvements until they are paid off, and if the customer moves the obligation and savings accrue to the new owner or occupant.
Missouri utilities taking a lead
Utilities nationwide have been slow to embrace the program. This year, about a dozen of them – mostly rural electric cooperatives – are offering this route to greater efficiency and lower bills, Lachman said.
But it’s a different story in Missouri. Within the next few months, the gas company Spire expects to offer PAYS in both major cities. Ameren Missouri, which provides electric service in the St. Louis area, introduced PAYS in December. Jeff Berg, the company’s senior program supervisor for energy efficiency, said there have been successes but declined to provide any details.
The state’s other investor-owned electric company, Liberty Utilities-Empire District, in September asked state utility regulators for permission to join them.
It’s not that the utilities all were necessarily eager to add this to their energy efficiency portfolios. Rather, the Missouri Public Service Commission strongly urged them to do so after years of lobbying by Renew Missouri and the state’s Office of Public Counsel, which is charged with protecting consumer interests in utility matters.
A few years ago, the commission ordered feasibility studies for all three electric utilities. In each case, consulting firm Cadmus concluded that PAYS would offer a valuable option, especially for renters and people with low incomes. The commission then instructed Evergy and Ameren to conduct 12-month pilot programs, which now are getting underway.
Geoff Marke, who as the chief economist for the public counsel’s office often challenges utility plans to spend more money, is enthusiastic about PAYS. A couple of years ago, after seeing a webinar about the approach, he said, “I really, really tried to find something wrong with it. But the more I found out about PAYS, the more I liked it and realized that this is really attractive for renters and working-class families.”
Although PAYS is theoretically available to any customer of a participating utility, the math has to work — and it doesn’t always. Brian File, Evergy’s director of products and services, said people who use copious amounts of energy — and do so very inefficiently — stand to gain the most. Although the PAYS barrier to entry is low, making it attractive for people with low incomes or a poor credit history, it is high-income earners who typically use the most electricity and natural gas.
Owen, of Renew Missouri, said it all comes down to the size of the energy bill.
“The higher the bill, the more effective PAYS works.” With federal weatherization funds available to low-income people, he said PAYS is a tool for people above that threshold who cannot obtain conventional financing.
“This isn’t a low-income targeted program,” said File.
Owen intends to carefully monitor the management of the state’s PAYS programs.
“Making sure the contractors provide upgrades that the customers need, that is important,” he said. “Making sure the utilities in fact do not charge more than what the normal bill would be is also important. Renew Missouri wants to make sure PAYS works, and that it is keeping track of any issues like this and making sure they are addressed by the right people immediately.”
How it works
Evergy has contracted out management of PAYS to EEtility, a B corporation in Arkansas that was established in 2014 to run PAYS programs. Tammy Agard, a founding partner, president and chief executive officer, said the company now is managing programs for eight utilities in six states, and is discussing possible deals with about a dozen other investor-owned utilities.
After an Evergy customer submits the initial form indicating interest in PAYS, EEtility dispatches an energy auditor to conduct a brief assessment and deliver a few free efficiency tools such as LED bulbs and faucet aerators. The auditors briefly assess the potential for energy savings, gathering data for a more detailed analysis later.
“The savings from investments have to be greater than the cost to pay them off. Once we get that indication, we can do a blower-door test,” Agard said. EEtility then provides a detailed improvement plan and cost estimate, suggests contractors and reviews the results. Customers can still opt out.
File said Evergy hopes to enroll between 1,000 and 1,500 customers. State regulators have allowed it a budget of between $10 million and $15 million. A few weeks ago, the company launched a marketing campaign that Agard said was far more robust than any she’s seen.
As a pilot, this will be a learning experience for Evergy.
“We want to find out which is the right type of customer,” File said. “There will be certain segments of customers that this will be positive for.”
Agard will manage programs for the gas and electric companies together. The combined savings will produce a much bigger offset against the higher cost of the equipment, she said, making efficiency moves such as insulation and air sealing even more financially attractive.
Agard sees other opportunities for synergy in Missouri.
Heating and cooling contractors generally drive around town with the cheapest and least-efficient machines allowed under local code, she said. Someone suddenly without heat or cooling — and 85% of purchasers are in such desperate straits — is likely to buy what’s on the truck or is in stock and readily available, not what has to be ordered from somewhere up the supply chain.
Agard is talking with manufacturers, distributors and contractors, laying the groundwork to make high-efficiency equipment more available since “demand is no good if you don’t have supply.
“We’re excited about the potential to drive up the adoption of very energy efficient equipment,” she said, “and to drive up the availability of that equipment in both markets.”