Traverse City could become the second city in the state of Michigan to launch a program that would allow residents to receive funding for major home energy upgrades, slowly paying back the loans over time on their monthly utility bills.

Traverse City commissioners will consider a request at their 7pm meeting tonight (Monday) from Traverse City Light & Power (TCL&P) to launch the “on-bill financing program” in early 2020. Michigan lawmakers passed legislation in 2014 to promote clean energy by allowing utilities to help customers finance energy improvements through low-cost loans. Holland was the first city to launch such a program under the legislation, with 121 loan applications totaling $1.18 million approved since 2016.

The program works by allowing homeowners to borrow an amount ranging from $5,000 to $30,000 to make their residences more energy efficient. “We’re not talking about just an air conditioner or a dehumidifier,” says TCL&P Executive Director Tim Arends. “This is for when people want to do insulation, windows, doors, natural gas furnaces – very expensive improvements.” An administrative fee capped at no more than five percent is applied to the loan. Rather than having to pay upfront for costly improvements, residents can instead spread loan payments across their monthly utility bills for up to a decade.

The goal is to make energy upgrades accessible to a wide range of customers – including those who could not otherwise afford them. The program has more relaxed credit standards than a traditional bank loan: Customers just need to have paid 12 consecutive months of utility bills on time and can’t have delinquent taxes, bankruptcies, or foreclosures in the last three years. The program is only available to residential customers – rental units can apply if the landlord is a TCL&P account holder – with a complete home energy audit completed prior to the loan being approved. Many customers realize long-term savings on their bills because of the energy improvements, Arends says.

While Holland chose to back loans out of its own internal funds, TCL&P internal funds are already committed to the utility’s upcoming citywide fiber program. So TCL&P approached the United States Department of Agriculture (USDA) and received tentative approval to receive up to $1.8 million in loan funding over the next 10 years through the department’s rural energy savings financing program. “It has certain requirements, such as the city commission has to approve the idea,” Arends says. “But we’re pretty confident we can get a zero-interest loan. We would only borrow as much money as we were actually lending out (to customers).”

Arends says the program is a win-win for TCL&P, allowing the utility to help its customers make upgrades, get closer to meeting its own renewable energy goals, and reduce demand on the grid. “The energy you don't use is the cheapest energy,” he explains. “So if we can have people improve their energy efficiency, the goal is that they use less energy and it reduces our peak demand. At the end of the day, that benefits all TCL&P ratepayers, because we as a utility don’t have to purchase as much capacity as we would if they didn't do these improvements.”

The program also poses little liability to TCL&P, since homeowners are legally obligated to pay back the loans. “The risks to us are minimal,” says Arends. “If they don't pay it back, we can lien it and collect it back in the same way we do property taxes. There's no credit risk to deploy the program.”

If commissioners approve the program tonight, TCL&P will next obtain final approvals from the state and USDA to move ahead with the lending program. The utility will train representatives on guiding customers through the loan application process, then set up a website and marketing campaign to make residents aware of the program. Arends anticipates that process could take four months, with the program likely to launch by February, he says.