Rural Star passes House Agriculture Committee

July 15, 2010 - The “Rural Energy Savings Program Act” (H.R. 4785), or Rural Star, passed the House Agriculture committee yesterday with few amendments and little debate. Introduced by Representative Clyburn (D-S.C.) in March, the bill would support on-bill financing programs in rural electric utilities to help their customers to fund energy efficiency retrofits in their homes.

What would Rural Star do?

Rural Star would direct the United States Department of Agriculture (USDA) to make $1 billion in loans to rural public utilities and electric cooperatives to support energy efficiency loans for customers. The program would be administered through the Rural Utilities Service and create a $4.9 billion loan authorization. USDA would provide the loans at zero-interest to utilities or electric cooperatives that would then be re-loaned to support customers’ “structural improvements and investments” for efficiency.

For customers, eligible efficiency improvements would include building envelope upgrades and some heating and cooling equipment, but not movable appliances. The loans to customers would be low interest (no greater than 3 percent) loans over relatively short repayment periods (no greater than ten years). Each rural electric cooperative would determine its own specific list of eligible improvements and establish appropriate measurement and verification methods.

USDA would contract with outside entities to create measurement and verification standards for this program, to be administered by the Rural Utilities Service, and would assist the utilities and cooperatives in establishing and operating their own measurement and verification programs.

According to Rep. Clyburn, the bill could create anywhere from 20,000 to 40,000 jobs per year.

How is Rural Star different?

Rural Star has a similar aim to other home efficiency financing programs and comes at a time of uncertainty for one of them, property assessed clean energy (PACE) financing. Like PACE, Rural Star loan repayment would stay with the property rather than the borrower, often considered a benefit in PACE financing. Unlike PACE, Rural Star would not conflict with mortgage liens, as PACE could, and its loans would be repaid on electricity bills rather than property taxes. Rural Star may also target a smaller loan amount than PACE programs: an expected $1,500-$7,000 loan rather than the $10,000-plus loans associated with PACE.

What’s next for Rural Star?

With the bi-partisan passage of the House agriculture committee, Rural Star will need to pass the full U.S. House and be paired with a companion Senate bill before being signed into law. The Senate bill (S. 3102) was introduced by Senator Jeff Merkley (D-Ore.) in March and awaits passage from the Senate Agriculture committee. If passed, Rural Star could be considered in the conference of the House and Senate comprehensive energy bills, ACES and ACELA.