Member Financing for Energy Efficiency and Solar: A Guide ... · 1. Conventional loans, repaid on...

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All Rights Reserved © 2017 NRECA

Member Financing for Energy Efficiency and Solar: A Guide for Cooperatives Prepared by Collaborative Efficiency

Introduction Cooperative member-consumers are increasingly interested in incorporating energy efficiency (EE) and solar measures into their homes and businesses. However, the upfront cost of many of these measures can be substantial, and without access to financing, many member-consumers choose not to implement these valuable projects.

A previous National Rural Electric Cooperative Association (NRECA) report, Financing Member Investments in Efficiency and Solar: A Solution for Cooperatives?, provides an introduction to member financing and outlines the reasons why a cooperative may want to offer financing options to its members. Briefly, some of the benefits of offering member financing are:

• Reaching underserved member-consumers: Some energy improvements, such as heat pumps and solar rooftop systems have significant upfront costs, and member-consumers without sufficient cash or credit may not be able to take advantage of these technologies without easily accessible financing options or be able to access loan offerings from other organizations, such as banks.

• Providing environmental benefits: Many states have adopted policies that mandate utility energy efficiency targets, and in some states, co-ops must also comply with these rules. Financing programs that provide access to clean energy technologies like EE and solar can help co-ops meet these mandates and achieve other environmental goals.

• Leveraging member and co-op funds: Member-consumers may have their own funds or co-op rebate dollars to help implement some energy improvements in their home. However, significant energy improvements will require more upfront capital than most member-consumers or co-op rebates can cover—financing can help stretch limited dollars and fund these improvements over time.

• Increasing member engagement: More third-parties are providing energy-related services than ever before, including financing. A co-op that provides member financing is giving its member-consumers additional options to choose from and providing a valuable service as a trusted energy advisor.

In addition, this previous report reviews existing electric cooperative financing programs and common program components. It examines potential barriers for implementing these programs and methods for overcoming those challenges. A co-op that is interested in an introduction to financing member investments in efficiency and solar and its benefits and challenges is encouraged to review this report.

Purpose of this Guidance Document This guidance document builds off the report described above and is intended for cooperative leaders and managers who are considering developing or revising a member-financing program that would fund

http://www.nreca.coop/wp-content/uploads/2013/06/ts_obf_for_ee_and_re_february_2016.pdf


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energy efficiency or solar projects. This document specifically addresses financing for member-sited projects, such as EE measures in a home or rooftop solar systems at a business property. However, any co-op considering a consumer-centric financing program to promote other co-op program goals will find this guidance document useful.

The information in this guidance document is intended to be a helpful and educational resource. The information is not an exhaustive and complete examination of financing issues. NRECA is not attempting to render specific legal or other professional advice in this guide. The guide assumes that an electric cooperative state act or similar act permits the electric co-op to finance energy efficiency and solar. Whether state law permits these financing activities is a threshold question that should be considered. Cooperatives should consult with qualified attorneys, consultants, accounting and tax advisers when determining whether a financing program is permitted by state law, and when implementing such program. References to specific vendors throughout the guide should not be construed as endorsements of any kind.

This guidance document addresses key topics for a co-op leader and program manager to consider when developing or revising a financing program, from the exploration stage to program implementation to program evaluation. In particular, this guidance document focuses on two models of financing that could bring the most benefit to cooperatives and their members:

1. Conventional loans, repaid on or off the monthly co-op bill; and 2. Voluntary tariffs, repaid on a member’s bill.

This guidance document includes five sections:

• Section 1: Designing a Program and Business Plan

• Section 2: Creating an Implementation Plan

• Section 3: Staffing the Program • Section 4: Launching and Delivering the

Program • Section 5: Evaluating and Improving the

Program

Each section is broken into sub-sections with the key steps that a co-op should take to develop and launch a plan for member financing.

If your co-op has an existing financing program and is considering revisions, some sections of this guidance document may not be applicable for your needs. However, it is recommended that you review the first few steps of Section 1.1 (Laying the Groundwork) to help determine whether your program needs substantial changes or only a few tweaks. In addition, Section 5 (Evaluating and Improving Your Program) gives some guidance for how to approach reviewing your program’s impact and processes.

What is the EECLP?

In late 2013, the United States Department of Agriculture (USDA) made low-interest financing available through the Energy Efficiency and Conservation Loan Program (EECLP), administered by the Rural Utilities Service (RUS). Rural small utilities can apply for this funding and can re-lend the funds to end-users for energy efficiency and conservation projects, including solar. EECLP does not limit the size or number of loans, and RUS has billions of dollars in funding authority to provide to guarantee loans. As a result, EECLP is a significant source of potential funding for co-ops serving rural communities.

Throughout this document, key requirements for the EECLP application process are noted with a .

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Throughout this document, key requirements of the Energy Efficiency and Conservation Loan Program (EECLP) application are highlighted, which can be a significant source of capital for some rural electric cooperatives (see textbox and Section 1.3.3 for more details). Co-ops should review the EECLP

requirements and rules, and not rely solely on this guide when applying.

This document also includes “lightbulbs”, like the one to the left, which highlight ideas for a co-op to save resources in designing or implementing a financing component of their energy improvement program.

What are cost-effective ideas for launching a

successful financing

offering for energy

improvements?

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Section 1: Designing a Program and Business Plan

The Section describes the overarching program design questions that will inform a business plan for offering EE and solar financing to members. The business plan provides the information and analysis necessary for approval of a financing program for EE and solar by the General Manager (GM) or Chief Executive Officer (CEO) and the Board of Directors (Board). This business plan could also be useful as a tool to secure capital for a financing program from external sources.

Designing a Program &

Business Plan

Creating the Implementation

Plan

Staffing the Program

Launching & Delivering the

Program

Evaluating & Improving the

Program

Section 1 lays the groundwork for a co-op designing a new financing program or undertaking a major review of an existing financing program for EE and/or solar. Key points from this section:

• Consumers are interested in access to EE and solar measures and co-ops are in a position to help provide this access through financing

• Collaboration with other distribution co-ops, the generation and transmission co-op (G&T), the statewide association, or others is a path to consider

• Engaging with external stakeholders early in the process will help anticipate future concerns • The financing mechanism and the source of capital will impact a number of other program

design choices, including measures that can be funded and members who will be eligible for financing

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Section Key Step Context

Laying the Groundwork

Understand the benefits and challenges

For your co-op, consider the potential benefits and potential challenges that a financing program could present

Research utility financing programs and key trends

Read reports and other information about utility financing programs to understand the basic terminology and key trends

Assess your local market

Understand local needs and desires for EE and solar: • Talk with local contractors, auditors, and other experts • Talk with nearby utilities that have financing programs • For existing financing programs, review past performance and

desired changes Establish program goals

Establish two to four goals to help guide design decisions

Consider collaboration opportunities

Research and talk with nearby co-ops, your statewide association, and other organizations that could be collaborators

Organize financing project team

Put together an internal team, engage external stakeholders, and consider partners and vendors

Developing a Program

Framework

Determine target market

Answer the key questions: who is the program for and how will your co-op determine eligibility?

Select eligible measures

Consider, based on program goals and target market, what measures should be eligible for financing

Assess possible program scale

Estimate the possible scale of this program to inform budgets and staffing estimates

Exploring Financing Options

Determine member repayment

Decide whether a participant will make their financing payment on the monthly co-op bill, if permitted under state law, or through a separate bill

Select a financing mechanism

Understand the two main financing mechanisms and decide which one will work best for your program

Determine level of external support

Determine what help your co-op will need to run a successful program

Assess sources of capital

Assess each possible source of capital carefully and determine whether your co-op should pursue it

Consider strategies to mitigate risk

Consider credit enhancements and establish creditworthiness criteria for participants

Determine billing and payment procedures

Decide on the key member-facing payment options: • If payment is on-bill, what changes are needed to billing

processes? • What will be the consequences of non-payment? • How will transfer of the property affect the financing?

Developing and

Presenting the

Develop a budget Develop a preliminary budget for each program component Undertake a risk analysis

Assess possible program risks and determine how your co-op and program would address each risk

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Business Plan Present and seek board approval

Consider all the program costs and benefits and present the developed materials to the Board

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1.1 Laying the Groundwork This section describes the key steps a co-op should take when deciding whether to launch a financing program for EE or solar measures. The first steps are exploratory, and they can lead to a decision to begin planning a program, but only if there is high level support in the co-op for taking an open and objective look at the potential benefits and costs of a financing program.

1.1.1 Understand the benefits and challenges of financing programs

Before starting down the path of developing a financing program for your co-op’s members, you should have a strong understanding of the potential benefits such a program could provide, as well as the challenges or risks. Knowing what these benefits and risks are for your co-op can help you answer questions from your CEO/GM and Board, external stakeholders, and other internal staff as you design and implement your program.

Questions to consider as you assess the key potential benefits, risks, and challenges of a co-op financing program for EE and/or solar include:

• Will your program provide access to low-cost capital to fund EE or solar measures that your member-consumers would not otherwise be able to access?

• How will broader member access to financing for EE and solar impact peak power demand? Could these measures help delay the need for new generation resources?

• Is the potential lost revenue resulting from the EE or solar upgrades a concern for your co-op? • How will you generate adequate demand for your financing program? • How likely is it that your program will produce higher member satisfaction levels? • Does your co-op have enough staff capacity to design and implement a new financing

program—or resources to engage outside help?

Later sections of this guide will address these questions in more detail. However, at the outset, it is important for co-ops to consider potential benefits and challenges that are specific to your co-op so you can prioritize program design resources and focus accordingly.

1.1.2 Research utility financing programs and key trends If your co-op has not had a financing program before, you may be unfamiliar with some of the terminology specific to financing and how co-ops around the country are implementing these programs. A good initial step as you begin considering the design of a financing program is to research and learn more about current utility financing programs for EE and solar.

KEY STEPS: 1. UNDERSTAND THE BENEFITS AND

CHALLENGES OF FINANCING

PROGRAMS 2. RESEARCH UTILITY FINANCING

PROGRAMS AND KEY TRENDS 3. ASSESS YOUR LOCAL MARKET 4. ESTABLISH PROGRAM GOALS 5. CONSIDER COLLABORATION

OPPORTUNITIES 6. ORGANIZE FINANCING PROJECT

TEAM

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The NRECA report, Financing Member Investments in Efficiency and Solar: A Solution for Cooperatives?, provides an overview of the characteristics of existing co-op financing programs. Some key characteristics of currently available co-op energy-related financing programs:

• Most provide funding for residential member-consumers, though there are a handful that provide financing to commercial member-consumers.

• Many are specifically for heat pumps. • Many finance any EE measure, as long as a qualified energy auditor recommends the measure. • Only a few explicitly fund renewable energy systems, such as rooftop solar photovoltaic (PV)

installation.

1.1.3 Assess your local market Member-consumers in your co-op territory are likely interested in having access to solar and EE measures, but you should research the local market to develop a more complete understanding of current needs, trends, and buying patterns.

Determine the need for EE and solar financing

Talk with your member-consumers, local contractors, your state energy office, energy auditors, and others with knowledge of the energy market in your area to help answer these questions:

• If your member-consumers had access to financing, what kind of improvements would they make?

• What are the major EE needs in existing homes? Do these measures have a high upfront cost (e.g., heat pumps, windows)?

• Is rooftop solar feasible in your territory? Is uptake of rooftop solar increasing? Is there interest from members in community solar as an alternative to rooftop solar?

• What other sources of financing are available for home improvements and solar installations (e.g., banks, credit unions, solar installers)? Are there financing programs from the state and local municipalities that would cover EE or solar measures? (You may determine not to offer financing, but you can encourage your member-consumers to participate in other financing programs.)

Gather insights on your local market

If there are nearby co-ops or utilities with energy-related financing programs available to their members and customers, talk with the program administrators to give you insights into what may be of interest to your member-consumers. Please keep antitrust laws in mind and do not discuss the specific costs associated with others’ financing programs. Some questions to ask are:

• Who is the targeted market for this program (e.g., all residential accounts, low-income member-consumers, commercial accounts, public institutions, multi-family buildings)?

• What are the most commonly funded measures? • Are renewable energy measures, such as rooftop solar systems, eligible for financing? • What is the size of the average loan? What has been the largest loan?


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1.1.4 Establish program goals Establishing program goals is essential as your co-op develops its programmatic framework and seeks Board approval. Setting goals will differ depending on whether your co-op has an existing energy-related financing program that needs improvement, has another energy program that you are adding a financing component to, or is starting a new financing program from scratch.

Remember that financing is a tool to support your program—your goals should reflect what your co-op is trying to accomplish with financing, rather than be specific to funding loans to member-consumers. In addition, be sure to make your goals measurable. For example, setting a goal to “Increase member energy efficiency” will be hard to measure and determine success, but “Increase audit conversion rate by 20%” has a concrete metric to measure against.

Review your existing finance program

If your co-op currently offers financing, your program manager should consider these questions:

• What percentage of your membership has taken advantage of the program? • Does your program have a target market? How has the program been marketed? Through what

channels? • Have member-consumers expressed interest in ineligible measures? • What would you like to improve about your existing program offering?

If your co-op already has a financing program:

You likely already have program goals. Reviewing these goals and seeing how the existing program is meeting them is a useful exercise. Revising or setting new goals could involve expanding participation, expanding loan volume, or improving member satisfaction.

If your co-op is adding financing to an existing EE/solar program:

Your goals will likely interact with the existing program’s goals. For example, if your co-op wants to add financing to a home energy audit program, some possible goals could involve increasing energy savings (from increased conversions), improving member satisfaction, or increasing overall participation in the energy program.

If you are creating a new EE/solar financing program:

Your goals could involve maximizing energy savings, increasing saturation of solar panels, reducing energy costs for a certain category of member-consumers (e.g., low income), improving member satisfaction, meeting regulatory requirements, or providing more options for member-consumers who want to convert propane, oil, or wood-heated homes to electric heat pumps program.

The manager of the financing program, in coordination with the GM/CEO and Board and other key stakeholders, should establish two to four guiding goals to help guide program design decisions.

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1.1.5 Consider collaboration opportunities Collaborating on programs can provide cost benefits such as economies of scale and centralized program management. A co-op can collaborate with other co-ops, with the G&T cooperative, with the statewide association or with a state or regional program. Collaboration can open opportunities to attract resources or to purchase the goods or services needed to scale a program up. For example:

• Program tracking software reduces administrative time and improves program quality, but it may take several co-ops working together to justify the cost of the software.

• One co-op may have a staff person trained in energy auditing, while another has a staff person familiar with state regulatory and legal requirements. Co-ops can share staff resources.

• Co-ops working together are in a better position to hire implementation contractors or other contracted services, as a larger contract can attract interest from a wider variety of contractors.

Another NRECA report, Practical Partnerships: Collaborative Approaches to Energy Efficiency, gives examples of successful collaborations between co-ops and the benefits that they have seen in their programs. The report suggests some first steps for exploring collaboration, including researching and talking with your nearby co-ops, your G&T, your statewide association, and any other organizations that could make sense as collaborators. Ideally, collaboration will leverage the strengths of each partner. Some questions to consider:

• Is one of these organizations already implementing a financing program? • Do your members and another co-op’s members have common needs and characteristics? • What skill or resource could your co-op bring to a potential collaboration?

o Member relationships and marketing o Billing and collection process

• What resources and skills could a financial partner bring? o Loan administration, underwriting, and loan-processing experience o Understand and comply with state/federal lending laws

• Is there need for additional expertise of a 3rd Party? • Is there a statewide organization or non-profit that could facilitate a collaborative financing

program so that multiple small utilities or co-ops could work together on program implementation?

Collaborate with other utilities or

another organization to

achieve benefits like economies

of scale and shared staffing.

https://www.cooperative.com/interest-areas/CRN/products-services/TechSurveillanceMagazine/Documents/ts_multicoop_collaboration_january_2016.pdf

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Collaboration can have major benefits, but can also bring challenges. As noted in the report, each collaborating co-op will likely need to make compromises on program design and may have a program with a different look and feel from their own branding. In addition, expecting equal contributions of staff and resources may not be realistic, especially if the co-ops working together are different in size. When collaborating with other co-ops or organizations, it is advisable to set clear expectations to alleviate any

future frustrations.

Throughout any collaborative efforts, please keep antitrust laws in mind and consult your co-op’s attorney with questions.

1.1.6 Organize financing project team A successful financing program needs a successful project team, which will include internal staff members, external community members, and potentially, outside professionals. You may find that you need to work with a third-party consultant before fully assembling your internal team, or that you should engage extensively with external stakeholders throughout the process—consider the different iterations that will be best for your co-op, rather than simply taking these steps sequentially.

Choosing an internal team Internally, your co-op should have a lead project manager for the financing program. That person should be supported by a team of other staff members who can provide input as the program is designed. Some key actions to take as you set up your internal team:

• Identify relevant staff and assign program roles and responsibilities to each team member • Identify a Board liaison or champion who will help answer questions from Board members or

the GM/CEO that arise outside of Board meetings • Hold a standing meeting time to discuss the program as it is designed and implemented • Review roles and responsibilities periodically to make sure one staff person is not overloaded

The staff involved may change as the program as implemented. Developing a staffing plan for the program is discussed in Section 3 of this document.

Collaboration and South Carolina’s Help My House

In 2010, the Electric Cooperatives of South Carolina (ECSC) launched an on-bill financing pilot program for energy efficiency measures with eight of the twenty cooperatives in South Carolina called Help My House. The program is an example of the benefits of collaboration between co-ops and with a central organization. ECSC developed customizable marketing materials for participating co-ops, coordinated with a third-party loan administrator, and managed funds and expenses. Some co-ops were able to manage the remainder of the pilot program themselves, while others needed assistance. Lindsey Smith, Vice President of Education at ECSC shared, “Some co-ops had existing staff members with BPI [Building Performance Institute] certifications who could manage the program locally for their members. Other co-ops needed help managing program operations and other tasks. We left it up to each co-op to determine what assistance they wanted from ECSC.” The pilot has since launched into a full program that five South Carolina co-ops are currently implementing. Ninety-six percent of participants reported the same or higher satisfaction with their co-op after participating in the pilot.

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Engaging external stakeholders Engaging externally in the design of your financing program can help increase support for your program, prevent problems, and alleviate concerns. These stakeholders can provide valuable input and advice. Some key stakeholders to work with could be:

• Local energy auditors • Contractors, such as HVAC professionals or solar installers • City, county, or state regulators and policymakers • General counsel or specialist with knowledge of relevant state and federal tax and lending laws • Relevant community organizations, such as community groups focused on clean energy or

affordable housing • Weatherization assistance programs • Real estate agents and organizations

Contact relevant stakeholders and consider when it makes sense to engage with them during your program design process.

Working with third parties Developing a financing program, especially if your co-op has little experience with EE, solar, or loaning money to its members, can be complex and time consuming. For many co-ops, it will make sense to work with a third-party administrator on some of or all of your financing program.

There are many companies and non-profit organizations around the country with experience and expertise in developing and implementing financing programs for EE and solar.

NRECA has a TechSurveillance series on hiring program implementers, which includes information on:

• Why a co-op may consider hiring a third-party program contractor • How to solicit information and bids from these contractors • A directory of some of the major firms that work with co-ops nationwide

Review this series and, as you are designing your program, consider where and when it makes sense to bring in outside expertise. Section 1.3.3 will expand on the ways that external support can assist with the specific challenges in a utility financing program.

1.2 Developing a Program Framework This Section highlights the key decisions your co-op will need to make about your program’s framework: who is the financing program for and what it will fund. The scale of the program can be adapted to meet changing needs and resources. To start a focused approach – where a co-op restricts itself to a specific financing source and a specific set of the end-use products can be highly effective in establishing a retail financing program. Following Board approval of the program, you will finalize the

KEY STEPS: 1. DETERMINE TARGET MARKET AND

PARTICIPATION GUIDELINES 2. SELECT ELIGIBLE MEASURES 3. ASSESS POSSIBLE PROGRAM SCALE

Implementation contractors have

experience working on successful

energy improvement

programs.

https://www.cooperative.com/interest-areas/CRN/products-services/TechSurveillanceMagazine/Pages/default.aspx

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details of this framework in your implementation plan (see Section 3), but you should know the key concepts of your approach before moving forward.

1.2.1 Determine target market and participation guidelines A key first step to developing the framework for an energy-related financing program is determining which of your member-consumers will be eligible for financing. Many existing financing programs target only residential consumers, but a few serve commercial consumers; some programs are open to both. How your co-op will determine participation will depend on the make-up of your membership and their particular needs; you likely have a target market in mind after researching your local market and establishing goals for your program, as discussed in Section 1.1.

Once you have determined a target market in your membership, you can set participation guidelines and parameters. For example:

• If you are targeting the residential market, what defines a residential building (e.g., four units or less)?

• Are homes that do not have electricity as their primary source of heating eligible? • Are tenants eligible? • If you are targeting lower income households, will you use an income guideline? • If you are targeting small businesses, what is the threshold that defines a small business (e.g.,

kWh use, kW demand, number of employees)? • If you are targeting non-residential members, are public institutions eligible to participate?

Setting creditworthiness guidelines is also a part of setting participation guidelines; Section 1.3.5 addresses this topic.

1.2.2 Select eligible measures Choosing the measures your program will finance is a key part of your program’s framework. You should consider the following questions when selecting eligible measures:

• What are your program’s goals? Do certain measures better target those goals?

• Does the source of capital that you are targeting limit your measures? • Is an energy audit required for participation in the program? Does an energy

auditor need to recommend the measures for them to be eligible? • Are distributed energy systems eligible? Are only certain types of systems

eligible? • Are non-energy measures eligible? For example, would asbestos removal or

replacing outdated knob-and-tube wiring be eligible measures? • Do the measures need to result in “bill neutrality”—that is, do the expected energy savings from

the improvements need to at least offset the monthly loan payments?

Research what nearby utilities are financing—do they have a

process in place for how

measures are screened?

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• Is fuel switching (e.g., switching from propane to electric heating) eligible?

1.2.3 Assess possible program scale Many utility programs end up operating at a certain scale without ever analyzing the scale that will best meet their specific goals. Small utilities often let staff availability dictate program scale without considering the many ways to streamline programs or exploring the possibility of hiring an implementation contractor to augment scarce staff resources. Considering the scale of the program is important for determining your staffing and budgeting decisions and how much capital you should seek. Start by answering these questions to help determine the scale:

• What is the size of the targeted market (e.g., how many residential households are in your territory)?

• How many contractors are available to do the work (e.g., how many solar installers work in the area)?

• What is the expected uptake of the program? How will different possible marketing strategies influence uptake?

In addition, consider economies of scale when designing your financing program. Larger programs can invest in the tools and resources that automate processes and minimize the staff time. These tools are what enables a program to ramp up to a larger scale. Most programs will have a high cost per participant when participation rates are low. As participation grows, fixed costs per participant will decrease.

1.3 Exploring Financing Options This Section discusses the important financial considerations

that should be determined before moving forward with your co-op’s financing program: how the program will be structured, use of a financial expert to help design and/or implement your program, sources of

KEY STEPS: 1. DETERMINE MEMBER REPAYMENT 2. SELECT A FINANCING MECHANISM 3. DETERMINE LEVEL OF EXTERNAL

SUPPORT 4. ASSESS AND CHOOSE SOURCES OF

CAPITAL 5. CONSIDER STRATEGIES TO MITIGATE

RISK 6. DETERMINE BILLING AND PAYMENT

PROCEDURES

Examples of Eligible Measures from Co-op Programs

• Pedernales Electric Cooperative in Texas offers financing to its commercial and residential member-consumers for grid-tied Distributed Energy Resources, including solar photovoltaic systems and grid-tied battery systems installed by a participating vendor.

• A number of Arkansas cooperatives offer the Home Energy Lending Program (HELP), which funds recommended energy efficiency improvements following an energy assessment and installed by a participating contractor.

• Red River Valley Rural Electric Association in Oklahoma finances loans for air-source and geothermal heat pumps installed by approved contractors.

Financial consultants can help your co-op quickly decide and implement these options to

launch your program.

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capital, financial risk mitigation strategies, and billing and payment procedures. This Section does not tell you which options to choose, but lays out the options so that your co-op can determine what will work best for your program, member-consumers, and organization.

1.3.1 Determine member repayment: on- or off-bill? A key decision for your co-op’s financing offering is to determine whether a participant will make their financing payment on the monthly co-op bill or whether there will be a separate bill for the energy improvement payments.

Many utility financing programs use on-bill repayment, as it makes paying the bill more convenient. Consumers are already in the habit of paying their electricity bill, so it lowers the “hassle barrier” of participating in the program. In addition, having the payment on-bill can help a consumer better understand the connection between the monthly payment and the resulting lower energy bills (e.g., because of new solar energy from their rooftop system or a more efficient heat pump). Cooperatives should confirm bill additions are permitted by state law.

However, an off-bill repayment offering is also common in utility programs. Some co-ops, particularly those with older billing systems, prefer to have the payment off-bill to avoid making upgrades to billing system software. If working with a third-party capital lender, some lenders prefer to handle their own payments. However, note that having the payment off-bill, particularly if the bill comes from a third party, could diminish the connection the consumer makes between the energy improvement and the co-op. In addition, some limited evidence suggests that off-bill loans have higher default rates than on-bill loans—for example, some off-bill unsecured loan programs for EE have default rates in the mid-to-high single digits, compared to zero to three percent for on-bill programs (SEEAction, 2014).

1.3.2 Select a financing mechanism There are two primary financial instruments used for energy investments: loans and voluntary tariffs. Conventional consumer loans, commonly used for the purchase of vehicles, college tuition, and high-end appliances, are a very familiar financing instrument to consumers. Tariffs are less familiar to consumers, but they are a widely used instrument for utilities who are making investments and recovering costs. This Section delves into more details about the differences between the two financing instruments and provides questions co-ops should ask as they decide between the two.

Conventional loans Loan programs can either be on- or off-bill. If the co-op is securing or providing the capital for the program, the program is an on- or off-bill financing program. If the co-op is working with a third-party lender to provide the capital, the program will be an on- or off-bill repayment program. In

TVA and EnergyRight Solutions

Tennessee Valley Authority (TVA), a federal power marketing agency supplying power to more than 150 local power companies, including 48 cooperatives, has an on-bill financing program for heat pumps and weatherization measures. The program is offered in conjunction with Regions Bank, an Alabama-based bank and financial services company. Regions Bank lends about $40 million per year through the program, in exchange for a TVA guarantee. Participating power companies can be as involved as they want in the program, from the utility handling all the details to a TVA contractor administering a turnkey program, or a hybrid in-between.

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either case, loans are subject to a number of state and federal consumer lending laws and regulations. For this reason, many co-ops and utilities offering energy improvement loan programs engage the help of financial partners and coordinating implementation contractors who can help secure capital, ensure sufficient underwriting, and service the loan (this topic is discussed more in Section 1.3.2).

Most loan programs require that participants be in good standing on their utility bills, own the home they live in, have a satisfactory credit score, and/or provide tax returns or income verification to substantiate their financial ratios. Like personal or business loans, both on- and off-bill loans are usually nontransferable and must be paid off when ownership changes hands. However, a few states have passed laws allowing energy improvement loans to be attached to the meter: when ownership changes hands, the loan is transferred to the next consumer. Consulting with an attorney on proper loan requirements that comply with federal law is recommended.

Tariff-based financing Tariff-based financing is an on-bill repayment offering for energy improvements. Utilities issue tariffs to describe their terms of service, including rates and fees for particular services. Utilities frequently offer tariffs on a voluntary basis—for example, voluntary “green power” tariffs can provide utility customers with the option of paying a premium to purchase renewable energy. A voluntary tariff for energy

efficiency or rooftop solar enables building owners to purchase and install money-saving measures with no up-front payment and no new debt obligation. Those who benefit from the savings pay for these products through a tariffed charge on their utility bills, but only for as long as they occupy the location where the products are installed. When they vacate the premises, the tariffed payment obligation is transferred to the next owner or occupant who benefits from the energy savings and takes over the tariff payments.

Most tariff programs require that the tariffed charge to be less than the projected monthly energy cost savings (this concept is often referred to as “bill neutrality”). For example, some tariff programs require that energy investments generate estimated savings that are 25 percent higher than the fixed charge calculated to recover costs.

The tariff structure can be beneficial for renters. Landlords commonly do not want to finance energy improvements because they will not realize the benefit if their tenants are paying the energy bills; a tariff allows the cost and the benefit to stay with the residents. Financing programs that use a tariff-based approach to financing upgrades typically

only use utility bill payment history to qualify participants—and therefore can attract underserved consumers who may have tarnished credit.

How Tariff-based Financing Programs Can Benefit Low-Income Members and Renters

Midwest Energy, an electric and natural gas co-op in Kansas with 48,000 member-consumers, offers a tariff-based energy efficiency financing program called How$mart® and about a fifth of participants are low-income and/or renters (Dreiling, 2015). Midwest’s program has also produced compelling member satisfaction benefits: 97% of How$mart® participants are satisfied with Midwest Energy compared to only 85% of all members. This statistic is notable because about one third of program participants enter the program as a high-bill complaint (ACEEE, 2012).

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Overall, meter inactivity as the result of foreclosure is the most common risk with tariff programs, but this risk is low because new occupants are obligated to begin paying the tariff. No utility with a tariffed on-bill program for EE has reported disconnecting a participant for non-payment (EEI, 2011).

The Energy Efficiency Institute, Inc. (EEI), a Vermont-based firm, pioneered the voluntary tariff approach to EE financing in New Hampshire in 2001. They refer to their approach as the Pay As You Save® (PAYS®) system. The trademarked PAYS® program platform has these essential elements:

1. A tariffed charge assigned to a meter location, not to an individual customer; 2. Billing and payment on the utility bill with disconnection for non-payment; and 3. Independent verification that upgrades/products are appropriate and savings estimates exceed

payments in both the near and long terms.

Although not all voluntary tariff-based EE financing programs are PAYS® programs, most co-ops and utilities that use the tariff approach to financing have received some level of assistance from EEI (Lachman, 2015).

Table 1. Characteristics of Loans vs. Tariffs

Loan Tariff Allowable repayment mechanism?

On-bill or off-bill On-bill only

Where does the financial obligation lie?

Usually the individual who applied for the loan, but some states allow loans to be attached to meter, so if the resident moves, the next resident takes over the loan payments

Most often with the meter—if the member-consumer moves, the tariff stays where the energy improvements were made and the new resident takes over payments

Disconnect for non-payment? Sometimes Usually yes What laws are applicable? Federal and state consumer lending

laws, possibly some state public utility commission regulations

Tariff regulations from state public utility commission, if applicable

Is bill neutrality a common program requirement?

Bill neutrality is rarely required for loan-based financing programs

Bill neutrality is a requirement for nearly all tariff-based financing programs

Selecting a Loan versus a Tariff When deciding which instrument will work best for your program, consider these questions:

• Is reaching low-income consumers a priority for your program? How many people in your service territory are renters?

o Because tariff programs generally have less stringent creditworthiness standards and do not require participants to own their homes, a tariff could be a better financial mechanism to select for a co-op with a high percentage of renters or for co-ops that have a goal of serving low-income member-consumers.

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o A loan program with less stringent credit requirements, such as a lower credit score and a good utility bill history, could also help serve lower income member-consumers (see Section 1.3.4).

• Is there already a tariff-based energy improvement program in your state? o Using a tariffed-based model to finance energy improvements is still a relatively new

financial mechanism. As of 2016, there are 13 voluntary tariff programs in existence and two programs in development. Although many co-ops are exempt from strict public utility commission oversight, the concept could still be challenging if there is not state or regional precedent.

o States with active voluntary tariff programs include California, Georgia, Kansas, Kentucky, New Hampshire, and North Carolina. Voluntary tariff programs are under development in Arkansas and Tennessee.

• How do you plan to capitalize your program? o Can you run your loan or tariff program with internal funds or do you need to augment

your program with outside sources of capital—either private or public? Most financial partners and lenders are familiar with loans and the laws that govern them and therefore are more comfortable capitalizing loan programs, not tariff programs. Only one tariff-based energy improvement program has had a private lender agree to capitalize their program. This example suggests that there could be an appetite for funding tariff-based energy improvement programs among private lenders, especially among mission-driven lenders such as community development financial institutions (CDFIs). Most co-op tariff programs use either co-op capital or federal funding sources that explicitly can be used with tariff programs (e.g., EECLP funds).

• Is there a packaged program or service you could sign onto for a loan or tariff program? o Signing up for or buying into a packaged program can greatly reduce the effort and costs

for program planning and development. For example, the TVA program discussed in section 1.3.2 is offered to all of TVA’s local power companies, including 48 electric cooperatives.

1.3.3 Determine level of external support After determining the financing mechanism, your co-op will need to determine what level and kind of external support you will need to implement the program effectively. Financing programs can be complicated—all co-ops will need at least some external expertise to help implement the program legally, effectively, and successfully.

There can be a spectrum of external involvement:

• At one end of the spectrum, a co-op may contract with a financial partner to design and implement the financing program and collect payment from members. In this case, the co-op role would be limited to promoting the program, while the financial partner handles all the implementation details such as developing the financial mechanism, originating and servicing of loans, managing delinquent accounts, answering member questions, and collecting

Any entity assisting in the financial

administration of a retail-financing

program must have underwriting

experience and be equipped to meet all

the state/federal lending laws.

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Financial Partner Co-op

payments off-bill. In some cases, there may be multiple partners to handle different aspects of the program.

• On the other end of the spectrum, a co-op could handle all of the financing in-house, but work with an external expert to review specific consumer lending laws or tariff regulations to ensure compliance with federal and/or state rules.

• Most co-ops, however, will fall somewhere in the middle of this spectrum. For example, a co-op could contract with a financial partner to review legal and financial regulations and perform key tasks, such as credit screening and loan origination, but the co-op markets the program, answers member questions, reviews applications, and collects payments on the utility bill (see Figure 1). The textbox below gives examples of organizations that can help with financial administration or consultation.

FIGURE 1. A POSSIBLE DIVISION OF RESPONSIBILITIES

Who can help with financial administration?

• Private financial partners: These companies provide turnkey or customized finance program administration. Examples are Renew Financial and Energy Finance Solutions.

• Community development financial institutions (CDFIs): CDFIs are private mission-driven institutions that help finance underserved markets, such as rural communities or low-income markets. Examples of CDFIs that have helped fund energy-related financing programs are Craft3 and Reinvestment Fund.

• Local credit unions/banks: Credit unions are member-owned financial cooperatives that function similarly to banks. Many credit unions have missions intended to support economic and community development. Credit unions and private banks are sometimes willing to help administer an EE or solar financing program. It is critical that the co-op ensures that any entity assisting in the financial administration of a retail-financing program is equipped to meet all the state/federal lending laws and has underwriting experience. For utilities interested in internally administering loans, financial consultants (e.g., Harcourt Brown & Carey, Capital E) can provide guidance in setting up the necessary systems and processes. Utilities interested in a tariff model can work with an organization like the Energy Efficiency Institute (EEI) that can help navigate the different state regulatory landscapes for tariff-setting. Third-party program implementation contractors and consultants with experience with EE and solar (e.g., CLEAResult, Franklin Energy, WECC) are also familiar with financing programs and processes and can help your co-op through the program design process and highlight when additional expertise on financing may be valuable.

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1.3.4 Assess and choose sources of capital The source of capital will play an important role in many other aspects of your program’s design. Assess each possible source of capital carefully and determine whether your co-op should pursue it for your financing program. Your program could use a combination of funding sources.

Internal co-op funds: The amount of internal co-op reserves that could be used for a financing program will depend on the amount of cash on hand, any co-op policies about minimum cash level, and whether using funds could be detrimental in some way to the co-op (e.g., not enough cash available for other purposes). Using internal co-op funds gives the co-op more flexibility in determining eligible measures, target market, and program procedures. Setting up the program as a revolving loan program could allow interest and principal payments to fund new loans. However, a program funded by internal funds could be size-constrained.

USDA RUS Funding: Co-ops can apply for several loan and grant programs from the U.S. Department of Agriculture’s Rural Utilities Service. To be eligible for the first two loan funds described below, a co-op needs to serve an area that satisfies the USDA’s rurality determination (see textbox to the right). These programs are a good source of low-cost funding, but have significant application processes and reporting requirements.

• Energy Efficiency and Conservation Loan Program (EECLP): This loan program is available to organizations providing retail electric services to consumers. The loans can be re-lent for the purposes of improving energy efficiency, reducing overall system demand, and/or encouraging renewable energy or demand side management. Loans are limited to 15 years, unless measures funded have a longer life than 15 years (e.g., ground source loop investments). EECLP does not have a specified limit, and applications are accepted on an on-going basis (RUS, 2016). RUS provides the loans out of a fund that is typically authorized to lend several billions of dollars per year.

• Rural Energy Savings Program (RESP): The RESP program provides rural utilities with zero-percent interest loans to implement EE measures, with terms of up to 20 years. Co-ops can then re-lend to consumers at up to a three percent interest rate for up to ten years. Funding for RESP depends on a Congressional appropriation: for fiscal year 2016, Congress appropriated $8 million, which RUS can use to buy down the

What is “Rural?”

For each program it offers, RUS evaluates several factors to determine whether an area qualifies as rural. The EECLP definition is “a town, or unincorporated area that has a population not greater than 20,000 inhabitants… Eligible communities can be combined into service territories that exceed 20,000 (RUS, 2016).”

RUS encourages interested organizations to contact a General Field Representative with more questions. http://www.rd.usda.gov/contact-us/electric-gfr

As part of the financial due diligence, a co-op

should explore financing options from private lenders in addition to RUS. Tax Credits and other deductions can

make them competitive with low-cost RUS

financing.

http://www.rd.usda.gov/contact-us/electric-gfr


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interest rate for over $50 million in zero-interest loans. Applications are accepted during an open window, rather than on an on-going basis (RUS, 2016b).

• Rural Economic Development Loan & Grant Program (REDLG): This is a loan and grant program for non-profit utilities that develop projects with economic development benefits in a rural area or town with a population of up to 50,000. Applicants can request up to $1 million in loans and $300,000 in grants to establish a revolving loan fund. Co-ops in South Carolina and Kansas have received REDLG funds that they have re-lent to their members for EE projects. Applications are accepted on an on-going basis (RUS, 2016c).

State or local governments: Your state or local government could offer funding for a loan program. Talk with your state energy office to see if loan or grant programs are available.

Private lenders: There may be private banks, credit unions, cooperative banks, or community development financial institutions (CDFIs) that could provide capital to support EE or solar financing—or, depending on your program, there may be an opportunity to work with multiple providers of capital. Generally, private lenders are interested in working with utilities who can bring a sufficient volume of loans into the program—so, working with these lending institutions can bring a program to scale quickly. However, creditworthiness criteria may be more restrictive and product terms may be less attractive for members; using credit enhancements strategies (see Section 1.3.4) and having on-bill repayment can help improve the terms.

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How much capital will you need?

Determining how much capital your co-op will need for your program will depend on the answers to a few questions:

• What do you anticipate the average project to cost? • How many member-consumers are likely to participate in the program? • What terms will the financing have (e.g., loan terms, interest rate)? How do these loan

terms compare to other financing options available to members? • Will your co-op set-up a revolving loan fund (i.e., repaid funds will be used to fund new

projects)?

It can be difficult to know the answer to these questions before the program starts. However, making some estimates can give you a good idea of how much capital you will need to run your program.

For example, Roanoke EMC in North Carolina capitalized its tariff-based Upgrade to $ave EE financing program with $6 million in funding from EECLP. In its request for funding, Roanoke EMC explained how the program would be open to all members in good standing, though targeted at residential consumers. The EECLP application estimated that Roanoke EMC would serve an average of 200 residential consumers per year over four years, with an average project cost of $7,500. Payments would be made on the electric bill, over a period of ten years, and Roanoke EMC will repay the EECLP funds over a period of fifteen years.

By comparison, a loan program could fund smaller investments, such as appliance upgrades; be open to a more limited selection of members, such as those with good credit; and have shorter loan terms with repayments that fund new projects. A program with this financing structure would require less capitalization.

In addition to these variable costs, co-op should develop an estimate of fixed costs, such as staff salaries and benefits, office expenses, and software needs, in determining their capital needs. Some ideas for reducing administrative fees as a proportion of your program:

• An administrative fee covered by participants can help or completely offset your administrative costs

• Contractor marketing can be very effective, bringing down your marketing needs. • Increasing the volume of loans your program makes will

Another NRECA TechSurveillance paper, Strategies to Cut Costs of Energy Efficiency Programs, has some other ideas for how a co-op can streamline their member energy improvement programs.

1.3.5 Consider strategies to mitigate financial risk Nationally, utility financing programs experience low default rates: an assessment of 28 on-bill financing programs found default rates between zero and three percent (SEEAction, 2014). Co-ops also see low

http://www.nreca.coop/wp-content/uploads/2016/04/CuttingCostsofEnergyEfficiencyPrograms.pdf

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levels of default across all bills—nationally, the average for uncollected bills at co-ops is about 0.4 percent (ACEEE, 2011).

However, every financing program contains some degree of financial risk that must be borne by someone. Co-ops need to decide what level of risk they are willing and able to take on, which will likely depend on the co-op’s financial situation and source of capital.

Many utility loan programs offer unsecured loans, but requiring security for a loan is a common mechanism for reducing risk. Loans can be secured by placing a lien on the home. A lien can also be placed using a Universal Commerce Code (UCC) filing, which is typically attached to something that is installed in the home. This type of lien requires payment upon sale of the home. (Fuller, 2009)

Below are two additional strategies for addressing and mitigating risk. In addition, setting consequences for nonpayment, such as having the authority to disconnect (discussed in Section 1.3.6) can help mitigate risk.

Creditworthiness criteria Existing utility financing programs use a range of methods for assessing a consumer’s creditworthiness prior to issuing a loan. A utility may use multiple criteria in evaluating a consumer. Common methods include:

• Credit score: Does the consumer have a high enough credit score? Existing co-op financing programs may approve applicants with a credit score as low as 620 or may require a score as high as 760.

• Utility bill payment history: Does the consumer have a good payment record with the co-op (e.g., no missed payments in two years)?

• Recent bankruptcy or foreclosure: Has the consumer had a bankruptcy or foreclosure in a certain period (e.g., past seven years)?

• Debt to income ratio: Will the total debt the consumer must pay be less than a specified percentage of income?

• Ownership: Does the member own the building in which energy improvements will be made?

As mentioned above, utility financing programs experience low levels of default, regardless of the creditworthiness criteria. However, using a criterion that focuses on utility bill payment history rather than credit scores or debt-to-income ratios decreases the decline rate for the programs (SEEAction, 2014). Using such a criterion can help your program better reach members with credit challenges. Consider which creditworthiness criteria will best help you reach your target market, while balancing any requirements from your partner lender or source of capital.

Credit enhancements Credit enhancements protect the lender from losses in case of borrower default or delinquency. Your financial partner can help you determine what credit enhancements are best suited to your program and your budget. Setting up credit enhancements can encourage a financial partner to work with your co-op and provide benefits to your members, such as a lower interest rate, longer loan terms, or less stringent creditworthiness criteria (covered above).

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Common credit enhancements include:

• Loan Loss Reserves (LLR): With an LLR, a portion of the capital funds are set aside to cover a portion of any losses from defaults or delinquencies. The amount of funds set aside and the portion of losses that can be recovered is negotiated between the lender and the co-op. The LLR generally sits in an escrow account.

• Loan Guarantees: Unlike LLRs, loan guarantees do not typically require an initial allocation of funds; instead, loans are guaranteed by the full faith and credit of the guaranteeing entity. Loan guarantees could cover all the loans in a portfolio, but they may also only be limited to a certain number of loans, to a certain dollar amount, or for a certain period.

• Debt Service Reserve Funds (DSRF): Like a LLR, a DSRF sets aside a limited reserve of initial capital. However, these funds are to cover overdue debt payments, rather than full defaults. These are commonly used when having consumers in arrears, even for a short time, could be severely detrimental to the lender.

• Subordinated/Senior Capital Structure: In this structure, a lender would contribute “senior” capital that funds the loan, while the co-op or another funding source contributes “subordinated” capital that would cover any losses. Unlike a LLR, subordinated capital could be invested and earn interest.

1.3.6 Determine billing and payment procedures The following are the final financing design decisions that need to be made for the member-facing requirements: (1) If the payment be made on-bill, what changes are needed to billing processes? (2) What will be the consequences of non-payment, and (3) How will transfer of the property affect the financing?

On-bill payment procedures As discussed in Section 1.3.1, whether loan payments are repaid on- or off-bill is a key consideration. If your co-op determines that energy improvements will be repaid on the monthly bill, determine the following:

• Will changes need to be made in your billing system software? Particularly for co-ops with older billing systems, being able to account for interest amortization and late, early, and partial payments can be complicated and require an upgrade. However, for some newer billing systems, integrating a new payment is as simple as clicking a button.

• If your co-op offers a prepaid metering option, how will a new on-bill charge factor into payments. Some co-op charge pre-pay participants for recurring monthly charges all at once, while others break a charge into daily charges.

Consequence of nonpayment Default rates for utility financing programs and for all electric cooperative payments are typically low. Nevertheless, your co-op should have a procedure in place for what happens in the case of non-

Software to automate administration of

programs can reduce staff time and increase

accuracy. Co-ops should work with their CIS

vendor to ensure billing systems are able to perform the needed

tasks.

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payment and ensure that the procedure is compliant with any applicable federal and state laws. Consider the following questions:

• How many warnings will you give for nonpayment? • Will you allow partial payments? If the loan is repaid on-bill, do partial payments first go toward

the electricity bill or toward the loan? • Will there be penalties for late payments? • Utility disconnection is one of the most common consequences for nonpayment, particularly for

on-bill programs. What are the laws or utility regulations in your state with regard to utility disconnection for nonpayment? Does the lender recognize electricity disconnection as security on the loan?

• Are there other means for securing the loan, such as a lien on the property?

Transfer of ownership procedures If a program participant moves, does the loan stay with the residence, does it move with the consumer, or does it need to be paid off? Many utility financing programs are non-transferable and must be paid off when the ownership changes hands. However, some allow for transferability to the next resident. As discussed in Section 1.3.1, in voluntary tariff programs, the tariffed charge stays on the utility bill at the residence, but transfer of ownership requires a disclosure to the next owners. If your co-op is using a voluntary tariff, develop a process to ensure that title companies disclose this tariff before new owners close on the property.

1.4 Developing and Presenting the Business Plan The above three Sections lay the foundation for your co-op’s financing program. This Section will cover the key steps for developing a business plan for your financing program for EE and solar and presenting that plan to your GM/CEO and Board. Although a business plan can mean many things to different organizations, this Section is intended to help program managers answer and address key questions and concerns that their GMs/CEOs and Boards may bring up. Although operational elements of a program are important, this Section focuses on assessing the financial viability of a program and anticipating and managing program risk. Taking this step is important for any successful program, whether self-financed or funded with external funds.

If applying for EECLP funds, developing a business plan is a key requirement for the application. The EECLP Business Plan should include the following pieces, some of which are covered in Sections 2 and 3 of this guidance document:

a. Executive Summary b. Organizational Background c. Marketing Plan d. Operations Plan e. Financial Plan f. Risk Analysis

KEY STEPS: 1. DEVELOP A BUDGET 2. UNDERTAKE A RISK ANALYSIS AND

MITIGATION PLAN 3. PRESENT AND SEEK BOARD

APPROVAL

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Following this Board presentation, your co-op will have direction on whether to move forward with completing the design (or re-design) of the program and starting implementation.

1.4.1 Develop a budget Based on the financing structure, the program scale and target market, and the available capital, your program should develop a preliminary annual budget for your financing program. A program budget (“Financial Plan”) is also required as a part of applying for EECLP funds. This Plan should include sources of funds, an itemized budget for each activity, an aggregate cost-effectiveness forecast, provision for loan loss reserves (when applicable), and expected loan delinquency and default rates.

A program budget should be structured to provide the information required by co-op management, by the entities providing capital, or by partners. A common criterion applied to program budgets is cost-effectiveness. Some categories typically included in a program’s budget are:

• Internal staff labor and benefit costs • External program support (e.g., financial experts, program implementers) • Financing costs (e.g., fees to lender) • Any costs from added incentives (e.g., interest buy-down, rebates) • Training costs (e.g., local contractor training) • Marketing costs • Evaluation costs • Other direct costs (e.g., travel, office supplies)

1.4.2 Undertake a risk analysis and mitigation plan Before presenting the program design and budget to your Board, it is helpful to undertake a risk analysis and develop a mitigation plan for addressing those risks. This analysis will build on your understanding of the potential program challenges developed in Section 1.1.1. Undertaking such an exercise will help your co-op anticipate the questions that could arise during the Board presentation. Developing a Risk Analysis is also a requirement for applying for EECLP funds.

Some possible risks that any utility financing program could face:

• Participation is lower than expected. • Participaton is higher than expected, and staff or funds are not able to keep up. • Members most in need of financing are unable to qualify. • The loan application process is too complicated. • Interest rates are too high from the lender. • The lender provides poor customer service. • Program administration takes more staff time than anticipated. • Program costs are higher than anticipated (e.g., marketing costing, training costs, external

support costs). • Default rates are higher than expected. • Prices for key measures increase or electricity costs decrease, substantially changing the cost-

effectiveness of the program.

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Your program may have additional risks specific to your co-op or local market. Create a list of all of these risks, consider their likelihood, and determine how your co-op and program would address each risk to mitigate its impact on the program.

1.4.3 Present and seek board approval With a program framework, financing options, budget, and risk analysis in place, your program can go before the GM/CEO and Board to seek approval. When presenting, be prepared to present all the costs and benefits to the co-op. Costs to consider include the budgeted costs of the program, as well as the potential for decreased sales from increased efficiency or solar use. Monetary and non-monetary benefits to consider include:

• Additional revenue from interest payments, loan administration fees, or application fees • Energy savings for the loan recipient • Energy savings for the co-op (and reduced power purchases) • Non-energy benefits (e.g., increased member comfort and satisfaction, decreased shut-off

notices) • Meeting regulatory requirements • Demand savings and load management and reduced cost of power purchases • Increase in electric sales if beneficial electrification

Depending on your Board’s process, you may present on the program at each stage of program development, from whether to pursue design of the program to finally launching the program and ask for periodic input, or you may only present and seek approval at key junctures. Your Board liaison should work closely with your CEO/GM to determine the best way to work with your Board to get the information that both sides need. The example below from Pedernales Electric Cooperative describes how this co-op worked with their Board on their program’s business plan.

Key Program Decisions

Before presenting to your Board, do you have a clear answer to each of these questions?

Who is the program for?

How will participants be screened?

What measures are eligible?

Will financing be through a loan or tariff?

How will the program be funded?

Who will administer the program?

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Pedernales Electric Cooperative’s Empower Loans

Pedernales Electric Cooperative (PEC) in Texas is one of the largest electric cooperatives in the United States, serving more than 200,000 members. In 2016, PEC began offering Empower Loans, which provide members with up to $20,000 for Distributed Energy Resource systems, including solar photovoltaic systems and grid-tied battery storage.

PEC developed this program to respond to member demand for solar—some nearby municipal and investor-owned utilities offered their customers rebates for solar systems, and members were asking PEC for a similar offering. PEC determined that offering a financing program for distributed generation, rather than a rebate program, would provide the following benefits:

• Help meet member demand and provide substantial incentives to members • Eliminate non-participant costs • Provide revenue in the form of interest to the co-op • Defer or avoid additional generation capacity

With this analysis, PEC was able to show its Board that the financing program was economically viable and a benefit to both the co-op and the members. Once the Board was convinced of the value of the program, PEC solicited their input and ideas on program design and kept the Board updated throughout the design and implementation process. Some of the key program design decisions that PEC worked with its Board on were:

• Target market: The program is open to all residential and commercial members. The program launched in early 2016, and PEC will begin marketing the program more aggressively now that the program has had some time to work out any implementation issues.

• Participant eligibility: Members must be in good standing with the co-op, have a qualifying credit score, own the property where the system will be located, and have an annual income at least three times the loan amount.

• Eligible measures: Any distributed energy resource system is eligible, though the main focus is on solar PV systems. Before a solar PV system is approved, the member undergoes an energy audit and site assessment to determine what sizing is appropriate, whether there are efficiency upgrades to make, and whether the site is appropriate for solar.

• Loan or tariff: The program is an on-bill loan, with a loan term of 10 years or less. Peter Muhoro, Chief Strategy Officer of PEC, noted that while a voluntary tariff could help the program reach more members, it is a relatively new concept that has not yet been implemented in Texas.

• Source of capital: Currently, the program is capitalized with internal funds. • Internal or third-party administration: PEC worked with a consultant to ensure that the program is in

compliance with lending laws, but otherwise administers the program internally. “The learning curve for financing administration was steep,” said Muhoro, who further noted that developing and administering the program internally was complex and took more time than originally anticipated, which delayed the launch of the program by a few months.

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Appendices Appendix A: Resources

• Reference material such as studies, reports or webinars • Resources - including public agencies, nonprofits or private consultants - that could be of

assistance or be collaborators

Appendix B: EECLP Road Map • This road map would direct the reader to all of the appropriate sections in this document that

related to how to develop an EECLP Business Plan

Appendix C: References [ACEEE, 2011] Bell, Catherine J., and Steven Nadel, Sara Hayes. “On-Bill Financing for Energy Efficiency Improvements: A Review of Current Program Challenges, Opportunities, and Best Practices.” ACEEE. December 2011. http://aceee.org/research-report/e118

[ACEEE, 2012] Can On-Bill Financing Become a Replicable Solution for Rural Electric Cooperatives? ACEEE. 2012. http://aceee.org/files/proceedings/2012/data/papers/0193-000054.pdf

[CEE, 2013] http://library.cee1.org/content/cee-2013-annual-industry-report-data-graphics/

[CEE, 2015] http://library.cee1.org/content/cee-2015-annual-industry-report-data-charts

[Dreiling, 2015] Personal Communication with Brian Dreiling, Manager of Energy Services at Midwest Energy, on September 9, 2015.

[DSIRE, 2016] http://www.dsireusa.org/

[EEI, 2011] Energy Efficiency Institute, Inc. (EEI). Pay As You Save® (PAYS®) Presentation by Paul Cillo to the Keystone Energy Efficiency Alliance. March 2, 2011. http://eeivt.com/wordpress/wp-content/uploads/2013/02/KEEAPresScript.pdf

[EPA, 2016] https://www.epa.gov/cleanpowerplan/clean-power-plan-existing-power-plants

[E Source, 2015] https://www.esource.com/system/files/files/2015-04/ESource-MRS-DS-10.pdf

[E Source, 2015b] https://www.esource.com/system/files/files/e-source-mrs-ds-29-net-metering_1.pdf

[Fuller, 2011] http://uc-ciee.org/all-documents/a/337/113/nested

[Improvenet, 2016] http://www.improvenet.com/r/costs-and-prices/heat-pump-installation-cost-estimator

[J.D. Power, 2014] https://www.jdpower.com/sites/default/files/2014%20CIR%20-%20Energy_Efficiency_Program_Alerts_Exec.Summ_.pdf

[LBNL, 2016] https://emp.lbl.gov/sites/all/files/lbnl-1005754.pdf

[Lachman, 2015] Personal communication with Harlan Lachman, EEI, on October 23, 2015.

http://aceee.org/research-report/e118

http://aceee.org/files/proceedings/2012/data/papers/0193-000054.pdf

http://library.cee1.org/content/cee-2013-annual-industry-report-data-graphics/

http://library.cee1.org/content/cee-2015-annual-industry-report-data-charts

http://www.dsireusa.org/

http://eeivt.com/wordpress/wp-content/uploads/2013/02/KEEAPresScript.pdf


https://www.epa.gov/cleanpowerplan/clean-power-plan-existing-power-plants

https://www.esource.com/system/files/files/2015-04/ESource-MRS-DS-10.pdf

https://www.esource.com/system/files/files/e-source-mrs-ds-29-net-metering_1.pdf

http://uc-ciee.org/all-documents/a/337/113/nested

http://www.improvenet.com/r/costs-and-prices/heat-pump-installation-cost-estimator


https://www.jdpower.com/sites/default/files/2014%20CIR%20-%20Energy_Efficiency_Program_Alerts_Exec.Summ_.pdf


https://emp.lbl.gov/sites/all/files/lbnl-1005754.pdf

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[RUS, 2016] http://www.rd.usda.gov/programs-services/energy-efficiency-and-conservation-loan-program

[RUS, 2016b] http://www.rd.usda.gov/programs-services/rural-energy-savings-program

[RUS, 2016c] http://www.rd.usda.gov/programs-services/rural-economic-development-loan-grant-program

[SEIA, 2016] http://www.seia.org/news/us-solar-market-sets-new-record-installing-73-gw-solar-pv-2015

http://www.rd.usda.gov/programs-services/energy-efficiency-and-conservation-loan-program


http://www.rd.usda.gov/programs-services/rural-energy-savings-program

http://www.rd.usda.gov/programs-services/rural-economic-development-loan-grant-program


http://www.seia.org/news/us-solar-market-sets-new-record-installing-73-gw-solar-pv-2015

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Section 2: Creating an Implementation Plan

After receiving Board approval of the business plan, your co-op can now create a program implementation plan. How complicated and detailed your implementation plan is will depend on the size and scope of your program—the bigger you expect your program to be, in terms of number of projects financed and total financing amounts, the more detailed your implementation plan should be. If you already have an EE or solar program in place and only need to add a financing offering to support the program, your work on an implementation plan will be much less involved, and should focus on financing administration (Section 2.2).

This section describes the main pieces of the implementation plan for an energy improvement financing program:

• Measure screening • Financing administration • Contractor and trade ally engagement • Program data tracking • Marketing and outreach

For each area, your project team should develop a list of the activities that need to happen, the projected costs, and the timeline. Together, these pieces will form an overall implementation plan, timeline, and budget.


Business Plan


Plan



Program


Program

Section 2 describes the major pieces of your program’s implementation plan. Key points from this section:

• How comprehensive and detailed your implementation plan is will depend on the size and scope of your program—bigger programs will need bigger plans.

• The most important pieces of your financing implementation plan are for: measure screening, financing administration, contractor and trade ally engagement, program data tracking, and marketing and outreach.

• For each piece of your implementation plan, there should be a list of activities, a timeline, and budget. This information will help develop the overall project implementation plan, including the timeline and final project budget.

Set a limit for how much time

to spend implementation

planning: you want a good plan, not a

perfect one!

32


Table 2. Implementation Plan – Key Steps

Section Key Step Key Content

Screening and Approving Measures

Approving energy efficiency measures

Determine how your co-op will determine eligible measures, whether you will require energy audits, and how energy savings will be measured

Approving solar measures

Determine whether energy efficiency will be required, how site assessments will be conducted, and how to serve member-consumers with unsuitable sites

Administering Financing

Determine underwriting procedures

Develop a process for how a member-consumer’s credit is assessed and other qualification criteria

Define conditions for origination and loan disbursal

Determine when and how loan funds will be paid

Finalize servicing procedures

Plan for how the member-consumer will repay loan funds to the co-op or financial partner

Engaging Contractors and

Trade Allies

Develop a Quality Assurance Plan

Develop a plan to address the safety and quality of energy improvements

Recruit contractors Let available contractors know about your program, what the benefits are, and what would be expected of them

Screen and select contractors

When selecting contractors to participate, consider setting screening guidelines to help protect your member-consumers

Plan for training and ongoing engagement

As needed, develop training or other materials to educate and engage participating contractors

Developing a Marketing Plan

Plan for target market outreach

Select appropriate venues and events to advertise the program to your targeted market

Determine needed program materials

Decide which program materials (e.g., flyers, social media postings, websites) are needed for outreach

Train internal staff Educate internal staff about the program and conduct any needed training

Tracking Program Data

Determine your purpose for data collection

Ask why you need to collect data—this will help inform your data-tracking approach

Assess and select data collection instruments

Assess your various data collection instruments (e.g., forms, audit reports) and determine how they can be designed to collect the data you need with minimum duplication and maximum accuracy

Automate and streamline data collection

Pick a method for how you will track your data and determine who will enter it

Develop Overall Project

Implementation Plan

Create implementation timeline

Based on needed program activities, create a timeline to ensure coordination

Finalize implementation budget

With the implementation plan and timeline, finalize your budget

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2.1 Screening and Approving Measures In Section 1.2.2, you decided which measures would be eligible for financing. For the implementation plan, you should finalize the details for how these measures will be screened and approved by your program.

Developing a plan for how measures will be screened and approved does not need to be complicated; there are existing standards and programs that your co-op can work from. For example, neighboring utilities may have a program that you can emulate, your state may have a Technical Reference Manual, or you can use an existing standard, such as Home Performance with ENERGY STAR (HPwES).

When developing your screening criteria, you should understand what your screening goal is: to fund any EE and solar improvement? To only fund cost-effective improvements—if so, at the portfolio level, or the project level? And over what period of time do the measures need to be cost-effective? The goals you developed in Section 1.1.4 will help inform the answers to these questions and help you determine what kind of screening you should implement.

This section specifically addresses screening for EE and solar measures. Your program may fund other measures (e.g., electric vehicles)—if so, you should have a plan for how to determine whether a specific technology is eligible or not under your program.

2.1.1 Approving energy efficiency measures If your program will fund EE, you should have a plan for how to address these three areas:

• Eligible measures: Determine whether your program will fund only specific measures (e.g., only heat pumps) or any energy efficiency measure and whether any EE measures will be specifically disallowed.

• Energy audits: Decide whether energy audits are needed for eligibility. Will the audits be handled in-house or will your co-op contract with local energy auditors? Which audit tool will auditors use (see textbox below)? For EECLP-funded programs, an energy audit conducted by a certified energy auditor is required for building envelope measures (e.g., air sealing, insulation).

• Energy savings: Research how energy savings from different EE technologies and upgrades should be measured for your program.

o Some states have Technical Reference Manuals (TRMs) with calculated energy savings to which you can refer.

o If you are unsure, or if there is not a TRM for your state, talk with your state energy office to see if there is available guidance for how other utilities in your state have estimated energy savings.

o For EECLP-funded programs, RUS recommends using the energy savings estimated by the DOE’s Uniform Methods Project, when available.

KEY STEPS: 1. APPROVING ENERGY EFFICIENCY

MEASURES 2. APPROVING SOLAR MEASURES

Talk with nearby utilities about

how they screen measures and

calculate energy savings for their

programs.

https://www.esource.com/members/DSM-RC-2/Resource-Center/TRMs

http://energy.gov/eere/about-us/ump-home

34


2.1.2 Approving solar measures Create a plan to address the following areas to determine whether a member-consumer’s solar installation will be eligible.

• Connection to energy efficiency: Decide whether your program will provide applicants information about EE opportunities. Many people who are interested in a solar system are unaware they may have very cost-effective EE opportunities that, if implemented, will reduce overall energy use, thereby increasing the percentage of building energy needs met with solar energy. Your program could encourage EE improvements by requiring an energy audit prior to a solar assessment, or by providing incentives for EE measures.

• Site assessment: Create a process for a solar site assessment. There are online tools, such as ENERGY STAR’s site assessment tool, that can help a homeowner determine if their home is appropriate for solar. On-site visits from an energy advisor or solar installer can also determine whether a site is appropriate for solar based on roof pitch, shading, orientation, and roof condition.

• Unsuitable sites: If the site is not suitable for solar, are there other options for the home- or building-owner , such as a community solar program or green energy credits?

2.2 Administering Financing Section 1.3 discusses the various financing decisions that your program will make before Board approval, including repayment procedure, source of capital, financing structure, and whether financing

Choosing Energy Audit Software Tools

A comprehensive energy audit by a trained and qualified energy auditor identifies appropriate energy measures and can help a home- or business-owner choose the best investment. Trained energy auditors use comprehensive energy auditing software to help track diagnostic results, provide energy use comparisons, and give detailed measure suggestions. The U.S. Department of Energy (DOE) maintains a comprehensive database of these whole building energy analysis tools (http://www.buildingenergysoftwaretools.com).

Your program should work with your energy auditors to choose a single auditing tool to ensure consistency. Consider the following questions when choosing a software package:

• Do the energy auditors have a preferred tool? • What is the price to use the tool? Is there a flat fee for your program to use it, or does each

auditor need to have a license? • How much time does it take to do an audit and input the data into the tool? • Does the tool give detailed measure suggestions? Does it predict energy savings from these

measures? • Is there a smartphone or tablet application that an auditor can use on-site? • Can the results be easily exported to your data-tracking system? • What do the results look like to a member-consumer? Are they easily understandable?

https://www.energystar.gov/index.cfm?c=rerh.assessment

http://www.buildingenergysoftwaretools.com)/

35


will be managed internally or externally. These decisions are the foundation of your financing implementation plan.

As you develop your implementation plan for financing administration, ensure compliance with applicable state and federal laws (see textbox on Regulatory and Legal Considerations below) by working with a financial expert familiar with these laws (see the discussion in Section 1.3.3).

2.2.1 Determine underwriting procedures Underwriting describes the process of assessing an applicant’s credit risk. As part of the implementation plan, your program should answer the following questions related to underwriting:

• What are the creditworthiness criteria (see Section 1.3.5 for more details)?

• What information needs to be collected from applicants? • What is the review process for applications (e.g., contact the

applicant’s financial institution to verify personal financial data, check utility billing history)?

• How quickly will you notify applicants of eligibility?

2.2.2 Define conditions for origination and loan disbursal Origination and disbursal is the process of creating the actual loan and then disbursing the funds to the applicant or a selected contractor. As part of the implementation plan, address these questions related to origination and disbursal:

• How will you verify that a project includes approved measures? • If bill neutrality is required (because of tariff requirements or state regulations), how will you

verify the bill neutrality of a project before disbursing funds for the project? • Will funds be disbursed to the applicant or directly to the contractor? If to the contractor, at

what point or points will funding be disbursed?

For example, a co-op could have a list of pre-approved measures that member-consumers can apply financing toward, such as air-source heat pumps with a minimum SEER rating or a solar installation. A contractor would then be paid directly following installation of the heat pump or solar installation at the member-consumers home.

KEY STEPS: 1. DETERMINE UNDERWRITING

PROCEDURES 2. DEFINE CONDITIONS FOR

ORIGINATION AND LOAN DISBURSAL 3. FINALIZE SERVICING PROCEDURES

A financial partner should be able to help with all of these administration questions and

details.

36


A co-op could also finance any measures recommended during an energy assessment by a qualified energy auditor. This process would require the co-op’s energy advisor to review the auditor’s energy assessment report, compare it to the requested measures, and, if needed for bill neutrality or reporting requirements, estimate energy savings and payback periods. The co-op could then pay the contractor following installation of the recommended measures.

2.2.3 Finalize servicing procedures Loan servicing is the process by which payments, including any interest, are collected from the borrower—section 1.3.5 discussed some of the major areas for loan servicing. In your implementation plan, answer the following questions for how loans will be serviced:

• If payment will be made on the utility bill, are any updates needed to the billing system (also see Section 1.3.6)? If so, how will that work be done? For example, a co-op may have a newer billing system that includes an option for partial, late, and early payments, as well as interest amortization. Another co-op may have an older system that requires working with their billing system vendor to receive this functionality.

• If working with a third-party lender and using on-bill repayment, what is the process for transferring funds to the lender? Depending on your co-op’s accounting systems and the relationship with your lender, it could either make sense to automatically transfer every payment directly to the lender, or to combine payments and issue a monthly check to the lender.

Regulatory and Legal Considerations

Both tariffs and conventional loans have legal and regulatory considerations that can make them complicated for co-ops to implement without some external expertise and support.

• Voluntary tariff: Your co-op may need to engage in a state regulatory approval process before offering a tariff. This process varies by state. In most states, co-ops are not regulated to the same degree as investor-owned utilities and are subject to less public utility commission oversight. Resources for implementing a tariff for your co-op could be other utilities in your state that have undertaken the process, co-ops in other states that have voluntary tariff programs, or an organization like the Energy Efficiency Institute, which helps develop voluntary tariffs for energy efficiency.

• Loans: Consumer loans are subject to a range of federal laws including the Truth in Lending Act, the Equal Credit Opportunity Act, and the Fair Credit Reporting Act. A range of other federal laws and rules could also apply, depending on your program’s size and scope. There are also state laws and regulations that could apply. If your co-op is administering your program internally, a financial consultant or lawyer familiar with federal and state consumer lending laws and regulations should review your financing administration process.

http://www.eeivt.com/

37


• What is the process for dealing with past due or delinquent accounts? For many programs, utility disconnection is a consequence of nonpayment, but state law may prevent this action without sufficient notice or during certain times of the year (e.g., winter months).

• If the participant moves from the residence, what is the process for managing the loan? In many utility financing programs, the loan must be paid in full if the resident moves, but for tariff programs and some loan programs, the loan may be able to transfer to the next resident.

2.3 Engaging Contractors and Trade Allies Contractors and trade allies can be important players in the implementation plan: in addition to providing the quality energy upgrades your member-consumers want, they can also help market the program and help you reduce staff time and administrative costs. Because they have considerable knowledge of the local energy improvement market, they can also be a good source of ideas or a sounding board for your implementation plan.

You may already have a successful trade ally program in place that can assist with your program. Another NRECA resource, Guide to Implementing a Trade Ally Program, has many details about how to engage your local workforce. Below are the major implementation plan steps for your contractor and trade ally engagement.

2.3.1 Develop a Quality Assurance Plan Utility programs take different approaches to quality assurance and to managing contractors. Some utility programs (other than those funded by the EECLP) put the onus for quality assurance on the building owner in the belief this will protect staff from being pulled into disputes. Co-ops generally try to be more helpful to their

program participants by playing a proactive role on quality assurance and the screening and management of contractors. A co-op program that is stimulating dozens or hundreds of jobs can have much more leverage on a contractor than an individual building owner might have.

From the outset, it is important to establish expectations about the technical standards contractors and trade allies participating in your program should meet. Clearly defined technical standards and quality assurance protocols can help mitigate safety risks, as well as improve the quality of the work. Your financing program should put a Quality Assurance Plan in place to help ensure quality energy assessments and installations. This plan can also help you define contractor eligibility requirements and can support your program’s evaluation plan (see Section 5). Some questions to consider as you put together your Quality Assurance Plan:

• Which technical standards will you choose for contractors to follow (see textbox below)? • What training will you need to conduct with internal staff and external trade allies on these

standards?

KEY STEPS: 1. DEVELOP A QUALITY ASSURANCE

PLAN 2. RECRUIT CONTRACTORS 3. SCREEN AND SELECT CONTRACTORS 4. PLAN FOR TRAINING AND

ENGAGEMENT

Vendors with expertise in

running trade ally programs are available if you have not

managed trade allies before.

http://www.nreca.coop/wp-content/uploads/2015/06/TS_Trade_Ally_March_2014.pdf

http://www.nreca.coop/wp-content/uploads/2015/06/TS_Trade_Ally_March_2014.pdf

38


• What is the process for technical review and approval before member-sited projects get underway?

• Will co-op staff inspect all energy improvements? Or do random checks? For example, some programs do quality assurance checks on all or most projects for new trade allies and contractors until they pass a probationary period.

• If a contractor has frequent problems or substandard installations, what will be the process for re-training or removal?

• Will the program conduct post-audits to ensure that energy savings from EE improvements are accurate?

• Will the program collect feedback from program participants about their contractor experience?

For EECLP funding, a Quality Assurance Plan is required. Elements required for this Plan include:

• Designation of an energy efficiency standard or criteria (see textbox above) • The use of qualified energy managers or professional engineers to evaluate program activities

and investments • Performance of energy audits by certified energy auditors • Follow-up audits within one year following installation on a sample of investments to confirm

that efficiency improvement expectations are being met • Testing to ensure new systems are meeting designed performance

parameters • The use of independent contractors who have been hired by the utility

(rather than the customer) • Monitoring of trade allies or independent contractors to ensure quality

work

2.3.2 Recruit contractors Recruiting contractors to work with your financing program requires that these contractors are aware of your program and understand the benefits and expectations. In some markets, recruiting contractors to be trade allies can be difficult and may take more time than you expect, as it is not an easy decision for a contractor to change their plans for marketing and doing

Setting Technical Standards

Your program should have technical standards that your energy auditors and trade allies will work within. Some examples are below:

• DOE’s Standard Work Specifications contain specifications for effective, durable, and safe energy installations in residential buildings.

• The Air Conditioning Contractors of America (ACCA) has a set of standards for quality HVAC installations.

• The Building Performance Institute (BPI) provides guidance on energy auditing, such as diagnostic test procedures.

• The National Electric Code includes specifications on solar PV equipment, installation methods, and design protocols.

Teaming up with a nearby utility

can attract more contractors to your program.

https://sws.nrel.gov/

http://www.acca.org/communities/community-home/librarydocuments/viewdocument?DocumentKey=df1e10b8-c437-473e-a125-b8152e78215e

http://www.bpi.org/standards.aspx

http://www.nfpa.org/codes-and-standards/all-codes-and-standards/list-of-codes-and-standards?mode=code&code=70&DocNum=70&cookie_test=1

39


business. The most important recruiting activity is to talk to your local contractors and listen to what they say. As you reach out to contractors you will get a feel for the importance they place on your proposed program. Contractors will want to know how many jobs they might attract through your program. If your program looks like a small opportunity contractors will be reluctant to put too much effort into it. You may decide you need to partner with nearby utilities or programs in order to get the full attention from contractors. Considerations for identifying, communicating, and engaging with local contractors include:

• Are there local contractor networks, such as state contractor licensing organizations and trade organizations?

• What will you cover at these events? At a minimum, explain the program, what is expected of contractors, and their incentive to be involved. You can also ask for their ideas on program design and outreach to participants.

• When and where is most convenient to hold these events? For example, a breakfast meeting at a coffee shop near their worksite will get more attention than an afternoon or evening meeting at your co-op offices.

2.3.3 Screen and select contractors Member-consumers participating in your co-op’s financing program will interact with contractors more than any other member of your program team. The experience that program participants have with contractors will affect their opinion of your program and your co-op, so it is important to set high standards for the contractors you work with. Consider setting contractor screening procedures, which could include:

• Time in business • Annual sales • Required state licenses • Customer or trade references • Standing with the Better Business Bureau • Liability insurance • Completion of any program training • Credentials such as certifications from North American Technician Excellence (NATE), Building

Performance Institute (BPI), or Home Performance with ENERGY STAR (HPwES)

Is Your Area’s Workforce Limited?

If there are few contractors in your area who can assist with your program, consider:

• Is there a local community college you can work with to develop training materials and workforce development?

• Can your co-op train local professionals in specialized areas? • Are there professionals in nearby markets who would be willing to provide services in your

area? • Can you collaborate with neighboring utilities to increase the scale of the program to make it

more attractive?

40


In addition to screening contractors into your program, you should have a plan for how to manage contractors who perform poorly for your member-consumers (see Section 2.3.1).

2.3.4 Plan for training and ongoing engagement Your program may require that participating contractors have some training or other engagement with your program to have a good understanding of the program’s structure and rules. Frequent communication and engagement can help build a strong relationship between your co-op and the trade allies supporting your financing program.

• What kind of training is needed for new contractors in the program? • Is there already training available? Does it address all of the needs? How often is it offered? • How frequently should you contact your trade allies outside of training (e.g., monthly

newsletters or only for major program changes)? • What should be included in a contractor manual (see textbox below)?

2.4 Developing a Marketing Plan Your program should have a plan for how the financing program will be communicated to its target audience, which program materials need to be developed, and how you will educate internal staff.

Under the EECLP program, applicants should submit a Marketing Plan, which “should identify the target Consumers, promotional activities to be pursued and target penetration rates by Consumer category and investment activity.”

2.4.1 Plan for target market outreach In Section 1.2.1, you determined your target market and participation guidelines. Even if your program is open to a broad selection of members, you may have a more specific target market in mind. For

Contractor Manual

A contractor manual can ensure shared expectations and transparency between the co-op, the member-consumers, and the contractors. A contractor manual could cover:

• Program guidelines and processes • Eligible measures • Marketing processes • Forms the contractor needs to complete • Financing process (e.g., when does the contractor receive payment) • Use of solar assessment or energy audit tools • Technical, safety, and performance standards for quality energy installations • Co-op or other partner contacts

KEY STEPS: 1. PLAN FOR TARGET MARKET

OUTREACH 2. DETERMINE NEEDED PROGRAM

MATERIALS 3. TRAIN INTERNAL STAFF

41


example, your program could be open to all residential accounts, but you could target high energy users, those with high bill complaints, low-income residents, or homeowners who have recently purchased a home. If your co-op is focusing on rooftop solar, you could specifically target members who are most likely to have an interest in renewable technologies. NRECA has a market segmentation tool for co-ops to help quickly identify member-consumer attitudes toward energy efficiency and the environment, which can be helpful for targeting a specific market of member-consumers.

Once you have identified your target market, you need to select the appropriate outreach mechanisms and venues. Many program managers decide to rely on broad mass-marketing approaches. However, this approach can create interest from those who will not qualify for the program, which can damage member satisfaction and create higher administrative costs. Targeting those most likely to benefit while keeping the door open to others who happen to hear about the program can be a better approach.

Some options for reaching your target market include:

• Direct mail to your target market (e.g., high energy users) • Through contractors and trade allies • Outreach to community groups or at community events • Through bill inserts, social media, or an online bill payment portal • Word-of-mouth from satisfied members—referral bonuses are one way to encourage this form

of program promotion

2.4.2 Determine needed program materials Once you have determined your target market and key channels to reach that market, your marketing team can determine what program materials are needed. For example:

• Branding: A catchy name and logo can help member-consumers remember your program if they do not sign up in the first wave.

• Program webpage: A webpage about your program should be easy to find from the front page of your co-op’s website and have clear information about what the program is, how to participate, and who to turn to for questions.

• Brochures and flyers: Brochures or flyers can be effective for events and for contractors to provide to their customers.

• Social media postings: These can generate questions that you will need to monitor and address. • Press releases: Write up a press release with the important program information and contact

names to help local news media organizations put out accurate reports about your program. • Other program materials: There are many program forms to develop, including applications,

loan agreements, and audit reports. All of these forms should have a similar “look and feel” and include any branding.

2.4.3 Train internal staff In addition to having a plan for marketing the financing plan externally, you should have a plan for educating internal staff about the program and conducting any needed training. For example:

If working with other utilities, use the same

forms and materials to

communicate with member-

consumers.

https://www.cooperative.com/public/bts/sunda/toolkit/Documents/6%20MARKET%20SEGMENTATION%20BY%20ENVIRONMENTAL%20PERCEPTIONS.pdf

42


• Educate all member service representatives (MSRs) about the program so that they can answer questions via email or phone from member-consumers. Provide the MSRs with key contacts for questions they are unable to answer.

• Talk about the financing program at staff events, including its goals, target market, and launch date. Take and answer questions—these questions could help you refine your materials for clarity.

2.5 Tracking Program Data Tracking program data is important for understanding the number of member-consumers you have served, the amount of energy savings realized or solar power installed, and the costs expended. All of this information is important for reporting to your Board, your funders, and other stakeholders—as well as for evaluating your program (see Section 5). Decide on which data is needed and how it should be tracked to best serve your program. For example, if you will need data from another co-op department, such as usage data, how will you get that information? More importantly, the co-op should consider applicable laws, regulations, policies and contracts (e.g. membership agreements) that affect whether the co-op can, and how, it uses member data. If data is collected or used by the co-op and its contractors, data privacy and protection is an important consideration.

2.5.1 Determine your purpose for data collection Why do you need to collect data about your program? Develop specific questions that the data you collect must answer. These questions could address:

• State or federal law requirements • Requirements from your capital provider • Board expectations • Project management needs • Quality assurance needs • Evaluation needs

2.5.2 Assess and select data collection instruments Your program will have a variety of useful data collection instruments. Assess these instruments and determine how they can be designed to collect the data you need with minimum duplication and maximum accuracy. Examples of forms or other data collection instruments your program may have are:

• Member application forms (if co-op has permissions to use and share this data in this manner) • Energy audit files • Project bid sheets • Post-installation inspection reports

KEY STEPS: 1. DETERMINE YOUR DATA NEEDS 2. ASSESS AND SELECT DATA

COLLECTION INSTRUMENTS 3. AUTOMATE AND STREAMLINE DATA

COLLECTION

Your data tracking should have a clear purpose—even if

only for your internal project management

needs.

43


• Member satisfaction surveys

2.5.3 Automate and streamline data collection A well-designed data-tracking tool can make it easy to organize your program’s data and produce reports that will assist with presenting results and evaluating your program. Plan, based on your program’s data needs and data collection instruments, how you will track your data and who will enter it. There are a number of options that co-ops can use to track data:

• Some programs may start compiling data on a spreadsheet. This method can seem like an easy way to get started, but can become cumbersome as the program grows.

• Customer relationship management (CRM) systems, such as Salesforce, can be used, but require some customization to make them work for co-op programs’ needs.

• There are specific platforms developed for tracking data associated with EE programs, such as energyOrbit, Energy Savings Platform, OptiMiser, Energy Efficiency Collaborative Platform (EECP), or EnergySavvy Optix.

• Some larger utilities have worked with third-parties to develop customized software tools for their needs.

Regardless of the tool, automating data entry as much as possible (e.g., online instead of paper applications, eliminating double entering of member data) will reduce errors and lower administrative costs. When choosing a software tool, your program should outline the process for how data will be collected and who will enter it. An example of a possible data workflow when a member-consumer enters the financing program is provided below in Figure 1.

Some questions to consider as you choose your tool and develop your plan:

• Will applicants enter their own information into an online application? Will an MSR check that information for accuracy? If applications are paper-based, who will enter the information into the co-op’s electronic tracking system?

• Will your financial partner have access to any part of the data-tracking tool pursuant to the governing contract? If not, how will you find out about a member-consumer’s financing status (e.g., monthly report from the financial partner)?

• Will trade allies have access any part of the data-tracking tool? • If you will need data from another co-op department, such as usage data, how will you get that

information?

44


FIGURE 2. EXAMPLE DATA WORKFLOW FOR MEMBER-CONSUMER INTAKE

2.6 Develop Overall Project Implementation Plan With these pieces of the implementation plans in place, including their costs and timelines, you can develop your overall project timeline and finalize the program budget that you started in Section 1.4.1. The overall implementation plan, timeline, and budget should be shared with your Board, any external funders, internal staff, and external stakeholders as needed and required. Your Board will likely want to approve this plan before you can move forward with your program.

2.6.1 Create implementation timeline An implementation timeline is important to ensure efficient coordination and shared expectations for all staff working on the project. It is particularly important if you are collaborating with other co-ops, financial partners, and/or external program implementers.

Below are some questions to consider when putting together your program’s timeline:

• What is your anticipated launch date for the program? • What are all of the activities and tasks that need to be completed before the program can be

launched? Is the launch timing realistic? • Who is responsible for each pre-launch activity? • Are there dependencies between pre-launch activities (e.g., website cannot be finalized until

program application is complete)? • What immediate post-launch activities need to happen and by when? • What ongoing activities will happen once the program is launched? • What annual or semi-annual tasks need to happen for the program (e.g., semi-annual website

review, annual member survey)?

Communicate your timeline, highlighting the major milestones, to all staff and external partners. Revisit it during project meetings and be open to revision if initial estimates were unrealistic.

Member applies for energy audit online

MSR checks that member is eligible and schedules

audit

MSR enters relevant member energy usage

information

Energy auditor provides audit results and

recommended measures

Member requests financing for some

measures

Technical services representative checks request against audit

results and eligible measures

KEY STEPS: 1. CREATE IMPLEMENTATION TIMELINE 2. FINALIZE IMPLEMENTATION BUDGET

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2.6.2 Finalize implementation budget You can now finalize the preliminary budget that you developed before presenting to the Board. As discussed in Section 1.4.1, this budget should be broken down by program component and should include estimated costs for internal labor, external support, marketing costs, financing costs, and other direct costs, among other line items. Tracking these expenditures closely once the program is implemented is important for reporting to funders and the Board, and can help you understand where unanticipated cost-sinks may exist in your program. The textbox on the following page provides some guidance on estimating staff time for your implementation plan and budget.

As mentioned in Section 1.4.1, a program budget (“Financial Plan”) is required as a part of applying for EECLP funds. This Plan should include sources of funds, an itemized budget for each activity, an aggregate cost-effectiveness forecast, provision for loan loss reserves (when applicable), and expected loan delinquency and default rates. Programs are expected to be cost-effective within ten years, except in cases where the useful life of the technology being funded is longer than ten years.

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Estimating Staff Time Example

Estimating the number of hours that your internal staff will need to launch and implement a financing program for EE or solar can be difficult, especially if your co-op has no past experience with a financing program. One way to estimate the time needed is to have each staff person involved in the program write down all of their program responsibilities (pre- and post-launch and ongoing) and provide an estimate for how many hours will be needed for each task. Then, the program manager can roll up those hours and evaluate whether those estimates are realistic and if there are staffing gaps. For example, a marketing manager might have the following estimates for their assigned responsibilities:

Marketing Manager Hours Estimate

Preparing to launch (4 weeks)

• Create program webpage: 15 hours total • Develop program branding and associated program materials: 40 hours total • Train member service representatives on program: 10 hours total • Plan launch event: 20 hours total

Total: 85 hours total

Early-Launch activity (2 weeks following launch)

• Send press releases and respond to media inquiries: 10 hours total • Hold launch event for official hard launch of program: 10 hours total

Total: 20 hours total

Ongoing Activities

• Advertise program at community events and in relevant publications: Average of 5 hours per week

• Continued training to new member service representatives: Average of 1 hour per week

Total: Average of 6 hours per week

If the marketing manager has significant other co-op marketing responsibilities, more co-op or external support would be needed during the preparing to launch period.

Once the program is underway, it is helpful to have staff track their hours spent on the financing program to help alert you to any staffing overloads and inform future year budgets.

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Section 3: Staffing the Program

Once the implementation plan and budget are approved and finalized, you know the scope and scale of your program so you can determine the level of staff and contractor support needed to prepare to launch your program, officially launch your program, and then provide ongoing support. The implementation plan you developed in Section 2 will direct your staffing needs, and your program design team, discussed in Section 1.1.5, will likely fill many of the roles.

This section breaks down many of the activities described in the Implementation Plan into specific staff roles. The roles these staff will play during the “Preparation” phase and the “Implementation” phase are listed in a table in separate columns. Your program may have different or additional tasks based on your implementation plan and whether you are building on an existing EE or solar program or are creating a new financing program.

Depending on the size of your program, one person or a few people could manage multiple roles. If you are building on an existing solar or EE program, you likely have some of these staff already in place and need only to add a few responsibilities to their roles related to financing. If you are building a program from the ground up, you may need to re-assign existing co-op staff, hire staff, or work with a third-party implementation partner (see textbox below).


Business Plan


Plan



Program


Program

Section 3 describes your program’s key staffing needs. Key points from this section: • Your program will need team members who can address project management, technical

services and trade ally coordination, marketing and outreach, financing administration, data tracking, compliance and legal issues.

• Depending on your program’s size and your co-op’s staff resources, some staff may wear multiple hats and/or you may work with a contractor or external partner.

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As part of the EECLP application process, applicants submit an Operations plan that includes a staffing plan, which “identifies whether and how outsourced contractors and subcontractors will be used to deliver the program.”

Key Staff Role Role Description

Project Management Provide overall management, coordination, and reporting to internal and external stakeholders

Financing Administration Coordinate loaning funds to member-consumer Technical Services and Trade

Ally Coordination Work with trade allies and contractors and answer member-consumers’ technical questions

Marketing and Outreach Coordinate communications about the program to member-consumers and other external stakeholders

Data Tracking Manage tools that track program data and provide reports as needed to other staff

Legal Counsel

Review agreements with trade allies and contractors. Ensure compliance with relevant laws and regulations governing the loan documents and process, security, bills, payment and nonpayment, and other issues associated with the financing.

Do you have the bandwidth and expertise?

How will you staff your financing program? Your answer will depend on the size of your co-op and staff resources, the scale of your financing program, and other co-op needs. You could have staff members who work on multiple program components (e.g., the project manager also coordinates with trade allies), or have multiple staff working on one program component (e.g., a marketing team). However, you may not have any available staff who have the expertise to fully address certain aspects of your program, such as financing administration or technical services.

You may find that it is a better use of resources to work with external program implementers or other support for some parts of the program. Deciding on using external support for your program is discussed further in Section 1.1.5, as well as in a separate NRECA TechSurveillance series on program implementers.

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3.1 Project Management The project management team provides overall management to the financing program, coordinates other program areas, and reports on the program to the Board, funders, and other stakeholders. The project management team could involve multiple staff members and could include a representative from the implementation contractor or program partners. One in-house staff person, however, should be the lead manager—this person is likely to be the same lead designated for program design, as discussed in Section 1.1.5.

If you are coordinating with multiple cooperatives, project managers at each of the cooperatives should meet regularly to discuss project needs and progress.

Key Preparation Tasks Key Implementation Tasks • Create agreements with implementation

contractors and collaborators • Coordinate with other staff and partners • Manage timeline and budget

• Coordinate with partners • Lead team meetings • Track program performance • Report to Board and other stakeholders • Lead evaluation efforts and continuous

improvement

3.2 Financing Administration Financing administration is likely to be the most unique component of your program, when compared to other consumer-centric programs your co-op offers. The staff in charge of this area will coordinate managing the capital and loaning the funds out to member-consumers. As discussed in Section 1.3.2, your co-op may decide to work with an external financial partner to manage financing, particularly if your co-op has little experience loaning funds to member-consumers. However, the project manager at the co-op should understand the major elements of the financing implementation plan (Section 2.2) and the status of key tasks.

Key Preparation Tasks Key Implementation Tasks • Finalize contracts with financial entities

for capital, underwriting, servicing, and any other financing functions

• Coordinate any needed modifications to the billing system if payment will be on-bill

• Develop financial procedures, financing application forms, and loan agreements

• Train staff on financing procedures

• Accept and manage financing applications

• Send letters of approval or denial to applicants

• Send statements with monthly payments and calculated amortization, either on-bill or off-bill

• Track and report on disbursements and collections

3.3 Technical Services and Trade Ally Coordination During the program, member-consumers and contractors will raise technical questions related to EE and solar measures installed at member-consumers’ homes and businesses. Your co-op should be prepared to answer those technical questions or direct answers to those questions, explain which measures are

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eligible (Section 2.1), and coordinate the contractors and trade allies participating in the program (Section 2.3). Co-op energy advisors or staff at an external program implementer are best positioned to handle these program tasks.

Key Preparation Tasks Key Implementation Tasks • Research and invest in an energy audit

tool or solar screening tool • Recruit, screen, and select contractors to

work with program participants • Prepare a contractor manual and other

contractor agreements and forms • Conduct training for trade allies and

energy auditors

• Continue ongoing recruitment, engagement, and training with trade allies

• Verify installations and review trade ally reports

• Answer technical questions from member-consumers

3.4 Marketing and Outreach A marketing and outreach team implements the marketing and outreach plan (Section 2.4) that coordinates communications about the program to member-consumers and other relevant stakeholders. Staff involved should have experience marketing other co-op programs and talking directly with co-op member-consumers. Any MSRs who will have direct contact with member-consumers about the financing program should also be connected with the marketing and outreach team.

Key Preparation Tasks Key Implementation Tasks • Develop program materials (e.g.,

website, program flyers) • Conduct MSR trainings on program • Market and advertise program at

determined venues and through contractors and collaborators

• MSRs answer and direct phone calls and emails from member-consumers about program

• Answer questions about the program from external stakeholders or direct to project manager

• Continue advertising program at co-op and community events

• Coordinate member evaluation surveys

3.5 Data Tracking A financing program of any scale will have a significant amount of data to track for each participant, as discussed in Section 2.5. Someone with experience managing large datasets should be involved with the program’s data tracking; other staff who should be involved are those who will enter or review entered data for the program (e.g., an MSR reviewing an application, an energy auditor entering audit data).

Key Preparation Tasks Key Implementation Tasks • Research and decide on program and

data-tracking tools • Set-up data-tracking infrastructure and

system

• Enter or review entered member-consumer information

• Create data reports for internal and

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• Train staff who will use data-tracking tools

external needs

3.6 Legal Counsel Your financing program needs to comply with different sets of state and federal laws—a conventional loan program will need to comply with state and federal consumer lending laws, and a tariff program may need to comply with public utility commission regulations (see Section 2.2). There may be specific tax laws that need to be addressed. The staff involved in reviewing legal compliance of your program should be any internal legal counsel at the co-op or external legal expertise as needed.

Key Preparation Tasks Key Implementation Tasks • Determining whether the state electric

cooperative act, or similar act, permits the electric co-op to finance EE and/or solar.

• Review program materials and processes to ensure compliance with federal and state laws governing loan documents and process, security, bills, payment and nonpayment, applicable state/public utility commission regulations, tax law, and other issues associated with financing.

• Review agreements with trade allies and contractors.

• Ensure continuing compliance with existing and new laws or regulations

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Section 4: Launching and Delivering the Program

You have made your plans, found your staff or contractors, and assigned and completed tasks—you are ready to open your financing program to your member-consumers! This section summarizes a few strategies to have a successful launch and continued delivery of your program.

4.1 Soft launching your program Before sending materials out and accepting applications, it is a good idea to “soft launch” the program to a pre-selected group of interested member-consumers. Soft launching help you refine program materials and work out procedural issues before full scale implementation. These member-consumers could become champions of your program and provide success stories for press releases, website testimonials, or other materials. A few questions to answer as you plan the soft launch include:

• It is not advisable to have board members or employees participate in a soft launch because of the appearance of favoritism, but it is perfectly acceptable to ask board members or other involved co-op members if they can review program materials.

• Are there member-consumers who could be first to go through the energy improvement and loan process and provide feedback? A member-consumer that had previously worked with the co-op on an energy improvement could be an example.

• How long will your soft launch last? • What is your process for revising procedures and materials based on feedback you receive? • Does your Board want to hear how the soft launch went before you fully launch the program?

When the program is ready to officially launch, plan an “event” or release date for the program. This event could be an actual physical event, with speakers talking about the program and activities for member-consumers, or it could be an “online release” where the program goes “live” and you use your website, social media channels, and bill inserts to alert member-consumers to the program. Either way, let local media know about the launch to help further your reach.


Business Plan


Plan



Program


Program

Section 4 briefly describes strategies for officially launching your financing program. Key points from this section:

• A “soft launch” of your program to selected participants can help you work out any problems or gaps before you open it to the rest of your members.

• Plan an official “release date” for your program to maximize advertising and marketing. • Be open to quick adjustments as needed once your program launches.

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4.2 Delivering your program With all of your financing program pieces in place and tested, your co-op should be ready to launch and deliver your program to member-consumers. You should be confident that all the pieces of your program are ready for member-consumers: they can apply, work with energy auditors, site assessors, and trained contractors, and apply for and receive financing without problems. An example of how a member-consumer could progress from having an interest in solar to having a co-op financed solar installation is provided below in Figure 2. You will likely encounter implementation challenges or delays that will require changes to the implementation plan you created in Section 2. It is good to be flexible, but it is critical to effectively communicate changes to all your staff and partners.

FIGURE 3. SAMPLE PROCESS FOR ON-BILL FINANCING OF SOLAR INSTALLATION

For the above Figure, the implementation plan you developed in Section 2 should help you answer questions for when things do not perfectly follow this process. For example:

• Are there other programs or information you can refer members to if they are not eligible for the program? If their site is not suitable for solar? If they are denied financing?

• What will happen if the solar installation is found to be faulty in some way? • What will happen if the member-consumer does not repay their monthly bill or does not pay it in

full?

Member applies for site assessment

Co-op verifies eligibility and

schedules assessment

Solar installer conducts site

assessment and finds site suitable

Member applies for financing

Financial partner checks credit and approves member

Solar system installed at site

Co-op conducts post-installation

check

Financial partner pays solar installer

Financial partner notifies co-op of payment amount

Co-op adds new line item to

member's bill

Member repays co-op monthly

Co-op repays financial institution

monthly

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Section 5: Evaluating and Improving the Program

Your team, co-op leadership, program funders, member-consumers, and other stakeholders will all expect updates about the performance of your program. Measuring program performance will allow these program stakeholders to understand how program design assumptions compare with real world performance. Program evaluation and assessment will also help determine if key program goals are being met and—if not—what aspects of the program may need to be modified.

This section highlights the three different evaluation areas that your co-op may want to focus on:

• Measuring the overall impact of your program • Evaluating your program marketing approach • Assessing process improvement opportunities

Many aspects of evaluating and improving your program relate to your data-tracking approach (see Section 2.5).

5.1 Assessing the Impact of your Program This section discusses how to assess program-specific changes (e.g., changes in energy use, member satisfaction) resulting, directly or indirectly, from your program. Your program management team should ideally have regular check-ins to assess the impact of your program. Impact evaluations often include:

• Evaluating energy impacts • Assessing progress towards program goals


Business Plan


Plan



Program


Program

Section 5 describes the process for evaluating and improving your program. Key points from this section are:

• You may be required by regulations or your funders to conduct an evaluation of your program’s energy impact—even if you are not, understanding what energy impact your program has is useful for your co-op.

• Track progress toward goals • Process and marketing improvements

KEY STEPS: 1. EVALUATE ENERGY IMPACT 2. EVALUATE PROGRESS TOWARD

PROGRAM GOALS 3. EVALUATE PARTICIPANT

SATISFACTION IMPACTS

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• Understand the member satisfaction benefits of your program

5.1.1 Evaluate energy impact Regardless of the reporting requirements of your program (see text box to the right), all programs would benefit from tracking these metrics:

• Building stock characteristics of participating homes/buildings

• Total and per home/building energy savings/generation resulting from upgrades/installation

• Total and per home/building carbon reductions resulting from upgrades/installation

• Average cost per upgrade/installation • Cost per kWh or other cost effectiveness tests of

your program • Participant billing impacts • Demographic information about participants

Although the evaluation of energy impacts is conducted after a program is underway, it is helpful to determine your evaluation process and team well in advance of program launch. Retroactively tracking energy impacts is much more challenging and costly than setting up data tracking and measurement systems at the outset of the program. Establishing reliable program data-tracking systems (see Section 2.5) prior to program launch will greatly facilitate efficient and cost-effective evaluation of energy impacts.

A range of requirements for evaluating energy impacts

For EE programs, investor-owned utilities and some regulated co-ops are required to conduct formal evaluations to assess actual energy and demand savings—this process is called evaluation, measurement, and verification (EM&V). Third-party EM&V is often required by state regulations to show objectivity in evaluation. Even if your co-op is not required to undertake EM&V, it is wise to become familiar with industry best practices related to evaluation so that the conclusions you make about the impact of your program are verifiable. Depending on the funding source of your program or possible regulatory reporting requirements, EM&V procedures can be very specific. If your co-op has specific evaluation requirements from a funding agency or utility commission, you may wish to engage the services of a third-party firm that can help your co-op follow industry best practices and standards.

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5.1.2 Evaluate progress towards program goals Section 1.1.3 discussed setting two to four guiding goals for your program and the importance of developing metrics for tracking progress towards meeting those goals. It is important not to lose sight of these overarching program goals and to periodically review your progress. Many programs have a quarterly meeting with all key program stakeholders to review program progress. Often, it is the role of the program manager to draw on reports from program data-tracking tools to illustrate progress towards program goals. An example of a program goals dashboard is below.

FIGURE 4. EXAMPLE OF PROGRAM GOALS DASHBOARD

PROGRAM GOALS DASHBOARD | REPORTING PERIOD: QUARTER 3, 2016 Guiding Program Goal Progress Towards Goal

Goal 1: 15% of program participants are low-income 6% of current program participants are classified as low income

Goal 2: Average per home energy savings of 20% of more Current average per home energy savings is 17%

Goal 3: Audit conversion rate of 30% Current rate is 35%

Meets or Exceeds Goal Within Range of Goal Significantly Off Target

5.1.3 Evaluate participant satisfaction impacts There is often an assumption that offering financing to enhance your energy improvement program will increase member satisfaction—but it is important to verify that assumption. With a new program, it is helpful to follow-up with participants immediately after the energy improvement is completed to capture immediate reactions and feedback, as well as a year later, after the member-consumer has experienced all four seasons with the energy improvement. Typically, an electronic or paper-based survey is the best way to capture this feedback. Some example topics to include in a survey:

• How the member-consumer learned about the program

• Member-consumer’s perception of the level of difficultly of program intake procedures

• Level of satisfaction with service from program administrators, the energy improvement contractor, and the financing administrator

• Level of satisfaction with the terms of the financing package offered via the program

• Perceptions about household comfort levels before and after the energy improvement

• Bill impacts as a result of the energy improvements

Finding and capitalizing on participant success stories A participant satisfaction survey is one of the best ways to find success stories about your program. If a member is highly satisfied with the program and willing to provide more information, it is a good practice to conduct an interview with the program participant. These interviews can then be transformed into success stories for your member newsletter or social media feeds to help market your program to other co-op member-consumers.

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• Likelihood that the member-consumer will recommend the program to others • General suggestions for improving the program • Willingness to be contacted by a co-op staff member to answer more questions about their

experience • Other programs member-consumers are interested in

5.2 Evaluating Your Marketing Approach Marketing is one of the most challenging aspects of all energy improvement programs. After program launch, there are often high expectations about program participation rates. It is important to track the effectiveness of your marketing approach. However, note that it also takes time for member-consumers to become familiar with a program. Key marketing metrics you might want to monitor include:

• Number of leads, assessments, and upgrades associated with your program o Conversion rate of leads to assessments and upgrades

• Results from the participant satisfaction survey about how member-consumers are learning about the program

• Cost per lead achieved based on overall marketing campaign or a specific outreach channel • Contractors’ marketing efforts

o Number of contractors promoting program o Degree to which contractors are promoting program via their own websites, social

media feeds, and other promotional materials • Open rate of email marketing • Program-related social media metrics • Amount of time it takes for a member-consumer to receive a call back from the program after

expressing interest during an outreach event

The goal of evaluating your marketing approach should be to capture lessons learned and avoid marketing strategies that do not produce results or are not cost-effective. To the extent possible, your project team should avoid making anecdotal observations about marketing performance and instead try to rely on quantitative metrics to measure the success of different approaches.

5.3 Identifying Process Improvement Opportunities Identifying the extent to which existing processes and practices are, or are not, contributing to your program’s performance is important for maximizing the impact of your program while minimizing costs. Identifying ways to improve program performance can be done through both qualitative and quantitative approaches, including:

• Develop a culture of continuous process improvement. All members of your team—internal staff and external contractors and stakeholders—should feel empowered to suggest ways to improve the program. However, it is often best if there is a scheduled and structured way that process improvement suggestions are made. Ways to do this could include:

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o The program manager could have monthly breakfasts with contractors to discuss common challenges with program paperwork, energy auditing requirements, additional training needs, and program marketing.

o The program manager could regularly meet with MSRs involved in supporting the program to discuss administrative bottlenecks, common questions received by member-consumers about the program, and additional training needs.

• Monitor program costs and identify cost reduction opportunities. o Section 2.6.2 discussed how to develop a program implementation budget. How does

the program budget compare with actual program costs? What is driving overspending or underspending?

• Survey or interview member-consumers who engage with the program but do not complete an upgrade. Talking with these “non-participants” can be a good way to identify any barriers that prevent them from moving forward with the program.

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Appendices Appendix A: Relevant Resources Below are some additional resources for electric cooperatives considering developing a financing program for energy improvements or adding a financing component to an existing co-op program. References to specific vendors are not to be construed as endorsements of any kind.

Reports and Resources • The American Council for an Energy-Efficient Economy (ACEEE) hosts an annual conference, the

Energy Efficiency Finance Forum, which highlights industry practices related to financing. • The Database of State Incentives for Renewables and Efficiency (DSIRE) can help your co-op find

out whether there are nearby utilities offering financing programs. • The Energy Efficiency Institute (EEI), Inc. is the developer of the Pay As You Save system for

tariffed on-bill financing. EEI developed the “Decision Tool for Utility Managers: Key considerations before investing in resource efficiency and rooftop solar through a tariffed on-bill program” in January 2016 to assist utilities in determining whether tariffed programs are appropriate for needs.

• The Environmental and Energy Study Institute has an ongoing initiative, the On-Bill Financing Project. Through this initiative, EESI is working with utilities and other partners to implement successful on-bill financing programs. EESI has a number of resources, including:

o “Overcoming the Barriers to Energy-Related Investments with an On-Bill Financing Program: A Primer for Municipal Utilities and Electric Cooperatives.” September 2015.

o “Help My House: Program Profile”, June 2016 • The International Building Performance Simulation Association (IBPSA)-USA hosts a Building

Energy Software Tools (BEST) Directory, which can help your co-op identify audit or modeling tools that would work for your program.

• NRECA has developed some resources related to member financing, including: o Financing Member Investments in Efficiency and Solar: A Solution for Cooperatives?,

February 2016 o Introduction to On-Bill Financing for Electric Cooperatives, October 2012.

• Roanoke Electric Cooperative (North Carolina) has resources on its experience with the EECLP program.

• The State and Local Energy Efficiency Action Network (SEEAction) developed a report in 2014, “Financing Energy Improvements on Utility Bills: Market Updates and Key Program Design Considerations for Policymakers and Administrators.”

• The U.S. Department of Energy’s Better Building Residential Program has a Solution Center with resources for an organization looking to develop or enhance an energy efficiency program, including incorporating consumer financing into a program.

Presentations and Webinars Below are some webinars related to financing and energy efficiency.

• EESI On-Bill Financing Project o On-Bill Financing: An Energy Efficiency Solution for Iowa’s Communities, October 8,

2015. o On-Bill Financing: An Energy Efficiency Solution for Member-Owned Utilities in the

Midwest, August 19, 2015.

http://aceee.org/conferences/2016/eeff


ohttp://roanokeelectric.coopwebbuilder2.com/sites/roanokeelectric/files/Roanoke%20Electric/Upgrade%20to%20save/Decision%20Tool%20for%20tariffed%20on-bill%20programs%20-%20Jan%202016.pdf



http://www.eesi.org/obf/main


http://www.eesi.org/files/OBFprimer.pdf

http://www.eesi.org/files/OBFprimer.pdf

https://www.epa.gov/statelocalclimate/help-my-house-program-profile


http://www.nreca.coop/wp-content/uploads/2015/06/TechBrief_Onbillfinancing.pdf

http://www.roanokeelectric.com/usda-eeclp

http://seealliance.org/wp-content/uploads/SEE-Action-On-Bill-Guide.pdf

http://seealliance.org/wp-content/uploads/SEE-Action-On-Bill-Guide.pdf

https://rpsc.energy.gov/

https://rpsc.energy.gov/handbooks/financing-%E2%80%93-overview

http://www.eesi.org/briefings/view/100815obf



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o On-Bill Financing: An Energy Efficiency Solution for Member-Owned Utilities in the Midwest, April 28, 2015.

o How On-Bill Financing Unlocks Energy Efficiency, July 24, 2013 • U.S. Department of Agriculture RUS EECLP Webinar Series, 2014-5

o #1 Overview and Cost Effectiveness o #2 Evaluation, Monitoring & Verification o #3 Residential Energy Efficiency Deep Dive, Part One o #4 Residential Energy Efficiency Deep Dive, Part Two o #5 On-Bill Financing o #6 Solar

Organizations Below are some organizations familiar with electric cooperatives and financing programs.

• CoBank is a national cooperative bank serving rural power, water, and communications providers across the United States.

• The Energy Efficiency Institute, Inc. are the developers of the Pay As You Save system for tariffed financing.

• The Environmental and Energy Study Institute (EESI)’s On-Bill Financing Project works with stakeholders to implement more clean energy financing programs.

• The National Rural Utilities Cooperative Finance Corporation (CFC) provides financial and business management services to its members, which includes many electric cooperatives.

• The USDA Rural Utilities Services (RUS) administers programs that provide infrastructure and infrastructure improvements to rural communities. It has loan and grant programs that electric cooperatives can apply for:

o Energy Efficiency and Conservation Loan Program (EECLP) o Rural Energy Savings Program (RESP) o Rural Economic Development Loan & Grant (REDLG) Program



http://www.eesi.org/briefings/view/how-on-bill-financing-unlocks-energy-efficiency

https://www.youtube.com/watch?v=IojDQQZvjX4&feature=youtu.be

https://www.youtube.com/watch?v=0r--cOTh10M&feature=youtu.be

http://youtu.be/zkhUmHp49g4


http://youtu.be/FBAthXzw6wU

http://youtu.be/xeMI3DRZOdI

http://youtu.be/jfoH78j5388


http://www.cobank.com/

http://www.eeivt.com/


https://www.nrucfc.coop/

http://www.rd.usda.gov/about-rd/agencies/rural-utilities-service




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Appendix B: USDA RUS Energy Efficiency and Conservation Loan Program (EECLP) The USDA Rural Utilities Services (RUS) offers the Energy Efficiency and Conservation Loan Program (EECLP), which provides low-cost capital that electric utilities that serve rural communities can re-lend to their consumers for the purposes of improving energy efficiency, reducing peak demand, and improving conservation. The major components of an EECLP application are described below, along with information about where a co-op manager can find more information in this guidance document that will assist with EECLP application development.

Eligible Entities EECLP funding is available to electric utilities that serve rural communities. According to RUS this means, “Loans… are available to those businesses (utility systems) that have direct or indirect responsibility for providing electric service to persons in a rural area. In general, a rural area for EECLP purposes is a town, or unincorporated area that has a population not greater than 20,000 inhabitants… Eligible communities can be combined into service territories that exceed 20,000.”

Eligible Projects/Activities Eligible projects may include (but are not limited to) energy efficiency and conservation measures, renewable energy systems, demand-side investments, energy audits, utility energy service contracts, consumer education and outreach programs, power factor correction equipment, re-lamping, and fuel switching.

Loan Terms There is no set maximum loan amount, though RUS reserves the right to place a cap per applicant and for total loan funds. The maximum term for loans is 15 years, unless the funding relates to ground-source loop investments or other technology that, on an aggregate basis, has a useful life greater than 15 years.

Application Process Applications are accepted on an ongoing basis. To get started with an application, first contact your RUS Electric General Field Representative. RUS outlines the following process for an applicant (RUS, 2014):

1. Borrower develops program 2. Borrower’s Board and RUS approve the program 3. Develop an Energy Efficiency Work Plan (EEWP) covering specific activities for 2-4 years—this

work plan should cover all EE-related activities and equipment by the utility. 4. Prepare and submit EECLP Loan Application 5. RUS approves the EECLP loan 6. Borrow and RUS close the loan 7. Borrower draws first advance (<5% of total) 8. Borrower executes their EEWP Activities in accordance with their EE Plan 9. Borrower submits documentation for completed work 10. Borrower draws the loan funds; RUS auditor reviews this in a normal audit cycle.





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Application Components Below are application requirements for EECLP loan funds, as taken from the Code of Federal Regulations. Co-ops should review the federal code and applicable rules, and not rely solely on this list. Co-ops are also encouraged to work with legal counsel.

• Letter from General Manager: A letter from the co-op’s general manager requesting a loan under the terms of the federal rule

• Board Resolution: A copy of the Board resolution establishing the program: this resolution should reflect that any funds collected in excess of the amortization requirements for RUS will be redeployed into the program or used to prepay the RUS loan

• Business Plan: A business plan for implementing the program (Section 1.4)—this business plan should include:

o Executive Summary: Includes the overall objectives to be met by the program and the timeframe

o Organizational Background: Include descriptions of the management team responsible for the program

o Marketing Plan (Section 2.4): Include the target consumers, promotional activities to be pursued, and target penetration rates

o Operations Plan (Section 1.4.1, Section 3): Include a list of the activities and investments to be implemented under the program and the Btu savings goals ;an estimate of the dollar amount of investment for each category of activities and investments; a staffing plan that identifies who will run the program, including whether and how outsourced contractors will be used; a description for the process for documenting and perfecting collateral arrangements for recipient loans, if applicable; and aggregate estimated Btu savings associated with planned EE upgrades.

o Financial Plan (Section 1.4.1): Includes a schedule showing sources and uses of funds; a n itemized budget for each activity and investment category listed in Operations Plan; an aggregate cost-effectiveness forecast; provision for loan loss reserves (Section 1.3.5); and expected loan delinquency and default rates.

o Risk Analysis (Section 1.4.2): An evaluation of the financial and operational risk associated with the program, including an estimate of prospective consumer loan losses

• Quality Assurance Plan (Section 2.3.1): For EECLP funding, elements required for this Plan include:

o Designation of an energy efficiency standard or criteria—when applicable, the program should use the protocols for determining energy savings developed by the U.S. DOE Uniform Methods Project

o The use of qualified energy managers or professional engineers to evaluate program activities and investments

o Performance of energy audits by certified energy auditors o Follow-up audits within one year following installation on a sample of investments to

confirm that efficiency improvement expectations are being met o Testing to ensure new systems are meeting designed performance parameters

http://www.ecfr.gov/cgi-bin/text-idx?SID=d1d017f9bbe6a54e9774ed23d84e29f9&node=pt7.11.1710&rgn=div5#sp7.11.1710.h

http://www.ecfr.gov/cgi-bin/text-idx?SID=d1d017f9bbe6a54e9774ed23d84e29f9&node=pt7.11.1710&rgn=div5#sp7.11.1710.h



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o The use of independent contractors who have been hired by the utility (rather than the customer)

o Monitoring of trade allies or independent contractors to ensure quality work • Analytical Support Documentation: Documentation that assures RUS of the operational and

financing integrity of the program. This documentation must include: o A comparison of the utility’s projected annual growth in demand after incorporating the

program o An updated baseline forecast on file with RUS, including an estimate of energy

consuming devices used by customers in the service territory and a specific time horizon for meeting the program’s performance objectives.

o Report on discussions/coordination with the power supplier, any issues identified, and the outcome of these discussions

o An estimate of the amount of direct investment in utility-owned generation that will be deferred as a result of the program

o A description of efforts to identify state and local sources of funding and, if available, how they will be integrating in the financing of the program

o Copies of sample documentation used by the utility in administering the program, such as sample forms

• RUS Approval: A copy of RUS’s written approval of the program • Working Capital Statement: A statement of whether an initial working capital advance is

included in the load budget and a schedule of how that working capital will be used • Schedule C: As applicable, a proposed draft Schedule C that lists assets to be financed

Resources for Applying for EECLP Funds RUS Resources

• RUS EECLP Webpage: http://www.rd.usda.gov/programs-services/energy-efficiency-and-conservation-loan-program

• RUS General Field Representatives: http://www.rd.usda.gov/contact-us/electric-gfr • RUS EECLP Toolkit: http://www.rd.usda.gov/files/UEP_EE_Toolkit.pdf • Presentation on the EECLP Toolkit:

http://www.rurdev.usda.gov/SupportDocuments/UEP_EE_Toolkit.pptx • Presentation by RUS on the EECLP Program:

http://www.rd.usda.gov/files/UEP_EE_Final_PowerPoint.pdf • U.S. Department of Agriculture RUS EECLP Webinar Series, 2014-5

o #1 Overview and Cost Effectiveness o #2 Evaluation, Monitoring & Verification o #3 Residential Energy Efficiency Deep Dive, Part One o #4 Residential Energy Efficiency Deep Dive, Part Two o #5 On-Bill Financing o #6 Solar




http://www.rd.usda.gov/files/UEP_EE_Toolkit.pdf

http://www.rurdev.usda.gov/SupportDocuments/UEP_EE_Toolkit.pptx

http://www.rd.usda.gov/files/UEP_EE_Final_PowerPoint.pdf

https://www.youtube.com/watch?v=IojDQQZvjX4&feature=youtu.be

https://www.youtube.com/watch?v=0r--cOTh10M&feature=youtu.be



http://youtu.be/FBAthXzw6wU

http://youtu.be/xeMI3DRZOdI



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External Resources Related to EECLP • Presentation by EESI on EECLP (April 8, 2015): http://www.eesi.org/files/EESI-CEA-webinar-

April-2015.pdf • Roanoke Electric Cooperative Experiences with EECLP: http://www.roanokeelectric.com/usda-

eeclp • NRECA Webinar on EECLP Funds • The Environmental and Energy Study Institute (EESI)’s On-Bill Financing Project has worked with

entities interested in applying for EECLP funds.

http://www.eesi.org/files/EESI-CEA-webinar-April-2015.pdf

http://www.eesi.org/files/EESI-CEA-webinar-April-2015.pdf



https://www.cooperative.com/conferences-education/web-conferences/pages/new-rus-energy-efficiency-and-consumer-loan-program.aspx


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Appendix C: References [ACEEE, 2011] Bell, Catherine J., and Steven Nadel, Sara Hayes. “On-Bill Financing for Energy Efficiency Improvements: A Review of Current Program Challenges, Opportunities, and Best Practices.” ACEEE. December 2011. http://aceee.org/research-report/e118

[ACEEE, 2012] Can On-Bill Financing Become a Replicable Solution for Rural Electric Cooperatives? ACEEE. 2012. http://aceee.org/files/proceedings/2012/data/papers/0193-000054.pdf

[CEE, 2013] Consortium for Energy Efficiency (CEE). “CEE 2013 Annual Industry Report Data Graphics.” http://library.cee1.org/content/cee-2013-annual-industry-report-data-graphics/

[CEE, 2015] CEE. “CEE 2015 Annual Industry Report Data Charts.” http://library.cee1.org/content/cee-2015-annual-industry-report-data-charts

[Dreiling, 2015] Personal Communication with Brian Dreiling, Manager of Energy Services at Midwest Energy, on September 9, 2015.

[DSIRE, 2016] Database of State Incentives for Renewables and Efficiency (DSIRE). Accessed August 22, 2016. http://www.dsireusa.org/

[EEI, 2011] Energy Efficiency Institute, Inc. (EEI). Pay As You Save® (PAYS®) Presentation by Paul Cillo to the Keystone Energy Efficiency Alliance. March 2, 2011. http://eeivt.com/wordpress/wp-content/uploads/2013/02/KEEAPresScript.pdf

[EPA, 2016] U.S. Environmental Protection Agency (EPA). “Clean Power Plan.” Accessed August 22, 2016. https://www.epa.gov/cleanpowerplan/clean-power-plan-existing-power-plants

[E Source, 2012] E Source. “Repository of Publicly Available Technical Reference Manuals.” January 3, 2012. https://www.esource.com/members/DSM-RC-2/Resource-Center/TRMs

[E Source, 2015] E Source. “Four in 10 Residential Customers Want More Energy-Efficiency Programs from their Utility.” 2015. https://www.esource.com/system/files/files/2015-04/ESource-MRS-DS-10.pdf

[E Source, 2015b] E Source. “Customer Attitudes about Net Metering Indicate a high Level of Support for Solar." 2015. https://www.esource.com/system/files/files/e-source-mrs-ds-29-net-metering_1.pdf

[Fuller, 2009] “Enabling Investments in Energy Efficiency: A Study of Energy Efficiency Programs That Reduce First-Cost Barriers in the Residential Sector”. May 21, 2009. www. http://uc-ciee.org/all-documents/a/337/113/nested

[Improvenet, 2016] http://www.improvenet.com/r/costs-and-prices/heat-pump-installation-cost-estimator

[J.D. Power, 2014] J.D. Power. “Customer Impact Report: Energy Efficiency Programs and Awareness.” April 2014. https://www.jdpower.com/sites/default/files/2014%20CIR%20-%20Energy_Efficiency_Program_Alerts_Exec.Summ_.pdf

http://aceee.org/research-report/e118

http://aceee.org/files/proceedings/2012/data/papers/0193-000054.pdf

http://library.cee1.org/content/cee-2013-annual-industry-report-data-graphics/






https://www.epa.gov/cleanpowerplan/clean-power-plan-existing-power-plants

https://www.esource.com/members/DSM-RC-2/Resource-Center/TRMs

https://www.esource.com/system/files/files/2015-04/ESource-MRS-DS-10.pdf

https://www.esource.com/system/files/files/e-source-mrs-ds-29-net-metering_1.pdf





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[LBNL, 2016] Lawrence Berkeley National Laboratory (LBNL). “Energy Efficiency Program Financing: Where it comes from, where it goes, and how it gets there.” June 2016. https://emp.lbl.gov/sites/all/files/lbnl-1005754.pdf

[Lachman, 2015] Personal communication with Harlan Lachman, EEI, on October 23, 2015.

[RUS, 2014] USDA Rural Utilities Service (RUS). “Tool Kit for Loan Applications associated with the Energy Efficiency and conservation Loan Program.” Presentation to National Governor’s Association 2014 EE Policy Retreat, 2014.” http://www.nga.org/files/live/sites/NGA/files/pdf/2014/1409TennesseeEEPolicyRetreatToolKitforLoanApplications_Moore.pdf

[RUS, 2016] RUS. “Energy Efficiency and Conservation Loan Program.” Accessed August 22, 2016. http://www.rd.usda.gov/programs-services/energy-efficiency-and-conservation-loan-program

[RUS, 2016b] RUS. “Rural Energy Savings Program.” Accessed August 22, 2016. http://www.rd.usda.gov/programs-services/rural-energy-savings-program

[RUS, 2016c] RUS. “Rural Economic Developing Loan and Grant Program.” Accessed August 22, 2016. http://www.rd.usda.gov/programs-services/rural-economic-development-loan-grant-program

[SEIA, 2016] Solar Energy Industry Association (SEIA). “U.S. Solar Market Sets New Record, Installing 7.3 GW of Solar PV in 2015.” February 22, 2016. http://www.seia.org/news/us-solar-market-sets-new-record-installing-73-gw-solar-pv-2015

Disclaimer of Warranties & Liability: THIS GUIDE IS PROVIDED “AS IS” AND NRECA AND THE AUTHORS MAKE NO WARRANTIES OR

REPRESENTATIONS, EITHER EXPRESS OR IMPLIED, ABOUT THE INFORMATION CONTAINED IN THE GUIDE, INCLUDING WARRANTIES OF

ACCURACY, COMPLETENESS OR USEFULNESS.

This work contains findings that are general in nature. Readers are reminded to perform due diligence in applying these findings to their specific needs, as it is not possible for NRECA its contributors to have sufficient understanding of any specific situation to ensure applicability of the findings in all cases. The information in this work is not a recommendation, model, or standard for all electric cooperatives. Neither the authors nor NRECA assume liability for how readers may use, interpret, or apply the information, analysis, templates, and guidance herein or with respect to the use of, or damages resulting from the use of, any information, apparatus, method, or process contained herein. In addition, the authors and NRECA make no warranty or representation that the use of these contents does not infringe on privately held rights. This work product constitutes the intellectual property of NRECA and their licensors, and as such, it must be used in accordance with the restriction set forth below.

License Right and Confidentiality: This guide is intended solely for use by NRECA electric cooperative members and should be treated as confidential and only shared with others, such as cooperative advisers and consultants, on a “need to know” basis.

https://emp.lbl.gov/sites/all/files/lbnl-1005754.pdf

http://www.nga.org/files/live/sites/NGA/files/pdf/2014/1409TennesseeEEPolicyRetreatToolKitforLoanApplications_Moore.pdf

http://www.nga.org/files/live/sites/NGA/files/pdf/2014/1409TennesseeEEPolicyRetreatToolKitforLoanApplications_Moore.pdf






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