Photo by Momenta Creative
The Ouachita Electric Cooperative in Southern Arkansas has designed an innovative energy efficiency program for its members that uses a tariff structure to finance home energy improvements at no upfront cost to the homeowner or renter, and no added risk to the Cooperative. General Manager Mark Cayce talks us through the system.
How does this program work?
Our energy efficiency program is available to any member of the coop. If you want an energy audit, we have qualified auditors go out and evaluate your home at no cost to you. The auditor conducts a blower door test, does a duct test, looks at insulation, evaluates heating and cooling equipment, and does safety checks for cracks or carbon monoxide leaks. Our county operator runs the results of the audit through software that estimates the savings from the recommended energy efficiency improvements. As long as the savings over 12 years are greater than the cost, we make the improvements and add a fixed fee to the customer’s energy bill starting the following month.
Because this is a tariff, we’re not loaning them money -- we’re investing in their structure to improve it, and those improvements lower our peak demand cost. We take 80 percent of the energy bill savings until we recover our investment. The customer gets 20 percent of the savings, so even with all of the improvements we make to their home, their energy bill is lower than it was before.
The way we’re doing it benefits us and keeps everyone financially sound, including our members. We have an app where everyone can see their savings the very next day. That’s a big part of what we do. They get immediate feedback within 24 hours, and that helps reinforce the decision.
Do your members have to own their homes to qualify?
What’s unique about this plan is it that it has allowed us to go into rental properties, because the investment is in the meter at that location. There had never been an incentive before for a landlord to make expensive upgrades, and the renters never wanted to pay for upgrades to a place they didn’t own. Through this program, what we’re looking at is structures. If we think the structure is going to continue to be occupied, it doesn’t matter who lives there, because the tariff stays on the property’s bill. If the original renter moves out, we’ll suspend the payments until someone else moves in.
Most of the time, the program requires no up-front money, no money down, no debt incurred, and no credit check. It makes a lot of people eligible who wouldn’t otherwise be eligible. It doesn’t matter if members don’t have good credit, or if their utilities have been cut off in the past. People would not make these upgrades if it was a loan, because they’d have to carry that with them. This way, the investment benefits them, and they live a more comfortable life, but they don’t have to shoulder a debt.
We’ve been doing this for 18 months, and we have had zero losses. We’re averaging about a $7,000 investment per location, and we know we’re going to recover that investment through the fee for up to 12 years.
How did you come up with this plan?
When we started out, it was a loan program. We wanted to find a way for people to lower their bills, because people come in every day, and they’re struggling and they can’t pay their bills, and they don’t know what to do. I’ve been in this business for close to 40 years now, and talking to members about their use has always been a part of the job. And we always give good advice. But we didn’t give them a way to actually solve the problem. Advice is great, but if you don’t have to money to make thousands of dollars in energy efficiency improvements, it’s not very useful.
The tariff idea was designed by Dr. Holmes Hummel, who is the CEO of Clean Energy Works. Dr. Hummel brought the idea of the tariff to us, and all we’ve done is implement it. But when we heard about the tariff, I knew instantly it would work, because as a utility regulated by a commission, everything we do is through tariffs. When we took the tariff to the commission and they approved it unanimously, that confirmed that the energy efficiency improvements we’re implementing are a central base of our core business, and that we can recover our investments for those activities, the same as with any other core business. Of course, what it also means is that if someone doesn’t pay their bill, the same thing happens as when anyone doesn’t pay their bill: they get disconnected.
Every utility has a certain percentage of customers who can’t pay, and so you write them off as “uncollectable.” They leave the residence and you can’t track them down to pay their bill. But with the energy efficiency improvements, the investments we’ve made through the tariff do not disappear. They stay with the meter, and someone else moves in and pays their bill, so we have less risk on those locations than on others.
The other thing we did to convince our board that we wouldn’t be risking all our money through this program is we worked with the the Arkansas Energy Office. They put up $100,000 in a reserve fund that is a loan loss refund, so we’re covered if we do have some losses.
How have your members responded to the program?
Everybody saves money on their bills with this program, but they also pay their own way. The program is self-sustaining. A lot of our customers don’t like the idea of paying for someone else’s electric bill. And under this program, they’re not. And they like paying for their own home improvements, because they aren’t looking for charity.
We’re seeing that as people start to get improvements to their homes, they take more pride in their homes. And once you make these energy improvements, you have other benefits like fewer pests in the house, cleaner air, and the house becomes a better and more comfortable place to live. The savings also leave people more money to do other things, and make other lifestyle improvements.
It’s changing lives, because if you need new heating and air equipment, it’s a major purchase. It can be as expensive as buying a car. If you already have to buy a car, or do something else to your house, there’s just not enough cash to make ends meet. This program gives people the opportunity to put more money toward other things in their lives. Maybe it’s medicine, maybe it’s sending their kids to school, or something else. But it eases their burden a little bit in life.
Beyond lower energy bills and more comfortable homes, are you seeing any other benefits in the community from this program?
So far we’ve invested over $2 million through the energy efficiency program, and that’s growing every month. Primarily, we’ve been looking at residential. But we also went to all our public buildings --schools, courthouses, jails, senior citizen centers. We converted all their lighting to LEDs, and they didn’t have to put up any money up front. We have a junior college in town that is saving $96,000 a year on their energy bill because of this, and they get to keep $20,000 of that. For these rural buildings that have few capital dollars, that goes a long way.
We are also trying to create business in the local economy. We’ve signed up all our local air conditioning contractors. What we didn’t have here, what we’re trying to develop, is certified energy auditors that live in the area. We’re trying to put the money that we invest into growing jobs and businesses here.
Are you integrating renewables into your coop?
We just installed a 1MW solar array, which is the largest solar installation we’re allowed by our power supplier. Because we’re a cooperative, we have to file a tariff to be able to sell community solar to our members, so we’re currently working on that.
Almost half the cost of solar is going to be paid for by demand savings we’re going to get on our power bill. Because we’re a utility, we’re billed on a peak demand basis, and that peak demand has monetary value. Since we’re able to capture the demand savings, our cost on the power we’re buying from that solar field is 2 cents per kilowatt hour. In south Arkansas, it had to be the lowest cost option. What people don’t always realize is: solar is the lowest cost option. It’s as reliable as the sun.
Our goal is to make it very affordable, so people can hopefully participate for as little as $5 dollars a month. They’ll get the credit for however many panels they purchase on the community solar array, no matter where they live in our system.