76 Energy Project Financing: Resources and Strategies for Success
- Properties are often managed by professional, third-party manage-
ment companies that generally cannot enter into debt obligations on
behalf of owners without special authority. - Building owners and/or tenants may be unable or unwilling to bor-
row more money, as they may be concerned about reaching their
debt capacity or violating covenants in existing loan agreements.
While many responsible building owners have “stepped up to the
plate” and committed to financing new energy efficiency projects, this mar-
ket sector still represents considerable marketing opportunities and chal-
lenges. An innovative financing alternative may help in “getting to yes.”
To address this marketing challenge, the adage “the past is the key
to the future” comes to mind. Back in 1991, Pacific/Utah Power, the elec-
tric generation and distribution divisions of PacifiCorp, offered their retail
customers an innovative type of efficiency program in which customers
repaid the costs of their efficiency installations through monthly energy
service charges on their electric bills. As part of the utility’s demand-side
management program, the utility had recourse to shutting off power if
the customer defaulted. In essence, the electric meter became the “credit.”
The utility did more than 1,000 transactions, and eventually sold their
loan portfolio to a major U.S. bank.
The many benefits of this program included not requiring the ten-
ant or building owner to enter into a debt obligation (thereby overcoming
aversions to borrowing), tying the repayment to the use of the equipment,
allowing the building owner to acquire new energy saving equipment at
no direct cost, and having the tenants reduce their monthly utility bills
without incurring debt.
The challenges to making a program such as this work include per-
suading the appropriate state public utility commissions to authorize a new
tariff (energy service charge), finding a lender willing to underwrite the pro-
gram, and insuring the installed equipment works as promised. Perhaps a
“bill-to-the-meter” financing program could be considered to increase par-
ticipation by this market sector in installing energy efficiency projects.CONCLUSIONThis chapter demonstrated how public and private sector organiza-
tions can redirect energy inefficiencies and waste from their current and