New Energy Efficiency Legislation on Pace

Energy Savings and PACE legislation could save homeowners and businesses.


Two bills in the U.S. Congress could help homes and buildings save energy—while boosting the energy efficiency market—if they can make it through the usual gridlock.

The Energy Savings and Industrial Competitiveness Act of 2011 (S. 1000), introduced by Sens. Jeanne Shaheen (D-N.H.) and Rob Portman, (R-Ohio), will use $1.2 billion of previously allotted money to fund energy efficiency programs for businesses and some homes while tightening efficiency standards on many appliances. The bill has been passed by the Senate Committee on Energy and Natural Resources with support from both parties.

Meanwhile, Representatives Nan Hayworth (R-N.Y), Dan Lungren (R-Calif.), and Mike Thompson (D-Calif.) have introduced the PACE Assessment Protection Act of 2011 in the House of Representatives (H.R. 2599), which would direct mortgage agencies Fannie Mae and Freddie Mac to accept PACE-type financing for energy efficiency and renewable energy upgrades for homes. The bill has several Republican and Democrat cosponsors and is said to enjoy bipartisan support.

PACE (Property Assessed Clean Energy) allows property owners to finance energy retrofits by providing up-front capital that is paid back through a special assessment on participants’ property taxes. PACE has been suspended in many areas due to objections by the secondary mortgage market entities that the program creates undue risk.

The PACE financing model perturbs the secondary mortgage market entities primarily because, as a tax assessment, it takes a priority lien-repayment position in front of the mortgage. From a mortgage lender’s perspective, a new tax raises the risk of default by being an additional liability and expense. Though according to PACENow, PACE homeowners’ default rates have been very low and are estimated at .1 percent.

Maine and Vermont have introduced PACE programs that place the PACE tax assessment’s lien position subordinate to the mortgage’s lien position.

The new federal legislation aims to revive PACE by defining it as an assessment rather than as a loan. It would incorporate underwriting standards for PACE programs and establishing rights of rescission, consumer protections and limitations on delinquent payment collection.

Is Energy Efficiency Bill Enough?

The Shaheen-Portman bill would establish a national energy efficiency strategy and promote the use of energy efficient technologies.

Highlights include:

• Boosting private sector investment in building efficiency upgrades by expanding the Department of Energy (DOE) Loan Guarantee program.
• Helping manufacturers reduce energy use and become more competitive by working with states to establish a revolving loan program to help finance efficiency upgrades.
• Standards on outdoor lighting, residential heating and cooling systems, residential appliances, and other appliance products based on agreements between manufacturers and efficiency advocates.
• Working with states to strengthen national model building codes, to make new homes and commercial buildings more energy efficient.
• Requiring the federal government – the single largest energy user in the country – to adopt energy saving techniques for computers, better building standards, and smart metering technology.

Appliance efficiency standards in the bill include those for furnaces and central air conditioning units, gas and heat pump pool heaters, portable electric spas (hot tubs), refrigerators and freezers, clothes washers, clothes dryers, dishwashers, certain reflective lamps, outdoor lighting and room air conditioners.

The bill also directs the Department of Energy to study efficiency standards for video game consoles, which consume considerable amounts of energy, and includes a provision that would possibly update Energy Star provisions for a number of household appliances and smart appliances to incorporate smart grid and demand response features.

The ACEEE (American Council for an Energy Efficiency Economy) says net consumer savings from the appliance standards are estimated at more than $43 billion annually by 2030, enough to meet the total energy needs of 4.6 million American households.

Other than that, there isn’t a whole lot in the bill that directly affects homeowners.

A Rural Energy Savings program will use $400 million for home energy loans with up to 3 percent interest, but that will only be available to Rural Utilities Service borrowers such as rural electric coops, according to a source. There is also a DOE loan guarantee for multifamily residential dwellings.

Good Night, Home Star?

Unfortunately, little remains of the once-promising Home Star legislation (aka Cash for Caulkers) that would provide $6 billion over two years in instant rebates (up to $3,000 or more) to homeowners who enact energy efficiency upgrades to their homes. Several have proposed funding Home Star with the approximate $4 billion in annual subsidies and tax breaks given to the oil and gas industries, though I’m told that no Home Star legislation is on the Congressional horizon.

It is completely understandable that any big energy conservation and efficiency initiative tackle the big energy use of commercial buildings and industry, as well as appliance standards first and foremost. But the home energy efficiency market that can help fuel a thriving and more efficient economy will not pick up unless real incentives are provided to homeowners. A reboot for PACE is a start, but some semblance of a Home Star program would help homeowners afford real energy-efficient upgrades and help restart a home building and retrofit industry that can employ many.



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