On-Bill Financing and On-Bill Repayment

What Is It?

On-Bill Financing (OBF) and On-Bill Repayment (OBR) are loan programs that allow residential, commercial, and industrial organizations to borrow the upfront costs to make resource efficiency improvements and repay the loan with on their monthly utility bills.

Under On-Bill Financing, the local utility makes a loan to the property owner.

Under On-Bill Repayment, a bank or other financial institution makes the loan, and the utility collects payments and passes them on to the lender.

They are similar in that they allow property owners to undertake improvements with little or no upfront costs and in both cases, the loan repayment is on the energy bill, so that owners can clearly see their reduced total payments. Utility bill default rates tend to be very low, so that the risk to lenders and interest rates to borrowers can be relatively low.

In addition to utility loan programs (those financed by the utility or a third party), some utilities have offered customers tariffed on-bill programs. The utility implements a tariff for an essential service -- meeting supply or distribution needs through resource efficiency achieved at specific customers', businesses', or institutions' premises. The tariff defines the rights and obligations of the utility, building owners, and customers (including renters). Investments in resource efficiency are made at customers' premises. The payment obligation belongs to the meter location, not to an individual so the building owner assumes no new debt and the payment obligation automatically transfers to successor customers until all costs have been recovered. Capital to pay upfront costs for on bill programs can be supplied by utilities, third party capital providers (however, the third party loan has been made to the utility) or a hybrid of these two sources of capital.

Case Studies

State of Oregon

Clean Energy Works of Oregon (CEWO), a non-profit organization, administers energy efficiency programs for homeowners. They provide energy assistants to guide homeowners through the process and offer rebates that vary with the size of the project. This is a residential only program and requires no up-front payment by homeowners. Up to $30,000 in financing per home is available, provided by CEWO lending partners and repaid on the homeowners’ utility bills. To date, CEWO has financed 1,600 projects. (more information)

State of Kansas

Midwest Energy's How$mart program is a program for residential, commercial, and industrial buildings. How$mart offers financing for energy efficiency improvements such as installation, air sealing, and new heating and cooling systems and is repaid for the upgrades through their monthly utility bill. The program is tied to the location and not to the original owner, so that if the building is sold, the next owner takes on responsibility for the loan repayments while also inheriting the benefits of the program. (more information)

State of Kentucky

How$martKY started in December 2010 as an on-bill financing pilot program implemented by four rural utility cooperatives in Eastern Kentucky. How$martKY has been managed by the Mountain Association for Community Economic Development (MACED) to provide energy retrofits, such as insulation, duct sealing, air sealing, and heat pump upgrades as part of a utility service under the Kentucky Energy Retrofit Rider. In 2012, At the end of the 2-year pilot program, 166 assessments had been done and 90 customers had implemented retrofits totaling $687,517. Three of the utilities have decided to move forward with a permanent tariff program. (more information)

Sonoma County, CA

Sonoma County, CA implements their on-bill financing through the Sonoma County Energy Watch (SCEW) program. SCEW is a partnership between Sonoma County and PG&E to serve local governments, nonprofit organizations, small businesses and special districts in the county of Sonoma. This program offers free energy audits and advice on what actions to take, financial consulting for low-income homeowners, and installation of energy efficiency upgrades. Since 2010, SCEW has distributed over $700,000 incentives and helped customers save over 5 million kWh. (more information)

Windsor, CA

Through Windsor’s Efficiency PAYS® (Pay As You Save®) program, water and energy saving upgrades are offered for residential properties that provide immediate utility bill savings with no upfront cost or debt. The program is available to Windsor residents based on their current water and energy use. The customer pays a surcharge on their water bill with the assurance that the estimated savings on the combined utility bill of energy and water will exceed the bi-monthly surcharge. This program also offers the option to end payments if the original customer leaves the home or apartment in which the upgrades were installed. (more information)

More Information