Virginia Should Expand The On-Bill Tariff Program
The on-bill tariff program allows utilities or third parties to finance energy efficiency upgrades and recover costs through fees on energy bills.
Only electric cooperatives are able to offer on-bill tariff programs for energy efficiency upgrades under current law.
A pilot program establishing the on-bill tariff program passed the state Senate unanimously in 2020.
Virginia’s General Assembly will kick off the 2022 regular legislative session next month. Starting this week, Powered By Facts will begin a weekly series walking readers through key legislative priorities that will help advance clean, affordable energy policy for all Virginians. This week, we’re urging the General Assembly to expand the on-bill tariff program for energy efficiency upgrades beyond electric cooperatives to include territories served by investor-owned utilities.
There’s a lot to love about energy efficiency upgrades. Customers save energy when upgrades are made, and that translates to saving money on energy bills. Utilities benefit from the energy performance improvements that upgrades enable, making energy grids more reliable and stable. The only problem, however, is that energy efficiency upgrades can be expensive.
But thanks to a new law that went into effect at the beginning of this year, certain energy customers in Virginia can have upgrades financed by utilities or another third party, and then pay off the cost of upgrades over time on their utility bills.
The law, which established what’s known as the on-bill tariff program, is simple. Utilities select customers that are eligible for energy efficiency upgrades, and then decide whether to finance the upgrades themselves or seek third-party financing. The upgrades are made, and the investment in the upgrades is tied to a specific meter location. The customer paying for energy at that meter location begins to receive a small monthly fee on energy bills, known as a tariff. The tariff is then paid by the customer at that meter location until the cost of the upgrade is recovered by either the utility or third-party.
The on-bill tariff program enables affordable energy efficiency upgrades, including weatherization, insulation installations, and heating and air conditioning system upgrades. Financing for the upgrades under the program is generally offered below market rates, and because energy efficiency upgrades reduce the amount of energy used, monthly tariffs usually cost less than the money customers save each month. Costs are tied to a metered location and not a specific customer, meaning there’s no need for customers to worry about accruing debt. If you move, the tariff remains with the new residents.
Currently, only electric cooperatives are able to establish and implement on-bill tariff programs in Virginia, as specified by law. While no electric cooperative has set up a program quite yet, the Rappahannock Electric Cooperative will be the first co-op in Virginia to offer a program soon. REC provides service to nearly 170,000 connections in portions of 22 counties, primarily in the northern region of the state. The program is expected to launch early next year.
In order to promote energy efficiency in Virginia, help energy customers save money, and create a more reliable energy grid, the General Assembly should expand the on-bill tariff program to territories served by investor-owned utilities (IOUs) like Dominion Energy and Appalachian Power. The benefits to customers are clear, but IOUs would also benefit from energy performance improvements and the ability to recover the costs of administering the program.
The bill establishing the program in territories served by electric cooperatives passed the Virginia Senate unanimously, underscoring the popularity of the program. With clear advantages for all, it’s time for the General Assembly to expand the on-bill tariff program to all parts of Virginia.