Industry Leader Interview: Maine Governor John E. Baldacci

John Baldacci, who is in his second term as governor of Maine, has made energy efficiency one of his top priorities. The Alliance asks Gov. Baldacci how he is using PACE financing, federal stimulus funds and other innovative techniques to improve energy efficiency in Maine.  

Alliance: Your state has recently set up a new entity, Efficiency Maine. How does Efficiency Maine work, and how does it relate to other state efficiency programs?

Gov. Baldacci: The Efficiency Maine Trust was created to administer all energy efficiency and renewable energy programs in Maine. It is an independent, not-for-profit, quasi-state agency governed by a stakeholder board of directors.

The Governor’s Office of Energy Independence and Security (OEIS) plans and coordinates state energy policy. While the OEIS provides the policy direction for the State, Efficiency Maine implements the strategies to help save Maine consumers money through efficiency and alternative energy programs. The Maine State Housing Authority works with both agencies to ensure that lower- and moderate-income Maine citizens can heat their homes, pay their electric bills and benefit from energy improvements at little or no cost. 

All three agencies are working together to reach our goals of weatherizing 100% of Maine’s housing stock and 50% of our businesses by 2030.

Alliance: Maine has a unique approach to PACE financing to help homeowners make affordable energy efficiency upgrades to their properties. Tell us a bit about PACE in Maine, including how the Home Energy Savings Loan fund fits in.

Gov. Baldacci: In Maine, property owners take out a low-interest PACE loan to pay for cost-effective energy improvements. Many homeowners cannot afford to pay the upfront costs, which typically range from a few thousand dollars to $15,000. Homeowners can be assured that if they move before the loan is paid off, the loan can be passed to the next homeowner. 

While Maine cities and towns now have the authority to establish a PACE program, Efficiency Maine’s Loan Fund provides the capital for the initial phase of the loan program.

Alliance: What is the benefit of a revolving loan fund?

Gov. Baldacci: The revolving loan fund is intended to continue long after the initial federal grants funds are exhausted. Repayment of PACE loans will generate a continuing revenue stream to keep interest rates low and ensure the loan fund is replenished at no cost to Maine taxpayers. While Efficiency Maine is still working out the details, the goal is to make the revolving loan fund sustainable and available for future participants to lower their energy bills.

Alliance: Earlier this year, the U.S. DOE announced that Efficiency Maine was one of the largest winners of funding to establish a revolving loan fund to help Maine homeowners finance the costs of insulation, air sealing, heating system upgrades and other energy improvements. What options are there for other states or even municipalities interested in similar financing?

Gov. Baldacci: Our prior commitment to energy efficiency as a major component of the State’s comprehensive state energy plan was instrumental in convincing DOE that we could operate a successful loan fund.

To hold Maine up as a model for other states without similar financing programs, we are working with groups like the Alliance to Save Energy and the National Association of State Energy Officials. Efficiency Maine can serve as a resource as its PACE program moves forward.

Alliance: This summer, the two major government-sponsored mortgage-backers, Fannie Mae and Freddie Mac, rejected PACE financing with the claim that the senior lien status would threaten lender security. How does the PACE approach in Maine address the concerns of Fannie Mae and Freddie Mac?

Gov. Baldacci: We worked closely with Maine stakeholders — including the Legislature, banks, credit unions, energy efficiency advocates and municipalities — to craft legislation that would allow property owners to finance energy improvements without interfering with the priority (or seniority) of home mortgages.

Any residential property owner is eligible to benefit from a PACE loan so long as credit, tax, lien, mortgage and cost-effective energy savings criteria are met. Fannie Mae and Freddie Mac should not have any problem with Maine’s PACE program.

Alliance: How has Maine implemented PACE differently from other states? What advice would you give other state governments looking to adopt your implementation model?

Gov. Baldacci: We look forward to working with our federal, state and regional partners to make PACE programs a reality across the nation as an energy, economic development and environmental tool.

As I mentioned earlier, a PACE mortgage in Maine is not entitled to any special or senior priority and is subordinate to the first mortgage. Also, in Maine, homeowners can be assured that if they move before the loan is paid off, the loan stays with the property to benefit the next homeowner.

Maine’s PACE law allows for Efficiency Maine to administer the program, limiting cost and personnel demands and liability in municipalities that choose to participate. In addition, businesses that own property can apply for a PACE loan if municipalities develop a financing program themselves. Finally, Efficiency Maine’s proposal is to make PACE loans available to towns across the entire state rather than just one town or a collection of municipalities.  This model may be appropriate for rural states that have few large cities yet want to take advantage of municipal government involvement and community networks.

We would advise other states to develop programs that make it as easy as possible for homeowners and businesses to access financing, set up clear underwriting and disclosure procedures and establish a loan fund that is efficient, affordable and achieves true energy savings.

Alliance: You expect your first PACE loans to be available in October. How are Maine's municipalities and counties responding?

Gov. Baldacci: Maine’s counties, cities and towns worked closely with the OEIS and the Utilities and Energy Committee to craft the legislation and were early advocates of the PACE approach. While any municipality may elect to establish a PACE program, there is no obligation to do so. But, by adopting a PACE ordinance, communities make it possible for Efficiency Maine to help finance energy efficiency improvements for their homes and buildings.

Alliance: On the topic of stimulus funds: With the help of the Recovery Act, Maine has made big strides in weatherization in the past year. What can you share about this and other stimulus spending on energy efficiency?

Gov. Baldacci: Maine has been recognized as a leader in its successful efforts to make energy efficiency improvements to Maine homes. We have some of the oldest housing, coldest climates and highest dependencies on imported heating oil in the country.

Maine weatherized 30 percent of low-income homes under the DOE Weatherization Assistance Program enabling the State to receive the full $41.9 million in eligible funding established by the Recovery Act. Maine received $30 million through the ramp-up initiative and additional funding for weatherization training. We have more than 75 percent of federal Recovery Act energy grants — including residential, industrial and commercial energy efficiency programs — under contract and obligated.

We appreciate the support of the federal Recovery Act in helping Maine achieve our goals to weatherize our old housing stock, conserve energy and grow jobs.  Maine has taken a leading role in weatherization because we know that conservation is the most cost-effective way to reduce our dependence on oil. We continue to work with our public and private partners to ensure that these funds are being used wisely and effectively to benefit Maine families and our economy.