Would banks lend again if they could get a cut of your power bill?
A common complaint in the “new normal” aftermath of the global financial crisis is that banks, despite receiving massive bailouts, aren’t lending … especially not to small-business owners or individuals. But would they be more likely to issue loans if they could be guaranteed repayment not by billing customers directly but by attaching the loan to people’s utility bills?
Such a program — called on-bill repayment — could hold the secret to finally getting more homeowners to invest in household energy-efficiency improvements. The Environmental Defense Fund (EDF), which has outlined just such a plan for the state of California, says the system could overcome the biggest obstacles currently facing home-focused energy-efficiency projects:
- Penny-pinching homeowners find it hard to shell out upfront cash for efficiency improvements, even if those more than pay for themselves over time. Owners of apartment buildings and commercial structures are also reluctant to make such investments, since their tenants are the ones who would reap the benefits of lower energy bills.
- On-bill repayment would make improvements with longer-term returns — rooftop solar panels, for example — more palatable by spreading out payments over a longer-term as well.
- Attaching the cost of energy efficiency work to utility bills gives building owners, as the EDF says, “a very strong incentive” to repay … as most people don’t enjoy having their electricity cut off for non-payment.
The California Public Utility Commission believes the idea is promising and has set a public comment period and workshops to explore the program. With a commission decision possible this April, a statewide program for on-bill repayment could begin as early as 2013, according to the EDF.
