Finance Workshop: Utility Support for Residential Sector Finance Mechanisms Downey, CA June 15, 2009 – Morning Jeanne Clinton, Facilitator California Public Utilities Commission

Residential Sector -- EE Financing Workshop 6/15/09 2 Residential Sector Discussion Objectives for Today: 1.How important is financing to achieving EE? 2.Review financing mechanisms currently available in CA and how attractive these are to their target audiences 3.Understand what California’s investor-owned utilities have proposed to support customer EE financing for Identify other mechanisms used by some utilities in the U. S. and why California IOUs did not propose these 5.Explore how IOUs and their efficiency programs might best support or interface with these other mechanisms,, or stimulate additional mechanisms.

Residential Sector -- EE Financing Workshop 6/15/09 3 Market Segments and Financing Products Available Today Market SegmentFinancing Mechanisms Available Single Family Owner Occupied Home Equity Loan (secured) Unsecured contractor financing “Fannie Mae” loan EE mortgage Community-based property assessment (“AB 811”-like) repaid over life of EE or solar measures Multi-Family Owner Occupied (e.g. condos) Home – Owner Association building renovation loan, including use of energy service companies Single Family Rental Renter’s own credit card financing Owner second mortgage Multi-Family RentalTarifed Installation Program (charges for utility-arranged EE measures, repaid via utility meter by successive occupants/utility customers) – offered by Midwest Energy and Maui Electric For an excellent analysis of residential energy financing mechanisms, see: Enabling Investments In Energy Efficiency -- A study of energy efficiency programs that reduce first-cost barriers in the residential sector, by Merrian Fuller, UC Berkeley and California Institute for Energy and Environment, September

Residential Sector -- EE Financing Workshop 6/15/09 4 IOU Proposed Approach to Exploring Residential Sector EE Financing Support See separate presentation by utility representatives

Residential Sector -- EE Financing Workshop 6/15/09 5 Question to Utility Panel: Why have California IOUs not proposed other mechanisms (used by some U.S. utilities) for California’s residential customers? Secured Loan (e.g. SMUD) Unsecured loan (on-bill financing) Tarifed Installation Program

Residential Sector -- EE Financing Workshop 6/15/09 6 Questions for group discussion: 1.To what degree are financing mechanisms critical to increasing market participation and gaining deeper, more comprehensive energy savings? 2.Do we have the right mechanisms for the different market segments? If not, what else do we need? 3.How can utility ratepayer programs best support or interface with these other mechanisms, or stimulate additional mechanisms? 4.How can we keep financing costs low, or at least cost- effective, when considering all ratepayer and taxpayer support for investing in EE (programs, incentives, financing, tax credits)?

Residential Sector -- EE Financing Workshop 6/15/09 7 Q2: Do we have effective mechanisms for all market segments? What else do we need? Market SegmentFinancing Mechanisms AvailableWhat Else Needed? Single Family Owner Occupied Home Equity Loan (secured) Unsecured contractor financing “Fannie Mae” loan EE mortgage Community-based property assessment Multi-Family Owner Occupied (e.g. condos) Home – Owner Association building renovation loan Single Family Rental Renter’s own credit card financing Owner second mortgage Multi-Family Rental Tarifed Installation Program? What is SDG&E’s experience?

Residential Sector -- EE Financing Workshop 6/15/09 8 Q3: How can utility efficiency programs best support other financing mechanisms, or stimulate new ones? Which current financing mechanisms and terms are most effective? What changes do we need to improve them, or reach broader market segments? In what ways can utilities can help make these mechanisms more attractive, less expensive, or easier? Should such improvements be uniform statewide?

Residential Sector -- EE Financing Workshop 6/15/09 9 Q4: By law, the CPUC must ensure that ratepayer funding of efficiency programs is cost-effective. This means that together, all ratepayer funding of - efficiency programs, - incentive payments, - costs of loan servicing, and - any interest rate subsidies, must cost less and the total value of the resulting energy saved. What do you see as the right balance between ratepayer support for financing, while keeping the total financial support for efficiency programs in check?

Wrap-Up and Next Steps Key themes and findings from today’s discussion that you may want to address in written comments: