Inclusive Utility Investment Pilot

An IUI program allows a utility to pay for cost-effective energy improvements at a specific residence, such as home heating and cooling units, and to recover its costs for those improvements over time through a dedicated charge on the utility bill that is immediately less than the estimated savings from the improvements. IUI leverages many of the existing regulatory systems that utilities use to make investments in wires and pipes, with approved costs recovered from customers through tariffs in exchange for utility service.

The IUI model differs from on-bill loans and repayment models in that investments are not tied to a customer loan, but rather a utility investment for which cost recovery is tied to the utility meter according to terms set forth in a utility tariff. The tariff charge remains attached to the meter at the improved home, regardless of who occupies the property, until utility cost recovery is complete. This investment model thus enables the utility to offer nearly universal access to capital to its customers, including those customers that are typically disqualified due to high debt-to-income ratios, poor credit, low home equity, or renter status.

At a minimum, utility investments behind the customer meter are required to deliver cash-positive benefits to the occupants; that is, the value of the expected energy savings must exceed the cost recovery charge.  Foreclosure on a customer’s home is excluded as a remedy for nonpayment within the IUI program. For this Pilot, customers will also be shielded from the threat of repossession of the investment asset and from disconnection of utility services for nonpayment.

Landlords have a fiduciary duty to provide space heating and hot water for their tenants. To prevent the cost of equipment upgrades from getting shifted to tenants, the Pilot will require landlords to contribute a copayment for space heating and hot water upgrades. Tariffed investments can cover the incremental costs of the upgrades.

See Energy Star’s fact sheet on Inclusive Utility Investments for an up-to-date listing of IUI program activity across the US.

The Energy Solutions team will demonstrate and expand the IUI model through a Pilot in partnership with Silicon Valley Clean Energy (SVCE). The intent of the Pilot is to expand customer access to capital to include those customers that are typically disqualified due to high debt-to-income ratios, poor credit, low home equity, or renter status.

TECH is partnering with Silicon Valley Clean Energy (a Community Choice Aggregator in PG&E territory) by providing technical assistance and ongoing support, including up to $3 million for risk management, to support design and launch of a Pilot IUI program. The intent of the Pilot is to test the application of IUI to electrification, building on proven success for energy efficiency, and expand customer access to capital to include those customers that are typically disqualified due to high debt-to-income ratios, poor credit, low home equity, or renter status. TECH is also working with PG&E and SCE on related proposals to lay the foundation for scaling up.

The pilot is subject to regulatory approval via the California Public Utilities Commission's “Clean Energy Financing Options” proceeding (R.20-08-022). Pilot launch is also contingent on coordination with PG&E around billing services, capital formation, and related issues. As of September, 2022, the pilot team is targeting a Q3 2023 launch date.

The Pilot’s intent is to demonstrate an investment mechanism to expand customer access to capital without the need for financial means testing. Nevertheless, the Pilot will, at least initially, be selective in who it invites to participate, in accordance with the principle of “first, do no harm.”

For the first year of program enrollment, the Pilot will focus on moderate- and middle-income single-family customers with aging mechanical systems (furnaces, air conditioners, and water heaters) and high bill savings opportunities. Customers may be either homeowners or renters, subject to landlord permissions under terms that fully protect tenants’ economic interests. By Year 2 of program enrollment, the Pilot should be ready to expand eligibility to multifamily dwellings and to proactively reach out to low-income and other equity-targeted customers. The Partners believe this staged approach offers the best balance of putting forth an inclusive program offering as soon as possible without experimenting on the most vulnerable members of the community with untested delivery systems.

Eligible TECH Pilot projects must include the installation of heat pump space conditioning and/or heat pump water heating equipment.  Complementary energy efficiency measures will be included in cases where they improve the overall project economics for the customer. Other technologies that can lower customer bills and reduce GHG emissions may be included.

The TECH team is contributing an array of technical and financial support, including:

- In-kind technical assistance for program design & pilot launch TECH expertise with multiple financing and IUI initiatives in CA and nationwide

- Deep understanding of and experience: utility rates and tariffs; disclosure processes and customer notifications; billing and financial accounting and data flow

- Program design informed by analysis of customer gas & electric data

- Contractor recruitment & training

- Project feasibility analysis, cost recovery calculations, QA/QC practices

- Meter-based customer targeting

- Up to $3M for pilot start-up and risk mitigation costs

- Program M&V & supporting risk management analytics