Needle in a Haystack: U.S. Senate Supports Lower Energy Costs for Rural America, will the House Follow Suit?

On June 11, the U.S. Senate passed a five-year Farm Bill that includes a rural energy savings program administered by the U.S. Dept. of Agriculture. Photo courtesy of Tim Coolong

On June 11, the U.S. Senate passed a five-year Farm Bill that includes a small provision with significant potential for reducing energy costs for rural Americans.

The Rural Energy Savings Program (RESP) — based on South Carolina’s successful “Help My House” program and first introduced in 2012 as a stand-alone bill — would authorize the U.S. Department of Agriculture’s Rural Utilities Service (RUS) to provide zero-interest loans to rural electric cooperatives to create what is known as “on-bill financing” programs. Should RESP be passed as part of the final Farm Bill, Appalachian Voices will work hard to promote the program to rural residents and electric coops through our Energy Savings for Appalachia program.

With on-bill financing, electric coops offer low-interest loans to their residential customers to finance energy efficiency improvements to their home, and the residents repay the loan through an extra charge on their electricity bill. In rural America, which largely gets its electricity from electric membership cooperatives, there is a greater concentration of inefficient housing and low-income residents. Low-interest loans that save homeowners and renters a significant amount of money on their electricity bills could have a significant financial impact not only for the residents and the local economy, but also for the electric cooperatives.

On-bill financing programs supporting home energy efficiency improvements are relatively new, but they have already proven to be highly successful and growing in popularity, particularly among heavily rural, conservative states. For instance, pilot programs having been implemented in Kentucky and South Carolina, and a full-scale program is being offered through Midwest Energy in Kansas. Each of these programs has achieved an average savings of 20 percent or more for their participating customers, and initial results for the South Carolina program estimate that the average loan is saving participating low-income residents nearly $1,300 per year.

In addition to the direct benefits for residential customers, energy efficiency programs can bolster rural economies by creating new demand for energy services and products such as home energy audits, retrofits and more energy-efficient appliances. As U.S. House Representative Jim Clyburn (D-SC) noted in 2010, on-bill financing programs authorized through RESP would also “be a boon for the domestic manufacturing and construction industries, as energy-efficiency products are almost exclusively manufactured in the United States and installation jobs cannot be exported.”

While lower energy costs for homeowners and bolstering rural economic development are the primary goals of on-bill financing programs, electric cooperatives benefit as well, not only through having to purchase and distribute less electricity from larger utilities, but also by avoiding the need to invest in new sources of generation or transmission lines. These avoided costs mean lower electricity bills for all customers of a particular coop, and in some cases, may also help preserve ecologically valuable wilderness areas.

The passage of the Senate Farm Bill with the RESP intact signifies that there is strong bipartisan support for the program. This is hardly surprising, given the potential economic benefits of the program and the importance of the Farm Bill for rural America generally. However, even though RESP would be funded through existing appropriations and would not require new sources of funding, the companion House bill currently excludes the RESP. Hopefully the program will be added to the House bill before it comes to a vote, but even if the House fails to recognize its importance for rural economies, there will still be a chance for the program to be included in the final bill.

Fortunately, there are a number of strong advocates for energy efficiency and the RESP that are working hard to make sure this happens, including Rep. Clyburn, Senator Jeff Merkley (D-OR), the Environmental and Energy Study Institute, the National Rural Electric Cooperative Association, the Alliance to Save Energy, the Electric Cooperatives of South Carolina, Appalachian Voices, and many others.

Even if the program fails to pass, existing programs such as RUS’s Energy Efficiency and Conservation Loan Program will still be available to fund on-bill financing initiatives. However, the RESP would provide lower-cost financing, resulting in even greater savings for both residents and coops. Contact your congressional representatives today and ask them to add the Rural Energy Savings Program to the House version of the Farm Bill.

About Rory McIlmoil

Rory is an energy policy and finance wonk with over a decade of experience working on energy policy and planning in Appalachia. He joined Appalachian Voices in spring 2013 as Energy Policy Director to head up our Energy Savings for Appalachia program. His dog, Hobo, is our official Boone office mascot.