Michigan legislators recently passed the Municipal Utility Residential Clean Energy Program Act, or HB-5397. The bill will allow municipal utilities to provide on-bill financing for residential properties to invest in clean energy and energy-efficiency improvements and pay for those improvements through energy savings on their utility bills.
The bill was brought forward and championed by Rep. Joe Haveman, R-Holland. Haveman worked closely with Holland BPW, WMEAC and other groups to identify the opportunity and craft the legislation.
Gov. Snyder is expected to sign the bill into law in the coming weeks.
West Michigan Environmental Action Council and the city of Holland consider the passage of the bill a big environmental win.
“The city of Holland was the key initial driver and promoter of this legislation,” said Ryan Cotton, city manager. “It is part of our Holland Community Energy Plan, a comprehensive, system-wide, 40-year plan to substantially reduce the amount of energy used as a way to save our residents money and enhance the environment.
“When we learned that Michigan, unlike 27 other states, did not have the legal mechanism in place to have on-bill financing, we approached Haveman to discuss the issue with him. He quickly became very supportive and agreed to introduce and support the necessary legislation.”
Up to 7,000 households in Holland will have the opportunity to take advantage of on-bill financing for energy improvements. Cotton said that represents 20 percent of total electric usage in the community.
Holland is already prepared to help residential customers take advantage of the new law.
“The city of Holland’s city council is incentivizing participation in a variety of low cost and in-kind ways,” Cotton said. “There are currently 100 Holland homes on a list for inclusion in this and related programs. This list was generated via making 1.9 percent financing available; we anticipate the on-bill financing will be even more attractive.
“If our current pilot program pans out, (which includes) 50 homes, the Holland Board of Public Works and the city council will discuss going to scale via several hundred homes per year, if interest, resources and new policymaking conclusions support it.”
The pilot program results will become available this summer, and the city council could opt to include the program in its next budget, which will be approved in May.
Cotton said a new nonprofit potentially called the Holland Energy Trust would also be required as part of the program. It would receive the capital funds and make the financing available.
He said on-bill financing is a low-risk program for the city.
“Michigan Saves is helping to cover the risk of our current pilot project,” he said. “They will be used, if allowed, if Holland goes to scale. If not, then the repayments will build in a loan loss reserve for any loans that may turn out to be uncollectable.”
Across the state, the Act has the potential to impact up to 260,000 households, according to Nicholas Occhipinti, public?policy and community activism director at the West Michigan Environmental Action Council.
“The way the bill is structured, each municipality is allowed to design a program that fits them,” Occhipinti said.
He noted an ordinance or resolution has to be passed at the municipal level to effectuate the state law.
“I would assume every city is going to have a little bit different program to meet the needs of the city,” he said.
Occhipinti explained any municipal electricity customer who wants to take advantage of the on-bill financing would undergo an audit first to help determine which improvements would be most beneficial.
Some of the eligible energy-efficiency improvements included in the bill are: insulation in walls, roofs, floors, foundations or heating and cooling distribution systems; storm windows and doors; automated energy control systems, air sealing, caulking and weather-stripping; energy recovery systems; day lighting systems; measures to reduce the usage of water or increase the efficiency of water usage; and lighting fixtures that reduce the energy use of the lighting system.
The bill requires a 15-year payback.
“It really is testing the concept that some of these projects can pay for themselves, and rather quickly,” Occhipinti said.
He said the key to the law’s success would be the quality of the programs created.
“First we need successful programs that have energy-efficiency measures being installed in residential property and saving money for homeowners,” he said. “When we’ve proven the concept, we can think about more ambitious goals. We’ve got to make these programs work.”
Not all homeowners will stay in their home through the completion of payback, Occhipinti noted. The new buyer would take on the on-bill financing agreement for the home.
“Of course, the new homeowner coming in would have to be made aware of this arrangement on the property before the purchase,” he said. “It makes sense because that’s where the improvements are.”
Cotton said homeowners who take advantage of the program stand to benefit beyond just residential energy savings, and so does the community.
“The Holland neighborhoods gain by enhanced home investments — stronger re-sale values, energy-smart labels on homes and the resultant increased property values,” he said.
It could also help the city cut down on future infrastructure costs.