The Energy Efficiency and Conservation Loan ProgramRural Development – Rural Utilities ServiceElectric ProgramUS Department of Agriculture

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Administration and Statutory Background Energy Efficiency and Conservation Loan Program Energy Efficiency Programs/Eligible Activities Options to Enable Energy Efficiency Financial Structure for Consumer Loans RUS Secured Loan Provisions Applying for a Loan - an Overview

◦ Performance Thresholds◦ Business Plan◦ Quality Assurance Plan◦ Load Forecasting◦ Environmental Report

RUS Accounting Next Steps Requests for Comment Questions

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Rural Utilities Service published the proposed Energy Efficiency and Conservation Loan Program on July 26, 2012 which implements Section 6101 of the 2008 Farm Bill

Section 6101 expands the ability of the electric program to make loans for energy efficiency activities

This proposed rule supports President Obama’s Recovery through Retrofit Initiative (RTR). RTR requires Federal Agencies to complete activities that increase green job opportunities and boost energy savings by retrofitting homes for energy efficiency

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The regulation will allow new financing opportunities for RUS borrowers to provide energy efficiency and weatherization activities to businesses and homeowners in rural America

The program is to be funded out of existing authority and appropriations

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Energy Efficiency Programs must be:

◦ Developed and implemented by an eligible borrower for its service territory

◦ Supported by a business and quality assurance plan◦ In accordance with existing policy applicable to the

interconnection of distributed resources

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Energy Efficiency Programs must:◦ Result in energy savings or peak demand

reduction◦ Demonstrate that the program can be expected

to be cost effective◦ Acquire RUS approval prior to the investment of

funds for which reimbursement will be requested

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All energy efficiency measures attached to the home Small scale distributed generation Demand side management Energy audits Soft costs Power factor correction equipment on the consumer side of the

meter Re-lamping to more energy efficient lighting Other investments approved by RUS as part of an EE Program Fuel switching is NOT an eligible activity*

*RUS is requesting comment

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Rate Based Structure Energy Service Contracts Payment through Electric Bill Financing Consumer Loans

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Loans will be made to a RUS borrower. The borrower may make loans to their consumers that have the following criteria:

◦ Consumers may be residential, commercial, or industrial

◦ Loans may be secured or unsecured◦ Loan receivables are owned by the eligible

borrower 

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Loans may be serviced directly by an RUS Borrower or a financial institution

Loans to the consumer should be less than or equal to the Treasury rate plus 1%*

*RUS is requesting comment10

Maximum term for loans shall be 15 years Ground source loop investments may be up to 30

years Feasibility must be demonstrated for all loans Loan advances shall be on a reimbursement basis

except for an initial advance of up to 5% of the total loan amount to assist with beginning an energy efficiency program

Loan Amounts◦ May not exceed 100% of net utility plant less

total outstanding debt ◦ Consumer education and outreach programs may

not exceed 4% of the total loan amount**RUS is requesting comment

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RUS will reimburse expenditures after the completed work

RUS will request analytical information to support the EE loan

Energy efficiency work plans will be required to capture program activity

Energy efficiency investments will not be listed on the traditional construction work plan

Subpart H of the proposed rule clarifies the application materials for RUS to approve an energy efficiency program and the associated loan

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Appliance upgrades must achieve a reduction in energy consumption for the appliance equal to or greater than 20%

Cooling system improvements must be designed to achieve a SEER* increase of not less than 20%

Building envelope improvements must be designed to achieve a reduction of annualized baseline energy consumption greater than 10% for the building

*SEER = Seasonal Energy Efficiency Ratio

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Energy audit recommendations must achieve an overall reduction in annualized energy consumption of at least 10%

Heating system improvements must demonstrate an annualized energy reduction of at least 20%

Other activities, determined on a case by case basis, must demonstrate energy savings not less than a 10% improvement in energy efficiency

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Eligible EE Programs must have a business plan that includes the following elements:◦ Responsible management team◦ Target consumers and promotional activities◦ Activities, investments, and the corresponding expected

efficiency gains◦ Estimates invested in each activity or investment◦ Financial plan◦ Description of contractors used to deliver the program◦ Process for documenting and perfecting collateral arrangements◦ Assessment of risks, including an estimate of prospective

consumer loan losses and established loan loss reserve◦ Description of efforts to identify state and local sources of

funding and how they are to be integrated in the EE Program

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Eligible EE Programs must have a quality assurance plan with the following elements:◦ The use of qualified energy managers or professional

engineers to evaluate program activities and investments◦ Energy audits shall be performed for energy efficiency

investments involving the building envelope at a consumer premises. This is not required if only an HVAC unit is being replaced

◦ Energy audits must be performed by certified energy auditors

◦ Follow up audits shall be performed within one year◦ Single system upgrades (such as a ground source heat

pump) must be designed and installed by certified and insured professionals

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Comparison of projected annual growth in demand before and after incorporating the EE Program

An itemized estimate of the energy savings and peak demand reduction to be obtained for each category of eligible activities and investments to be pursued

A report of discussions and coordination conducted with the utilities power supplier

An estimate of the amount of direct investment in utility-owned generation to be deferred as a result of the EE Program

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A borrower’s environmental report (ER) is expected to accompany the energy efficiency work plan associated with the loan request

The ER will be expected to reference the programmatic environmental assessment (PEA), and identify any investments that are proposed in the work plan that were not captured in the PEA

RUS’s PEA will have a 30 day public comment period. Publication is expected in the coming months

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Nothing in this program changes RUS accounting, monitoring, and reporting requirements

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The regulation is currently out for public comment until September 26, 2012

RUS seeks comments on specific topics

Once the comment period closes, the regulation will be revised and go through additional clearance

We expect to issue the first EE loans in March of 2013

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RUS is requesting comments on six specific questions, as well as comments on any area of the proposed rule

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What should be the threshold for determining when small scale renewable energy systems on the Consumer side of the meter is presumed incidental and thereby qualify for reimbursement under this program? 

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What is the appropriate markup above the treasury-based interest rate paid to RUS that the utility should be allowed to add to cover its administrative costs in the interest rate it establishes for consumer loans funded under this proposed subpart?

 

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What is the appropriate performance thresholds that should be set to ensure products purchased with loan funds are significantly more energy efficient than conventional products, have reasonable payback periods, and perform at least as well as conventional products?

Are the percentage energy efficiency improvements for specific projects appropriate measures for this program’s energy efficiency standards?

Should this rule reference existing energy efficiency standards or criteria or other voluntary consensus standards as a means of ensuring products purchased with loan funds are significantly more energy efficiency than conventional products?

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Fuel switching is currently not allowed in the regulation: Should fuel switching be an eligible activity under this programmatic regulation? Should the agency consider any net increases unconventional fossil fuel consumption or emissions due to fuel switching even though the utility’s electrical load may be reduced during peak periods?

Would limiting fuel switching projects to 50% of the average anticipated electrical load associated with the end user, adequately address any concerns with potential emissions or overall energy generation increases?

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Is the one percent cap on interest rates that utilities may charge to high or to low? Should the limit for administration and miscellaneous expenses remain at four percent?

  

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Should this program be limited to $250 million a year?  

 

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Via http://www.regulations.gov, and follow the instructions for submitting comments

By Postal Mail/Commercial Delivery, addressing comments to Michele Brooks, Director, Program Development and Regulatory Analysis, USDA Rural Development, 1400 Independence Avenue, SW, STOP 1522, Room 5162, Washington, DC 20250-1522 

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Please visit our website at: http://www.rurdev.usda.gov/UEP_HomePage.html

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