Small businesses in California may have an easier time investing in new energy-saving equipment, thanks to a program approved Thursday by the California Public Utilities Commission.
Businesses will be able to borrow funds from their utility company with little paperwork and minimal interest for items like energy-efficient lighting and kitchen equipment.
They can then repay the loan from the savings on their utility bills -- in some cases having the payment listed as a line item on their regular bill.
Pacific Gas and Electric will initially allocate $20 million for loans. PG&E has about 400,000 business customers that meet the criteria of using less than 200 kilowatts of power per month.
"This is extraordinarily important because the financing of energy efficiency has always been a problem for small businesses," said PUC Commissioner Dian Grueneich.
California has tried various programs in the past to induce businesses to create more energy-efficient workplaces. Utility companies have offered rebates on energy-efficient equipment. The state has also offered some loans for energy-saving purchases.
But the application process for these previous loan programs was too complicated and time-consuming for most small businesses. So, even with rebates, most small businesses couldn't afford the up-front investment needed to lower their energy consumption.
"Those programs were just not used by small business at all," said Hank Ryan, executive director of Small Business California, an advocacy group that pushed for the new program.
The program, called "on-bill financing," is similar to efforts that have been under way in New England for several years.
United Illuminating, a small utility in New Haven, Conn., says that 1,700 of its business customers have used on-bill financing for the past five years, cutting their energy costs by about 20 percent and saving a total of 30 million kilowatt hours of electricity.
The details of the California program have not yet been worked out, and will vary by utility. But they will work roughly the same way:
-- A business will be eligible if it has been a utility customer for two years and has a good payment record. It won't need to fill out any of the financial statements required for regular business loans.
-- Businesses may be able to get rebates for part of the cost of energy-efficient improvements.
-- The utility, such as PG&E, will use ratepayer funds to lend the rest of the cost, up to a certain amount. Some utilities will lend the money interest-free; PG&E plans to charge a very low rate.
-- The business will repay the loan over two years with the money it saves on its energy bill. So if a restaurant lowers its electricity cost by $300 a month by installing a new ice machine and steamer, it will make loan payments of $300 a month. Its total monthly utility bill will remain the same. When the loan is paid off, its bill will go down.
"The advantage is there is no problem with up-front cash flow," Ryan said. "Your rebate covers part of it, and on-bill financing covers the rest. After two years of a neutral cash flow, you'll get a positive cash flow. And you'll have made these changes without a hit to your business."
The program is scheduled to start in early 2006. Information is available by calling PG&E at (800) 468-4743.
E-mail Ilana DeBare at firstname.lastname@example.org.