Posted by Joseph Sullivan | Date March 8, 2017
Mr. Chair and members of the Committee, my name is Joe Sullivan. I am the Manager of Strategic Relations at the Center for Energy and Environment.
CEE is an almost 40-year-old energy efficiency nonprofit based in the Twin Cities. We work throughout the state with utilities, businesses, and individuals to reduce energy waste and help people save money, make their businesses more competitive, and make their homes more comfortable. CEE designs and implements efficiency programs for utilities, provides low-interest financing to businesses and individuals, does original research into efficiency issues, and works with policymakers to advance energy efficiency.
Before discussing PACE (Property Assessed Clean Energy) financing, I think it’s important for the committee to understand a couple basics about energy efficiency. Minnesota’s utilities have been operating electric and gas efficiency programs for more than 30 years. Today, if you aggregate all our efficiency programs and savings together, the data shows that we save approximately 8.5 million megawatt hours of electricity per year, which is the equivalent to 14% of our electric system. We save more than twice as many megawatt hours than we generate from natural gas.
And this is important because efficiency is the lowest cost resource for the system. It costs on average 2 cents to save a kilowatt-hour — versus 8 cents to generate one — and Minnesotans have saved roughly $6 billion dollars over the years through efficiency programs. What all this tells you is that energy efficiency programs have been operating successfully in Minnesota for years. There is no silver bullet to making these programs successful. Just hard work.
Our organization lives and breathes efficiency. This is why we support Senator Pratt’s SF 1088. And the reason we want to ensure there are adequate consumer protections for residential PACE is because there is a danger to all clean energy programs and providers when clean energy programs are not designed well and don’t protect consumers.
PACE is a financing tool that proponents argue unlocks a huge new market for home energy improvements. That may be, but our concern is that it is possible to lose one's home due to defaulting on a residential PACE loan, although people may not recognize this risk.
There are inadequate statutory consumer protection requirements for residential PACE in Minnesota. It is a secured home loan in the guise of a tax lien, and tax liens are not subject to the suite of consumer protections imposed on other financing mechanisms where homeowners can lose their home in the case of default.
In our opinion, these basic consumer protections should include adequate and timely disclosure of all costs and fees under a Residential PACE loan; adequate underwriting criteria to make sure a homeowner has the ability to pay back the loan; unique protections necessary for elderly, low-income homeowners and other financially vulnerable homeowners; ability to cancel a loan if a homeowner changes their mind; protections against contractor kickbacks; and the like.
California has been the major market for residential PACE loans for more than five years. As the PACE program has been utilized in California a number of consumer protection issues have come up — there are at least three class action lawsuits pending in California alleging consumer abuse, and the California legislature recently scrambled to enact consumer protections for Residential PACE, and will likely work on more in the future.
We'd like to avoid a California-type situation and set the consumer protections in place prior to Residential PACE taking off here.
No one is currently operating a residential PACE program in Minnesota, so no one will be harmed by taking our time to do this right. SF1088 provides the appropriate time and process to protect Minnesotans from the problems that Californians have experienced. Let’s learn from the California experience and "measure twice, cut once.”
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