New state plan pairs loans and utility bills

Homeowners will soon have the option to repay energy-related home improvement loans of up to $25,000 on their monthly utility bills.
Gov. Andrew Cuomo touted the new service last week in his State of the State address as a convenience that is expected to spur interest in state-sponsored energy-efficiency programs.
Customers who borrow to pay for insulation, air sealing, high-efficiency furnaces or other approved items can use so-called “on-bill financing” to pay back the loan as part of their monthly utility bill.
Besides convenience, the new option may offer lower costs when it becomes available Jan. 30.
The fixed interest rate for on-bill financing will be 3 percent, said Dayle Zatlin, speaking for the New York State Energy Research and Development Authority, which operates the revolving loan fund.
That’s 25 percent lower than the 4 percent NYSERDA charges for traditional loans through its Home Performance with Energy Star program, and 14 percent less than the 3.5 percent interest rate for customers who arrange for automatic bill payment.
Because the loan installments are included on the utility bill — and carry the same penalties for nonpayment, including service termination — the on-bill loans are considered less risky, said Zatlin, of NYSERDA.
“We anticipate the financial markets will provide the funds to NYSERDA at a lower interest rate because of the added assurance of repayment,” she said.
Buyers must sign a mortgage to get on-bill financing, which means interest payments may be tax deductible, NYSERDA officials said. They advise borrowers to consult with a tax professional.
The NYSERDA mortgage is subordinate to other home mortgages and cannot be used to foreclose on the property, Zatlin said. But the mortgage ensures that any purchaser of the property is informed of the debt, which will remain on the home’s utility bill if the property changes hands before the balance is paid off, she said.
The loans are typically repaid over five to 15 years, Zatlin said.
State regulators have been working with utilities to implement on-bill financing by next June. Cuomo said Wednesday that he pushed up the schedule to make it available this month. The service will be available to residential customers by Jan. 30, and to business customers within the next few months, Zatlin said.
To qualify for a loan, a homeowner must participate in NYSERDA’s Home Performance with Energy Star program. The first step is to contact a certified contractor, who will assess the home’s energy performance and recommend improvements.
NYSERDA uses a loan servicing company, Energy Finance Solutions, to process the loans. Customers pay EFS a processing fee of $150. NYSERDA also pays EFS $175 per loan.
NYSERDA uses part of the money collected from interest payments to reimburse utilities for their costs to provide billing. Utilities get $100 per loan, plus 1 percent of each loan’s value.
The state will limit the availability of on-bill financing for the time being, until its effectiveness can be assessed, Zatlin said. For the Upstate territory of National Grid, the option will be limited to 6,665 residential customers, she said.
To learn moreMore information about NYSERDA’s residential energy-efficiency programs and links to loan applications are available at nyserda.ny.gov/residential or by calling 877-697-6278.
Contact Tim Knauss at tknauss@syracuse.com or 470-3023.

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