Building Sector



On-bill programs allow building owners and occupants to pay for clean energy investments over time through an additional charge on utility bills.

On-bill programs have mostly focused on energy efficiency measures, though renewable energy and water efficiency projects may be eligible as well.  Such projects often come with a high upfront cost that many people, businesses, and institutions cannot easily afford. On-bill programs can mitigate this problem because an administering utility or a third party covers the upfront cost of the clean energy installations. A customer’s history of utility bill payment can help to establish credit, and the customer may see little or no net increase in the monthly bill due to expected reductions in energy consumption. Generally, non-repayment will lead to a shutoff in utility service, which deters defaults and can make the loan provider more confident in repayment.

There are two general types of on-bill programs:

  • On-bill financing (OBF) – a utility incurs the cost of clean energy upgrades and is repaid by the customer.
  • On-bill repayment (OBR) – a third party (not the utility) provides the capital for a clean energy upgrade and is repaid by the customer through a utility bill.

On-bill programs vary by state and by provider, and each program has its own terms and process. Programs may be available to residential, commercial, industrial, and/or institutional customers depending on the state and utility policies. In those states with legislation that requires utilities to offer OBF, generally it is only obligatory for investor-owned utilities (IOUs). Administration of on-bill programs also varies; programs may be administered by the utility itself, a nonprofit organization, or a government entity. Some programs feature a discounted or zero interest rate. Initial investment funds for on-bill programs can come a variety of sources from utility ratepayers, government grants, or other funding sources. The American Recovery and Reinvestment Act of 2009 (ARRA) provided a significant amount of funding for OBF.

Most participants in on-bill programs begin the program with an audit of the building to determine if energy efficient upgrades would be cost-effective. Some programs require all upgrades to be “bill-neutral.” Bill-neutrality occurs when the savings accrued by the decreased energy use will be equal to or greater than the monthly repayment amount.

Certain on-bill programs may also have the characteristic of being “tied to the meter,” meaning that responsibility of repayment lies with the current resident of the building, rather than forever with the resident who instigated the financing. This allows for flexibility for residents who wish to move or sell their home.

The states are organized into the following policy categories:

1.    State-Required On-Bill Financing or State-Launched On-Bill Program: These states have passed laws or public utilities commission orders that require utilities statewide (usually only large or investor-owned utilities) to provide an OBF program or directed a state agency to set up an on-bill program. Program specifications, such as loan terms, program size, and customer eligibility vary from state to state. 

2.    State-Supported On-Bill Programs: These states have passed laws or public utilities commission orders that authorize and/or support the implementation of OBF or OBR state-wide, but do not require any utilities to offer on-bill programs. These include policies that remove legal barriers or establish funds to offering on-bill programs.

3.    Preliminary On-Bill Program Policy: These states’ public utilities commissions have ordered the establishment of pilot on-bill programs or commissioned research or working groups to analyze the feasibility of on-bill programs.

4.    On-Bill Financing Offered by Individual Utilities: Utilities in some states have voluntarily created OBF programs without direction from local or state government. In some states, utilities can earn money from reducing overall demand.  Energy efficiency can also be a way to reduce peak loads and thus generation costs.

To learn more about On-Bill Financing programs, please see the C2ES On-Bill Financing Brief.

Additional information:

U.S. Department of Energy: On Bill Financing and Repayment Programs

ACEEE: On-Bill Financing for Energy Efficiency Improvements

NRDC: On-Bill Financing Overview and Key Considerations for Program Design