Energy Efficiency for Everyone: MACED’s How$martKY On-Bill Financing Program

In October 2014, SEEA approved funding for four innovative energy efficiency finance pilot programs in the Southeast.  In March 2015, we spotlighted the work being done by the Warehouse for Energy Efficiency Loans (WHEEL).  In this post, we focus on the Mountain Association for Community Economic Development (MACED) and the How$martKY on-bill program.


MACED_logoAs temperatures in the Southeast begin to edge up and millions of residents start to turn on air conditioning units to improve home comfort, many residential electric customers will see energy bills soar. In the hot summer months, spikes in electricity usage is not uncommon and it is during these months that many households have trouble paying utility bills and other household expenses. Some utilities – most notably electric cooperatives – have instituted innovative on-bill programs that help residents with the upfront cost of energy efficiency measures in order to reduce the average energy bill. The cost of the improvement is repaid on the customer’s utility bill, either through a rate tariff or a loan payment.  A key element of many of these on-bill Financing or on-bill repayment programs is to match the repayment amount to the energy savings. The Mountain Association for Community Development (MACED)’s How$martKY program, for example, requires the repayment amount to be less than 90 percent of the estimated savings associated with the improvement. Read on to learn more about the key design elements underlying the successful How$martKY program and how they are striving to make energy efficiency affordable for everyone.

MACED is a community development financial institution (CDFI) working to improve the economy and lives of people in eastern Kentucky. MACED believes that clean energy – in particular energy efficiency – has enormous potential to transform the economic and environmental future of eastern Kentucky and continuously works to develop innovative programming to service and generate demand within eastern Kentucky’s commercial and residential energy efficiency markets. One MACED program, called How$martKY, addresses the primary barrier households and small businesses face when they want to save energy and save money — finding the upfront cash to pay for improvements such as insulation, air-sealing and HVAC upgrades.

How$martKY is a tariff-based, on-bill residential energy efficiency financing program run in conjunction with utility partners in the East Kentucky Power Cooperative (EKPC) system. Six rural utility cooperatives in Eastern Kentucky (Big Sandy RECC, Fleming-Mason RECC, Grayson RECC, Farmers RECC, Licking Valley RECC and Jackson Energy) currently work with MACED to provide energy retrofits under the KY Energy Retrofit Rider, a voluntary tariff available to residential and commercial electric customers. The How$martKY program is not a loan or a subsidy, but an extension of the utility services that households are already receiving. After completing an energy assessment of the property and estimating the potential savings, the utility will oversee the contractor installing the energy efficiency upgrades and provide assurance that the improvements have been correctly installed.

To make the program enticing to the customer as well as reduce the risk to the utility, the program is designed to be a win-win both for the electric customer and the utility:

  1. The retrofit charge is required to be less than 90 percent of the estimated savings associated with the investment.
  2. No up-front investment is required by the customer, however the customer may choose to make a down payment, especially in cases where the cost of an improvement doesn’t meet the 90 percent threshold.
  3. Whenever possible, weatherization assistance grants and low-interest funds are incorporated into the program in order to reduce the retrofit cost for qualifying customers.
  4. The retrofit program costs are repaid through a monthly line item on the utility bill.
  5. No requirement for payoff is required if there is a change in property ownership, however the new owner must agree to assume the payment. In many cases the seller prefers to pay off the obligation.

After installation of efficiency measures, the program allows customers to make installment payments as part of their monthly utility bills, gradually paying for the efficiency upgrades by using part of the energy savings generated by the retrofit. Because the charges remain with the property and not the customer, this approach works for all classes of utility customers — renters, homeowners or business owners.

Using this model, the How$martKY program has successfully completed 190 residential energy efficiency retrofits, saving an average of 429 kWh per home each month and $49.79 in energy savings. The average repayment amount is $36.24, netting homeowners about $12.55 each month on average.

As part of its commitment to expanding the use of innovative financing programs in the Southeast, SEEA has committed part of its DOE Better Buildings Neighborhood Program funds to helping MACED expand the How$martKY program into four additional rural cooperative utility territories in Kentucky, helping to finance at least 27 additional residential energy efficiency retrofits in the state. By providing the upfront capital investment necessary to complete a retrofit, these utilities put energy efficiency within the reach of those who need it the most. Truly energy efficiency for everyone.

Want to learn more about utility on-bill programs?  Join the Southeast Energy Efficiency Finance Network for our webinar on Thursday, June 25th at 2:00 pm EST:  Key Decision Points to Consider when Creating an Utility On-Bill Program.

For additional information on MACED or the How$martKY program, please contact Chris Woolery at [email protected]. For more information on the Southeast Energy Efficiency Finance Network, please contact Jen Weiss at [email protected]. For details on SEEA and its Innovative Finance projects, please contact Tim Block at [email protected].