California regulators seek to expand utilities' loans for small businesses

The pilot program helps firms buy energy-efficient equipment.

By Cyndia Zwahlen
Special to The Times

May 5, 2008

California regulators want to expand a pilot program under which utilities offer interest-free loans to small businesses that want to buy energy-efficient gear.

The three big utilities that tried the program last year are on board to enlarge the effort. At least one will probably propose raising the cap for loans to small businesses to $100,000, from $50,000, and increasing the payback timetable to 10 years for loans to institutional customers such as cities and schools, said energy consultant Hank Ryan, who is credited with bringing a successful Connecticut program to California that lets customers make loan payments through their utility bills.

Southern California Edison wants to boost its loan fund, which was about $2.5 million last year.

"We'll be increasing it many, many times over," said Gene Rodrigues, director of energy efficiency for the Rosemead-based utility. Edison plans to bring in third parties that offer financing as well as efficient technologies, such as equipment vendors or manufacturers with loan programs.

The goal is to help small firms buy new equipment that is so efficient the energy savings will cover the monthly loan payments. Small businesses were attracted to the pilots launched last year because they required only a good payment record with the utility.

In its October opinion covering how utilities should address energy savings goals for 2009-2011, the Public Utilities Commission directed all utilities to create or continue on-bill financing pilot programs for small commercial customers. It asked for a proposal for on-bill financing programs for institutional customers and for continued investigation of programs for other sectors such as residential customers.

The utilities have created numerous programs to help meet the energy savings goals set by regulators and thus earn incentives funded by taxpayers.

San Diego Gas & Electric, a unit of Sempra Energy, has had some early success with the pilot program that offers no-interest loans of $5,000 to $50,000 to buy energy-efficient equipment approved by the utility. About $1.5 million of its $5 million in pilot funds has been promised in loans, spokeswoman Rachel Laing said.

SDG&E's sister utility, Southern California Gas Co., had the same amount in loan funds for its pilot program.

Both utilities are looking at ways to improve.

"We are considering enhancing it for the next program cycle with higher caps and making it more feasible for institutional customers," Laing said.

Some utilities, such as Pacific Gas & Electric, have expressed concerns about on-bill financing because of technical limitations of billing systems and the risk of loan defaults to the ratepayers who fund the program.

The commission backs the program because it offers small businesses, which traditionally struggle with cash flow and access to loans, a way to jump-start their energy-efficiency efforts.

Ryan says increased demand for energy-efficient technology is a benefit for small firms. "That could help bring prices down and mainstream new equipment," he said.

Bill would change rules on grants

Congress is considering legislation that would allow certain small businesses backed by venture capital to qualify for federal small-business grants.

The bill, HR 5819, has landed in the Senate committee on small business and entrepreneurship after speedy and overwhelming approval by the House of Representatives two weeks ago.

It would reauthorize -- and make controversial changes to -- two key research and development funding programs for small firms: the Small Business Innovation Research and the Small Business Technology Transfer. The Small Business Innovation Research is due to expire Sept. 30.

The bill would re-open those grants to small businesses disqualified under a 2003 change by the Small Business Administration. A small business would qualify for grants even if it was majority-owned by venture capital firms, as long as no single firm owned more than 49.9% of it or controlled a majority of its board.

Venture capitalists and the biotech industry, among others, have fought to change the rules, arguing that the Small Business Innovation Research grants provide vital, early-stage funding for research and development of critical drugs and technologies.

Critics argue that the grant programs are meant for small businesses without deep-pocketed investors. Those with venture capital investors, opponents say, don't need federal grants.

The bill also would triple the size of Small Business Innovation Research phase one and phase two grants to $300,000 and $2.2 million, respectively. It doesn't increase agency budgets for the grants so far fewer businesses may be funded. It also calls for agency advisory councils to encourage commercial projects as well as grants for small businesses owned and controlled by women, minorities, service-disabled veterans, those in rural or economically depressed areas or involved in energy efficiency efforts.

Sen. John F. Kerry (D-Mass.), chairman of the Senate small-business committee, has put a priority on reauthorizing Small Business Innovation Research but didn't act on a similar House bill last fall.

Policy proposals focus of seminar

Los Angeles will be the site of the first California Small Business Advocate's Conference on Small Business and Entrepreneurship, a two-day gathering in November during which small-business leaders and supporters will unveil their policy recommendations for Gov. Arnold Schwarzenegger's last two years in office.

The event, scheduled for Nov. 18-19, will be modeled after the successful 1995 White House Conference on Small Business. All but four of the 60 policy recommendations made there resulted in laws or regulations, the advocate's office said.

At their first planning session last week, Marty Keller, director of the Small Business Advocate, and the conference steering committee picked 11 issues to focus on, including greenhouse gas emissions and the green economy, as well as the perennial challenges for small firms: healthcare, funding and workforce development.

cyndia.zwahlen@latimes.com