Energy efficiency pilot program considered

The city of Minneapolis is seeking permission from utility regulators to start a pilot program that would allow renters and homeowners to make energy-efficiency improvements without spending big up front or accruing interest.

The “inclusive financing” program has been proposed to the Minnesota Public Utilities Commission (PUC) as a corollary to a proposed rate hike by the city’s natural gas provider, CenterPoint Energy.

Under terms of the program, CenterPoint would pay for energy-efficiency improvements such as insulation and high-efficiency appliances at houses and apartments throughout Minneapolis.

To cover the up-front costs, it would charge renters and homeowners a monthly tariff that would amount to 80% of the expected monthly energy bill savings from the project.

The utility would charge the tariff until it covers the cost of the improvement or until the installation reaches 80% of its expected useful lifetime value — whichever comes first.

For projects where the upfront cost would exceed what the utility would expect to recoup through the tariff, the customer would be charged a copay up front to cover the difference.

A project’s cost-effectiveness would be evaluated before installation.

The city would like CenterPoint to spend $50 million over three years on the program.

A CenterPoint spokesman said in a statement that it supported the city’s “intention” to submit a proposal and is reviewing specifics.

The latest push to start an inclusive financing program comes about nine months after CenterPoint proposed a rate increase of 6.8% over 2018 costs.

The city is concerned that the increase will impose additional hardship on low- and moderate-income residents and residents who are Black, Indigenous and people of color, sustainability director Kim Havey told the PUC on July 15.

He noted that Minneapolis has a higher-than-average proportion of renters and said that an inclusive-financing program could spur more upgrades in apartment buildings, since landlords wouldn’t be responsible for capital costs.

Typically, landlords don’t have many incentives to make efficiency improvements, since they pay for the capital costs but don’t reap the benefits of lower utility bills, he said.

Alice Madden of the organization Community Power noted that the program does not require participants to take on debt or have cash on hand to pay up front.

She also said the program benefits utilities by reducing the peak demand for energy consumption.

Havey said the city has plans for a tentative launch date of 2021 for the inclusive financing program, pending PUC approval. A commission spokesperson said the PUC will decide whether to approve the program as part of its decision on the proposed CenterPoint rate hike.

A PUC decision is expected in the first quarter of 2021.