Breaking Down the Barriers to Efficiency Improvements in the Rental Housing Market: One Utility's Approach

Michael Volker, Midwest Energy, Inc.
Katherine Johnson, Market Development Group

Keywords

Abstract

How$martSM is an energy efficiency program designed to overcome market barriers to efficient investment in energy conservation. As an electric and gas cooperative in central and western Kansas, Midwest Energy, Inc (Midwest Energy) has been active in providing energy efficiency services to its members for decades and has particular expertise in the provision of comprehensive energy audits for smaller customers. Despite efforts to advise customers on ways to improve the energy efficiency of homes and small businesses, Midwest Energy consistently witnessed "failure to respond" to its efficiency recommendations due to market barriers.

The development of the How$martSM program is the result of a collaborative effort between regulators, contractors, social service agencies, and the company to overcome many of the common barriers observed: up-front costs, capital constraints, long-term payback, split incentives (i.e. conflicting landlord/tenant motivations), and consumer education. How$martSM essentially creates an energy services company (ESCO) for small customers similar to the concept developed by PaysAmerica with its Pay-As-You-Save® (PAYS®) programs.

How$martSM is being offered on a pilot basis in four counties. The pilot received approval on August 16th, 2007. Interest in the program is strong particularly from landlords who see this as a way of improving their rental properties without raising rent to their tenants. Similarly, social service agencies see the program as a means of lowering the need for utility bill assistance from low-income households. Midwest Energy anticipates minor adjustments to the program and opening it to the full 41 county service area by the end of July 2008.