Loans available for saving energy
Southern California Gas Co. and San Diego Gas & Electric Co. have $5 million apiece burning a hole in their pockets that they want to lend, at no cost, to small businesses to buy energy-efficient equipment.
Southern California Edison has about $2 million for interest-free loans to small companies to do the same thing -- replace light fixtures, refrigeration units, air conditioning systems, water heaters and other equipment that use too much energy and cost business owners a pile of money to operate.
The hope is that the new equipment will allow small businesses to save at least as much money on their monthly energy bills as the cost of their monthly loan payments. Once the loan is paid off, which has to occur in five years or less, a business will enjoy lower bills for the long term.
The business owns the equipment and saves money, the utilities get closer to their mandated energy saving goals, for which they get monetary rewards, and California reduces its reliance on fossil fuels while cutting the amount of greenhouse gases it produces.
And the program means new sales for equipment makers and installation companies that have sprouted up to serve the major energy-efficiency push launched in California for 2006-09.
“It’s a win-win-win deal,” said Tom Hall, president of Eco Energy Systems, a lighting retrofitter in San Marcos, Calif.
Edison, which is just hitting the streets with its pilot loan program geared to small grocery and convenience-store owners, expects to attract customers who don’t have the time or money to implement energy-efficiency projects.
“You are capturing savings that would otherwise go uncaptured,” said David Bruder, manager of nonresidential programs for the Edison International unit.
Loans will range from about $5,000 to $50,000.
Collateral and business credit checks aren’t required, but a customer must have a good payment record with the utility. And the new equipment must meet certain efficiency standards. The utility pays for the equipment, after applying any of the sizable rebates frequently offered for purchases of energy-efficient equipment.
The loan will be paid through a charge on a small company’s utility bill, hence the program’s formal name: on-bill financing.
The fact that small businesses will not have to lay out their own cash upfront will be an important sales tool.
“Cash flow -- those two words are probably most important as to why small businesses don’t invest more in energy efficiency,” said Hank Ryan, executive director of the advocacy group Small Business California and the man credited with spearheading on-bill financing in California. It has been a success in Connecticut for several years.
Kirk Henson, president of the Henson & Son automobile repair business in Escondido, Calif., said he balked at upfront costs of $3,000 to $5,000 to replace old light fixtures in his 22,000-square-foot facility.
“I wanted to do it, but I don’t want to dump that kind of cash flow into it,” said Henson, who employs 41 workers.
San Diego Gas & Electric’s on-bill financing program got his attention. The utility paid for his new lights, including installation a few months ago, and will bill him for the loan payments to cover the cost over two years. His electric bill will remain roughly the same, $3,500 to $4,000 a month, as the immediate energy savings are offset by the loan payment.
When the loan is paid off, the savings will continue and his electric bill will drop about 15%, or $525 to $600 a month, he said.
“It’s a no-brainer because you save a tremendous amount of energy and the lighting is incredible, 20% brighter per fixture,” Henson said.
Last week Pat Van Natta, administrator at the for-profit Country Hills Health Care & Rehabilitation Center in El Cajon, Calif., used the on-bill financing program to replace aging light fixtures throughout the 305-bed center.
San Diego Gas & Electric paid the $12,509 upfront costs and will add the loan payment to the center’s bill.
“The lighting is higher quality -- people ask if we’ve painted or refurbished,” said Van Natta. “And we fully expect that the monthly loan payment will be more than covered by energy savings, which will show up as a lower bill.”
Lighting and refrigeration equipment upgrades are key initial targets for on-bill financing, because they can produce relatively easy, cost-effective energy savings.
Gas-powered equipment can be more challenging.
Southern California Gas said it was the first gas utility in the country to offer on-bill financing. The utility’s program, which was rolled out in the last six months, has signed up three customers.
“It’s been a little slow, but it’s starting to gain traction,” said Frank Spasaro, manager of energy-efficiency partnerships for SoCal Gas and San Diego Gas & Electric, both owned by Sempra Energy.
Utilities traditionally have shied away from using customer bills as a vehicle for anything other than energy costs and related charges, for regulatory and technical reasons.
The size of the companies’ new energy savings goals helped to clear the way, Spasaro said.
“This is a very visible program for our senior management. They’ve made it very clear to me that they are supportive of making it successful,” he said.
State regulators also are keeping tabs on the fledgling financing program.
“It’s something we think is potentially a really important program.... This is energy we don’t need to procure,” said Cheryl Cox, an analyst for the California Public Utilities Commission’s Division of Ratepayer Advocates.
As the division begins planning this week for the next three-year energy efficiency program for the state, it will evaluate the success and challenges of on-bill financing “and hopefully bring it beyond the pilot stage for the next funding round,” Cox said.
Small-business energy costs remain a hot-button topic as energy bills rise.
Last week the Small Business Administration was pressed by the Senate Committee on Small Business and Entrepreneurship, headed by Sen. John F. Kerry (D-Mass.), to explain its apparent lack of progress in implementing a federally mandated energy-efficiency program for small businesses required by the Energy Policy Act of 2005.
The role to be played by on-bill financing could be limited by the high, $5,000-minimum loan amount, industry observers say.
The systems that small businesses need to buy often don’t cost that much, especially when the substantial rebates the utility companies offer are added in.
Utilities say the limit was set as part of the exemption they were granted by state banking regulators to make the energy loans. Anything under $5,000 is considered a consumer loan and comes with a raft of rules and regulations.
The other major hurdle has been getting the program in front of busy small-business owners.
Most utilities plan to use equipment contractors to sell the loan program. The contractors typically will conduct a free energy audit, run the numbers to find the best-qualified equipment, fill out the paperwork and install the equipment.
All that’s left for the small-business owner to do is pay the utility bill on time and look forward to the savings once the loan is paid off.
“The payback period is typically less than a year,” said Ryan Cooney, director of commercial sales for Ultra Lighting of National City, Calif., which has also used on-bill financing to spur retrofits at several schools.
That bottom-line approach helped persuade Henson to take the plunge.
“The savings,” he said, “will pay for a heck of a Christmas party at the end of the year.”
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Help from utilities
For details on utility company financing for California small businesses to buy energy-efficient equipment, use the information below. Some restrictions apply to on-bill financing programs, which target nonresidential customers.
For general on-bill financing updates: www.smallbusinesscalifornia.org/Action_Initiatives_OBF.htm
Southern California Edison:
Information about the pilot program is available at (800) 736-4777
Southern California Gas Co.:
www.socalgas.com/business/cash_for_you/onbillfinancing.shtml
San Diego Gas & Electric Co.:
www.sdge.com/obf/index.shtml
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Source: Times research
