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New Jersey Considers Replacing Energy Efficiency Rebates with Loans

Consumers and businesses in states across the nation are being encouraged by governments and energy utilities to take on energy efficiency improvements by incentives such as cash rebates and on-bill financing. But in New Jersey, state officials are considering completely revamping their incentive program and ending rebates for energy efficiency improvements in favor of loans.

Why are they reconsidering their approach? Because of a roughly $2 monthly charge on residential customers’ bills.

Over the last decade, more than 100,000 New Jersey residents have received state subsidies for home energy audits that have helped them save energy and reduce utility bill costs. State rebates for new washing machines went to 80,000 more residents. And 67,000 low-income customers got free energy efficiency upgrades like thermostats, insulation and even refrigerators.

The rebates and freebies are paid for by a line item on utility bills called the “societal benefits charge” that costs customers a little more than $2 a month. The fee nets more than $300 million a year for the state’s incentive programs.

But Lee Solomon, head of the Board of Public Utilities (BPU), which manages state utilities in New Jersey, said earlier this year that he was going to look into eliminating the fee — and subsidized rebates — in order to save customers a couple of bucks a month.

“We’re just looking to go from a rebate-based program where money is collected from ratepayers and paid out to other ratepayers,” Solomon said. “We’re looking to go to a revolving (loan) plan over time.”

Under such a plan, an initial sum of money collected from all utility customers is loaned to some customers to finance energy efficiency improvements. Loan payments would then replenish the fund, preventing customers from having to pay additional monthly charges, such as the societal benefits charge, to fund the program.

Experts Caution Change, Say Energy Efficiency Loans Won’t Do as Well as Rebates

Although Solomon said that a revolving loan program would ‘reach more participants in a cost-effective way,’ almost everybody else — from environmentalists and consumer advocates to energy policy groups and state contractors’ advised caution when Solomon solicited them for responses to his idea of a loan program.

Applied Energy Group, which coordinates New Jersey’s Clean Energy program, said that financing alone wouldn’t achieve the customer participation or energy savings that New Jersey had achieved thus far. The group cited a Delaware study that found financing should be combined with rebates, education, marketing and outreach programs in order to achieve the level of customer participation and energy savings BPU hoped for.

The American Council for an Energy-Efficient Economy, a non-profit energy policy group, disagrees with Solomon’s assumption that a loan program would reach more customers. The Council said that financing programs reach less than 1 percent of customers and that, if given a choice between financing and rebates, 90 percent of customers choose rebates.

Nexant, a company that provides grid software and clean energy solutions, recommended in its response that BPU first roll out or transition changes to its incentive programs to gauge participation and effectiveness. Instead of offering the loan program as a single incentive, Nexant suggested that BPU make available a wide variety of incentive options.

Solomon said that BPU had not yet made a decision on the future of energy efficiency rebates in New Jersey and that the agency would seek proposals to overhaul the state’s clean energy program by the end of the year.

Sources

“N.J. Considers Offering Energy Efficiency Loans Instead of Rebates to Save Ratepayers Money,” NJ.com, Sept. 25, 2011.

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