California Alternative Energy and Advanced Transportation Financing Authority

California Hub for Energy Efficiency Financing Pilot Programs

California Hub for Energy Efficiency Financing Pilot Programs — Background

In 2011 the California Public Utilities Commission (CPUC) began exploring the expansion of energy efficiency financing options offered by the investor-owned utilities (Pacific Gas & Electric, San Diego Gas & Electric, Southern California Edison and SoCalGas). Of special interest were programs designed to leverage private capital and programs testing customer willingness to make investments in energy efficiency upgrades without traditional rebates or incentives.

In 2013 the CPUC issued Decision 13-09-044 authorizing several pilot programs to test energy efficiency financing through the use of a credit enhancement to attract private capital providers as well as the ability for utility customers to make monthly loan payments to these private capital providers directly through their bills (on-bill repayment). The decision designated a programmatic home for the pilots, the California Hub for Energy Efficiency Financing (CHEEF), to be administered by the California Alternative Energy and Advanced Transportation Financing Authority (CAEATFA), an authority housed within the State Treasurer’s Office. The CPUC budgeted $75 million in investor-owned utility ratepayer funds for developing, administering and providing credit enhancements to the pilot programs. CAEATFA received budgetary authority to operate the CHEEF in 2014.

The pilot programs were modified in March 2017 by Decision 17-03-026, which granted CAEATFA the authority to make certain program design changes. The CPUC clarified the Evaluation, Measurement and Verification (EM&V) process for the pilots in Resolution E-4900, issued in December 2017. In April 2020, following completion of the EM&V process for the CHEEF’s first pilot, the Residential Energy Efficiency Loan (REEL) Assistance program, the Commission issued Resolution E-5072 approving the transition of REEL from a pilot to a full program.

CHEEF currently manages three financing programs: the Small Business Energy Efficiency Financing (SBF) and Affordable Multifamily Energy Efficiency Financing (AMF) pilot programs and the REEL program. Development of a fourth, on-bill program (without credit enhancements) planned for large non-residential buildings was paused in 2019. CHEEF is developing on-bill repayment functionality for deployment in the SBF and AMF programs.

The mechanism at the heart of the CHEEF programs is a credit enhancement, which is provided in the form of a loss reserve to participating lenders. In the event of a default, lenders can receive a reimbursement for a portion of the charged-off loan principal. By mitigating risk for these lenders, the Programs facilitate better rates and terms offered to a wider base of customers. In turn, California consumers have access to more attractive financing, allowing them to make their homes and businesses more energy efficient and comfortable.