First Regular Session Sixty-eighth General Assembly STATE OF COLORADO INTRODUCED LLS NO. 11-0545.01 Jason Gelender HOUSE BILL 11-1132 HOUSE SPONSORSHIP Lee, SENATE SPONSORSHIP (None), House Committees Senate Committees Transportation A BILL FOR AN ACT Concerning on-bill financing of energy efficiency improvements to residential real property. Bill Summary (Note: This summary applies to this bill as introduced and does not reflect any amendments that may be subsequently adopted. If this bill passes third reading in the house of introduction, a bill summary that applies to the reengrossed version of this bill will be available at http://www.leg.state.co.us/billsummaries.) Current law does not allow a public utility to finance the up-front costs of making one or more energy efficiency improvements to real property and to have the property owner repay the financing over time through direct charges on the owner's utility bills. Section 2 of the bill allows such on-bill financing in certain circumstances and specifically: Authorizes a public utility that sells natural gas or electricity to retail customers and a customer of the utility who owns residential real property to enter into an on-bill financing arrangement whereby the utility finances and completes one or more energy efficiency improvements to the residential real property and imposes a meter conservation charge on the customer's subsequent utility bills to recoup the costs, including financing charges, of completing the improvements; Requires a public utility to perform, or cause to be performed, an energy audit that includes an estimate of the costs and expected savings from all proposed energy efficiency improvements and that recommends appropriately sized energy efficiency improvements before entering into an on-bill financing arrangement with the owner of the audited residential real property; Specifies limitations and requirements for an on-bill financing arrangement; Allows a public utility to disconnect electricity or natural gas service in accordance with existing law if a customer fails to pay a meter conservation charge; Requires a public utility that enters into an on-bill financing arrangement to record with the appropriate county clerk and recorder a meter conservation charge notice that discloses the existence and amount of the charge and the length of time for which the charge is expected to remain in effect; Requires the public utilities commission to determine the extent to which clean energy improvements financed by any on-bill financing arrangements made by a public utility have created energy savings and to allow the public utility to count the energy savings toward compliance with any mandated demand-side management targets or goals; and States that an on-bill financing arrangement does not preclude a public utility from offering its customers other types of financing for energy efficiency improvements as otherwise permitted by law. Section 1 of the bill makes legislative findings and declarations. Be it enacted by the General Assembly of the State of Colorado: SECTION 1. 40-3.2-101, Colorado Revised Statutes, is amended to read: 40-3.2-101. Legislative declaration. (1) The general assembly hereby finds, determines, and declares that cost-effective natural gas and electricity demand-side management programs will save money for consumers and utilities and protect Colorado's environment. The general assembly further finds, determines, and declares that providing funding mechanisms to encourage Colorado's public utilities to reduce emissions or of air pollutants and to increase energy efficiency are matters of statewide concern and that the public interest is served by providing such funding mechanisms. Such efforts will result in an improvement in the quality of life and health of Colorado citizens and an increase in the attractiveness of Colorado as a place to live and conduct business. (2) The general assembly further finds, determines, and declares that allowing the financing of demand-side management programs through on-bill financing of energy efficiency improvements to residential real property will provide greater flexibility and choice for public utility customers in meeting the goals of this article. SECTION 2. Part 1 of article 3.2 of title 40, Colorado Revised Statutes, is amended BY THE ADDITION OF A NEW SECTION to read: 40-3.2-106. Financing of energy efficiency improvements - on-bill financing agreements - definitions. (1) As used in this section, unless the context otherwise requires: (a) "Customer" means an owner of residential real property who receives electricity or natural gas as a retail customer. (b) (I) "Energy efficiency improvement" means one or more installations on, or modifications to, existing residential real property that are designed to reduce the energy consumption of the property and that are not required by a building code as part of new construction or a major renovation. The term includes, but is not limited to: (A) Insulation in walls, roofs, floors, and foundations and in heating and cooling distribution systems; (B) Storm windows and doors, multiglazed windows and doors, heat-absorbing or heat-reflective glazed and coated window and door systems, additional glazing, reductions in glass area, and other window and door system modifications that reduce energy consumption; (C) Automatic energy control systems; (D) Heating, ventilating, or air conditioning and distribution system modifications or replacements in a building; (E) Caulking and weatherstripping; (F) Replacement or modification of lighting fixtures to increase the energy efficiency of the system without increasing the overall illumination of residential real property unless the increase in illumination is necessary to conform to the applicable building code for the proposed lighting system; (G) Energy recovery systems; (H) Daylighting systems; and (I) Any other modification, installation, or remodeling approved by a public utility as a utility cost-savings measure eligible for an on-bill financing arrangement. (II) "Energy efficiency improvement" does not include: (A) Any improvement made to newly-constructed residential real property or residential real property that is under initial construction; or (B) The replacement of natural gas appliances or equipment with electric appliances or equipment, or vice versa, unless the same public utility provides both natural gas and electric service to the customer seeking to have the appliances or equipment replaced. (c) "Meter conservation charge" means a charge placed on a customer's account by which a public utility may recover the costs, including financing costs, of completing one or more energy efficiency improvements to the customer's residential real property. (d) "On-bill financing arrangement" means an agreement between a customer and a public utility that sells natural gas or electricity to customers that provides for the costs, including financing costs, of one or more energy efficiency improvements to be paid by or through the utility and repaid by the customer to or through the utility by means of a meter conservation charge. (e) "Residential real property" means an improvement to real property that is designed for use predominantly as a place of residency. The term also includes any other improvement or connected land that is billed with the improvement for purposes of ad valorem property taxation. (2) A public utility that sells natural gas or electricity to retail customers may enter into an on-bill financing arrangement with a customer for one or more energy efficiency improvements to residential real property owned or leased by the customer and served by one or more utility meters on the customer's account, subject to the following requirements and limitations: (a) Before entering into the on-bill financing arrangement, the public utility shall perform, or cause to be performed, an energy audit of the residential real property. The energy audit shall include an estimate of the costs of, and expected savings from, all proposed energy efficiency improvements and shall recommend energy efficiency improvements that are appropriately sized for the specific use contemplated. The utility shall provide a copy of the energy audit to the customer. (b) The on-bill financing arrangement shall identify each energy efficiency improvement to be completed and the contractor responsible for its completion and shall specify that the customer shall only be responsible for the payment of the meter conservation charge upon satisfactory completion of all energy efficiency improvements by the responsible contractor. (c) The on-bill financing arrangement shall specify that the public utility shall be entitled to recover its costs, including financing costs, of completing the energy efficiency improvements solely through the meter conservation charge, which: (I) Shall be stated as a separate line item on the customer's utility bill; (II) Shall be in an annual amount that does not exceed the amount of annual savings that will result from the completion of the energy efficiency improvements, as estimated by the energy audit performed pursuant to paragraph (a) of this subsection (2); (III) Shall be in a total amount that does not exceed the costs, including financing costs, of completing the energy efficiency improvements; and (IV) Shall have a fixed rate of interest over the term of the on-bill financing arrangement that is clearly set forth in the arrangement and that is no more than four percentage points above the yield for one-year treasury bills as published by the federal reserve at the time the arrangement is entered into. (3) A public utility may treat failure to pay a meter conservation charge as a failure to pay the account, and may disconnect electricity or natural gas service for nonpayment of the charge in accordance with all applicable laws, rules, and ordinances relating to disconnection of utility service. (4) A public utility that enters into an on-bill financing arrangement shall record a meter conservation charge notice in the office of the county clerk and recorder for the county in which the property is located. The notice shall not constitute a lien on the property, but shall disclose to any prospective purchaser of the property or other person who searches the property records of the county: (a) That the charge exists and that bills for utility service to the property will include the charge; (b) The amount of the charge; and (c) The length of time for which the charge is expected to remain in effect. (5) For any public utility that sells natural gas or electricity to retail customers for which the public utilities commission has developed expenditure and natural gas savings targets pursuant to section 40-3.2-103, or established energy saving and peak demand reduction goals pursuant to section 40-3.2-104, the commission shall determine the extent to which energy efficiency improvements financed by any on-bill financing arrangements made by the public utility have created energy savings and shall allow the public utility to count the energy savings toward compliance with its expenditure and natural gas savings targets or energy savings and peak demand reduction goals, as applicable, using any method deemed appropriate by the commission. (6) This section shall not be construed to prohibit a public utility from offering its customers other types of financing for energy efficiency improvements as otherwise permitted by law. SECTION 3. Safety clause. The general assembly hereby finds, determines, and declares that this act is necessary for the immediate preservation of the public peace, health, and safety.