National Grid OBF / OBR Overview August, 2010. Slide 1 Agenda Overview of OBF / OBR Financing at...

National Grid OBF / OBR Overview

August, 2010

Agenda

Overview of OBF / OBR Financing at National Grid

State-specific Expansion Needs / Requirements

Scope of work and Resources

Next Steps

2009 Electric Commercial & Industrial Key Highlights

Retrofit Large Commercial / Industrial Program has been very successful in MA and RI due to the focus on specific market segments as well as offering on bill financing

Major success with 1) The Retrofit / Whole Building Assessment program which offers comprehensive treatment (beyond lighting); 2) The High Performance Schools program; and 3) Municipal programs which had high participation due to OBF (primarily) and using whole building assessments to maximize penetration into that market.

Enhancing the lighting incentive levels and expanding the depth of the project expediters was effective in delivering the high-performance lighting measures.

Retrofit Small Business was successful in MA and RI and had a great launch in UNY

The Small Business program was able to deliver its goals using program attributes such as OBF

UNY Small Business Services program was launched in March with one bridge vendor and has now expanded to three regional program administrators with a staff of 50, performing audits and lighting installations to support the expansion of programs in 2010 / 2011.

2009 OBF /OBR & Financing Activity – Electric C&I Market

- Number of Loans 1317 (SBS); 216 (mid-large C&I)

- Avg loan amount $2,000 (SBS); $30,000-$300,000 (med / lrg); 30% of total project cost; Up to 70% incentives

- Payment terms Customer chooses up to 24 monthly installments, interest free. payment with SBS customers are offered a one time15% discount on the 30% remaining balance (total 4.5%)

- Customer Comm Installation and materials are provided by a National Grid Small Business Regional Program Administrator.

- Project Scope Projects are primarily lighting and refrigeration measures. Recycling of fluorescent lamps and ballasts at no cost to customer

StateLarge Small Total

MASS $5,364,216.00 $2,096,862.00 $7,461,078.00NH $0.00 $147,720.00 $147,720.00RI $1,361,712.00 $1,413,974.00 $2,775,686.00

$6,725,928.00 $3,658,556.00 $10,384,484.00

CoPays (Financing amounts - 2009 YE)

5

Small/Mid-Sized Business Direct Install Program

Available for 20 years to small

business customers

In 2009, financed projects with

1300+ MA customers, totaling $3.4

million at zero interest.

Funding source is systems benefit

charge dollars

Sixty percent of customers

representing 45% of dollars opted

for 1-time quick pay. As projects

grow in size, majority opt for 24

months.

6

Small/Mid-Sized Business Direct Install Program

Making it easier for the customer to say “yes”...

Simple process/contract: Vendors claim “it sells the program”, improving close rate by 25% to 50%

No creditworthiness test: Small projects where average financed amount was ~$2300

Loan term of two years: Insures projects have positive cash flow with average payback less than one year

Default Rates: Less than 3%

2009 Financing Activity – Residential Market (MA)

- Total Dollars Financed $9,459,288 (through traditional prequalified banks)

- Number of Loans 1262

- Avg loan amount $7,500

- Payment Terms 12 to 84 months at 0% to the customers (NGRID buys down the rate; spent ~$2M SBC dollars)

-Rate Buydown Amount 1% over prime with a minimum of 5% for MA Banks. 12% to 18% with EnerBank USA

-Customer Comm Our vendor CSG currently handles all the communication with the customers and introduces the customer to financing options. MassSave (electric): "Home Performance with Energy Star" requires the contractor to be BPI certified. An audit is

also required for any financing to be released to the customer

-Project Scope Projects are primarily weatherization, heating, etc.

Once OBF is put in place in MA, the above financing options would remain available to the customers.

2010 EE Outlook and importance of OBF

Aggressive State-specific savings goals, in some cases doubled from previous year, will only be achieved through multiple new and innovative solutions, including the expansion of On Bill Financing and securing third party funding for financing

The basic concept behind on-bill financing is to provide utility customers a means of financing energy efficiency measures directly through their utility bills with little or no up-front cash outlay.

One purpose of an on-bill financing program is to lower or eliminate the presumed barriers to customer participation in energy efficiency.

Such barriers include lack of access to capital and other financing related issues, reluctance to commit capital, uncertainty of benefits, and the divergent interests of landlord and tenants (i.e., split incentive).

Ideally, an on-bill financing program would overcome these barriers for certain consumers.

OBF / OBR New Requirements by State

Regulatory

Requirements

Sector Approach Funding Sources

MA 3-yr MA plans (ordered to

attain outside funding for financing/grants for Jan 2011)

Residential and C&I (electric / gas)

Currently only Small Business

Residential Heat Loan through 3rd party banks

Working with DOER and other PA’s (various Working Groups and other venues)

DOER searching for a source of funds to establish a loan loss reserve.

RFI (launch 3/12) Seeking Grants for

customers through DOER & internal NG resources (investigating)

UNY Green Jobs-Green New York

Act requires NYSERDA to demonstrate the feasibility of "innovative financing mechanisms" for EE measures, including OBF/OBR.

$112M RGGI funding OBF plans were filed 4/1

Residential and small C&I (less than 100 employees; electric / gas)

Currently : Small Business: Residential pilot moving forward

Working with NYSERDA as a partner to implement this OBF/OBR pilot

NYSERDA will establish loan loss reserve

NYSERDA applied for DOE grant to cover IT infrastructure changes

NYSERDA attain 3rd party funding source

RFI (launch April); can be utilized for other EE programs not eligible for GJGNY Legislature (SBS, EI, etc)

DNY NYPSC initiated a proceeding

(CASE 09-M-0465) to consider an on-bill financing pilot for DNY (later shifted to UNY).

Residential and C&I (gas) Currently: None

No active focus on DNY (to be considered end of 2010)

IT System changes for OBF setup will take time and $$ (initial est. ~$1.2M for each NYC & LI upgrade)

RFI (launch April); suggested in the RFI that there will be funding oppt in the near future for DNY

RI / NH RGGI proceeds to be utilized

for a revolving loan fund NH (el): $300K (C&I);

$50K (Res) RI (el): $4M (40% for

OBF)

Residential and C&I (electric)

Currently: Small Business.

Tariff approved for Residential and Municipal in NH

Residential and C&I (expand current OBF programs & launch resi NH program)

RGGI – establish revolving fund and supplement with funding from RFI (launch April)

OBF Project Resources

Team Lead Bill Codner

RFI Procurement: Treasury: Financing: Consultant (Financing):

IT Billing

Requirements

Billing: Pricing / Rates Credit/ Collections: Accounting:IT: Policy & Procedures: Legal: Regulatory:

Energy Efficiency (EE)

Requirements

(programmatic)

EE Resi team: EE C&I Team: InDemand: EE Regulatory:

National Grid requests information from Financial Institutions/Lenders/Fund Managers/Trust Managers and others who can provide EE third-party financing for gas and electric residential, small / medium & large business customers

National Grid is looking for innovative approaches to fund customer’s energy efficiency projects without encumbering National Grid’s balance sheet. Furthermore, while offering customers financing over agreed upon terms (to be determined), National Grid would offer the customers to pay the amount financed back through their utility bill. National Grid will collect the payments for the third-party entity, easing the process for the customer and the third-party.

An estimated $250-300 million gross investment is required over three years, which has a potential to increase in the future

In addition, National Grid is interested in exploring funding available for financing of renewables as well as oil to gas conversion projects (majority being high efficiency) for the above mentioned customer segment.

2010 2011 2012Massachusetts 16.0$ 58.0$ 115.0$ Rhode Island 4.0$ 5.0$ 5.0$ New Hampshire 0.5$ 0.5$ 0.5$ Upstate New York 10.0$ 10.0$ 10.0$ Downstate New York 10.0$ 20.0$ Renewable Energy Projects 8.0$ 8.0$ 8.0$

38.5$ 91.5$ 158.5$

Three Year Gross Finance Needs 288.5$

Anticipated Funding Needs (millions) RFI Launch: March 2010 RFI Results: April 2010 Launch RFP process RFP completed: end of August Have the ability to offer 3rd party

financing January 1, 2010

RFI Scope

Please note that these figures represent the anticipated funding needs of National Grid only.

3-year MA Funding Needs

Energy Efficiency Advisory Council - Other Funding Estimates for National Grid (Based on the Statewide estimates) Allocated by Sector

gas grantselectric grants total grants

gas financing electric financing total financing

total outside funding

Desired Financing

Funding 3

Potential Gap in Financing

Needs

Total Budgets -

GasTotal Budgets -

ElectricResidential -$ -$ -$ -$ -$ -$ -$ 28,666,276$ 46,713,474$ Low Income -$ -$ -$ -$ -$ -$ -$ 9,553,251$ 18,492,520$ C&I -$ -$ -$ -$ -$ -$ -$ 15,400,000$ (15,400,000)$ 13,023,598$ 68,952,736$ Total -$ -$ -$ -$ -$ -$ -$ 15,400,000$ 51,243,125$ 134,158,731$




Desired Financing

Funding 3


Needs

Total Budgets -

GasTotal Budgets -

ElectricResidential 3,720,793$ 10,022,709$ 13,743,502$ 2,480,529$ 6,681,806$ 9,162,334$ 22,905,836$ 41,412,087$ 60,771,372$ Low Income 1,265,360$ 1,001,074$ 2,266,433$ 843,573$ 667,382$ 1,510,956$ 3,777,389$ 13,048,014$ 23,094,950$ C&I 1,646,247$ 16,929,122$ 18,575,369$ 1,097,498$ 11,286,081$ 12,383,579$ 30,958,948$ 27,800,000$ (16,513,919)$ 18,922,310$ 115,584,798$ Total 6,632,400$ 27,952,904$ 34,585,304$ 4,421,600$ 18,635,269$ 23,056,869$ 57,642,173$ 27,800,000$ 73,382,412$ 199,451,120$




Desired Financing

Funding 3


Needs

Total Budgets -

GasTotal Budgets -

ElectricResidential 7,102,046$ 20,045,417$ 27,147,464$ 4,734,698$ 13,363,612$ 18,098,309$ 45,245,773$ 48,674,489$ 73,937,570$ Low Income 2,650,352$ 2,002,147$ 4,652,499$ 1,766,901$ 1,334,765$ 3,101,666$ 7,754,165$ 16,719,854$ 29,599,678$ C&I 3,512,402$ 33,858,243$ 37,370,645$ 2,341,601$ 22,572,162$ 24,913,763$ 62,284,409$ 38,700,000$ (16,127,838)$ 24,613,805$ 157,088,139$ Total 13,264,800$ 55,905,808$ 69,170,608$ 8,843,200$ 37,270,539$ 46,113,739$ 115,284,346$ 38,700,000$ 90,008,148$ 260,625,386$




Desired Financing

Funding 3


Needs

Total Budgets -

GasTotal Budgets -

ElectricResidential $10,822,839 $30,068,126 $40,890,965 $7,215,226 $20,045,417 $27,260,644 68,151,609$ $118,752,852 $181,422,416Low Income $3,915,712 $3,003,221 $6,918,932 $2,610,474 $2,002,147 $4,612,622 11,531,554$ $39,321,119 $71,187,148C&I $5,158,649 $50,787,365 $55,946,014 $3,439,099 $33,858,243 $37,297,343 93,243,357$ 81,900,000$ (48,041,757)$ $56,559,713 $341,625,673Total 19,897,200$ 83,858,712$ 103,755,912$ 13,264,800$ 55,905,808$ 69,170,608$ 172,926,520$ 81,900,000$ 214,633,684$ 594,235,237$

Notes:1 - National Grid expects its share of statewide outside funds in the amounts of $20 million for gas and $100 million for electric in 2011. These funds are first allocated to each company, then allocated for use as grants or for financing, and then finally allocated to customer sector.2 - National Grid expects its share of statewide outside funds in the amounts of $40 million for gas and $200 million for electric in 2012. These funds are first allocated to each company, then allocated for use as grants or for financing, and then finally allocated to customer sector.3 - Desired Financing represents amount that National Grid is assessing will be needed for financing (C&I now only includes electric - Small & Large C&I)

2010

2011 1

2012 2

2010-2012

Contact Information

Bill Codner

(781) 907-1715

[email protected]

National Grid OBF / OBR Overview August, 2010. Slide 1 Agenda Overview of OBF / OBR Financing at...

Documents

Transcript of National Grid OBF / OBR Overview August, 2010. Slide 1 Agenda Overview of OBF / OBR Financing at...