GEMS Administrator Anticipates On-Bill Loan Financing This Year

posted in: May 2017 | 0

When the state’s Green Energy Market Securitization (GEMS) loan program was established in 2013, all parties involved believed that customers who took out loans for installation of photovoltaic and other energy saving technologies would have the option of paying off the loan charges through their monthly utility bills.

That process, known as on-bill financing, was to be available not only to customers who financed these improvements with GEMS loans, but to all electric utility customers.

In June 2014, the Public Utilities Commission officially opened a docket that was aimed at working out the technical issues that would need to be addressed before on-bill financing could become a reality. It hired a consultant, AFC First Financial Corporation, to assist with the process. By January 2015, the PUC was able to release the “Hawai‘i Energy Bill $aver Program: Program Manual,” a document that, including appendices, ran to more than 100 pages.

The utilities seemed on board with this. In April, Hawaiian Electric notified the PUC that it had agreed on specifications for interfacing AFC First Financial. “Effective May 1, 2015,” Hawaiian Electric told the PUC, “the agreed upon [information technology] interfaces should be capable of processing at least ten applications per day, increasing to at least 100 applications per day by June 1, 2015.”

Although at this point, the on-bill financing system seemed to have a green light, it was never implemented. On May 20, 2016, more than a year after Hawaiian Electric notified the PUC that it was prepared to launch the program, the PUC suspended it.

What happened? Simply put, the company hired to administer on-bill financing quit. In October 2015, AFC informed the commission that it had been acquired by a company named RenewFinancial, and that RenewFinancial and AFC had no interest in continuing to fulfill the role of finance program administrator after the contract end date of December 31, 2015. (It may be worth noting that RenewFinancial, then known as Renewable Funding, was paid $1 million by DBEDT to develop the GEMS program.)

The PUC attempted to find a replacement administrator, but without success.

Although on-bill financing might be stalled for non-GEMS loans, the PUC did instruct Hawaiian Electric to work with the Hawai‘i Green Infrastructure Authority to develop an on-bill repayment plan for GEMS loan recipients. Last December, the HGIA board authorized reallocating $247,000 of funds from its annual operating budget of $1 million to pay for studies of on-bill financing.

HGIA executive director Gwen Yamamoto Lau explained in an email to Environment Hawai‘i that the money isn’t actually paying for studies, but will support “extensive IT programming and testing” of an on-bill financing system that will allow HGIA’s loan servicer (Concord Servicing) and the HECO companies to electronically transfer loan payment data on a monthly basis.

She continued: “Further, in an effort to be fiscally responsible, HGIA has requested PUC approval to utilize relevant and applicable documents, material, and tools already developed under the OBF docket.” Yamamoto Lau said the HGIA was “working diligently with Concord and HECO” and that they expect the program to launch this year.

Financing, with Conditions

In the GEMS annual plan submitted in late March to the PUC, Yamamoto Lau included a request for PUC approval of “GEMS OBR [on-bill repayment] loan products to finance energy efficiency and/or renewable energy technologies, subject to a minimum 10 percent utility bill savings for the ratepayer.”

The problems with calculating savings were laid out at length in the PUC’s order suspending its work toward on-bill financing. Agreeing with recommendations of its on-bill financing working group, the PUC noted that “bill neutrality” would need to be assured before adding financing costs to customers’ bills. Bill neutrality would be “based on the reasonable life of the equipment with a not-to-exceed maximum of 12 years and the payment calculation based on the price of equipment and electricity at the time of program enrollment.”

But given the fluctuation of electricity costs, customers investing in energy-saving technology were essentially taking a risk, should energy prices decline. To help ensure savings for participants, the commission stated that “the level of savings … must be beyond bill-neutral.”

The cost of electricity, the commission noted, “did, in fact fluctuate greatly during development of the [on-bill financing] program.” In June 2014, when the on-bill financing docket was opened, the price of a barrel of oil was $105.79, the PUC wrote. By January 2016, the price of that same barrel “had decreased approximately 70 percent to $31.68.” Over the same time, Hawaiian Electric residential rates on O‘ahu dropped from an average of nearly 37 cents per kilowatt hour to 24 cents.

“This drastic drop in oil and electricity costs, coupled with the basic costs of the [on-bill financing] program, resulted in great difficulty in ensuring that savings for program participants would be beyond bill-neutral.”

— Patricia Tummons

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