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August 2011 Commentary
Investments in our energy future
Sen. Lugar's innovative consumer energy loan program would go through co-ops
 by Bruce Graham
CEO of Indiana Statewide
Association of RECs, Inc.
As our nation works to determine a solution to our budget, spending and revenue problems, leaders are right to examine every single government expenditure in an effort to start living within our means.
Rural electric cooperatives have a long connection with the federal government. In fact, the program was created through federal initiative of President Franklin Roosevelt when he championed the Rural Electrification Administration to bring this life changing service to the power-starved countryside. Through the past 75 years, we have maintained an important connection. While the REA name has changed to the Rural Utilities Service, it remains an important source for acquiring funds to build generation and transmission, and make other system improvements necessary to continue our tradition of safe and reliable electric service.
Yes, the RUS program requires budget authority but you might be surprised to learn that the program actually generates revenue for the U.S. government (and us taxpayers). The numbers are impressive, too. Because of the excellent repayment history cooperatives have and the difference between the government’s cost of money and interest rates paid by the cooperatives, the program is projected to produce a profit of $60 million for the federal treasury this year alone. If every government program had anywhere near the same return on investment, we wouldn’t be facing such debt crisis issues.
And speaking of return on investment, I had an opportunity to testify in support of a bill that would create another very interesting partnership for rural areas of our nation. At the invitation of Indiana Sen. Richard Lugar, I testified before the Senate Agriculture Committee in July to support a concept he is advocating called the Rural Energy Savings Program Act. This act would establish a loan program that consumers could access to make energy-efficient improvements to their home or business.
Rural electric cooperatives would lead this initiative by accessing funds appropriated for this act and lend them directly to consumers through a low-interest loan program. The really creative part of this program is that to be eligible for the funds, the consumer projects would have to create savings that equal or exceed the monthly cost to service the loan.
The loan payment would be added to the utility bill, but if an eligible project can save 20 to 30 percent on the average utility bill, the savings could exceed the new loan payment. In addition, the borrower should benefit from increased property values and improved comfort in the home or business. Once the loan is paid off, the homeowner will continue to benefit from the lower monthly energy costs.
Consumer loans would cover only structural upgrades such as: blocking air infiltration, insulation, HVAC systems, windows, and other improvements that co-ops can demonstrate will produce sufficient savings. Loans will not be used for appliances that do not stay with the structure — refrigerators, window AC units, etc.
RESPA would have a minimal impact on the federal budget because it is a loan program, not a grant program, and requires repayment of loans to the federal government. The co-ops are ultimately responsible for paying back the loans from the RUS, not the individual customers. Therefore, co-ops have a strong incentive to make careful evaluations of potential projects to make sure that their member-owners get the value they expect and that they have the ability to repay the loan.
A successfully implemented program also has the potential to create much-needed jobs in rural America for energy auditors, contractors, installation crews, and thousands of jobs to manufacture the new windows and doors, insulation, heating and cooling systems and other energy saving building improvements.
In addition, effective energy efficiency measures have the potential to reduce demand during peak periods of electric use (saving the cooperative and its members money) and the potential to curb carbon emissions across the country.
RESPA is included in Sen. Lugar’s Practical Energy Plan and is expected to be introduced in stand-alone legislation this year as well. It was approved by the U.S. House of Representatives last year but will need to be blessed again by that body as a step toward passage.
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