Your Utility Might Pay to Make Your Home More Efficient

Out-of-date homes and commercial properties are both a drain on the power grid and a burden on the environment. But updating those spaces isn't cheap and often represents too great a cost for an individual to make the work worthwhile. A CNET survey found nearly a third of Americans were concerned about the cost of home energy efficiency projects.

To close that gap, some utility providers offer what are called "pay as you save" programs (sometimes called PAYS programs), which position those improvements as a mutual benefit rather than a responsibility of the owner. The work is funded by the utility and paid back through the savings the owner experiences. 

The best part of these deals? They seem to be working. 

Jeff Deason is an energy and environmental policy researcher in the Energy Markets and Policy Department at Lawrence Berkeley National Laboratory. He and two colleagues studied pay as you save programs in Tennessee, North Carolina, Arkansas, Kansas and Kentucky.

"The very significant majority of households, as you would expect in the program, saved energy as a result of participating," he said. "We saw an average electricity bill usage savings of about 15% and an average gas savings of about 26%." 

So how do these programs work, and how can you take advantage of them?

What is pay as you save?

A pay as you save program is an agreement with a utility provider or program administrator in which the utility pays an agreed amount upfront for upgrades to the participant's home and recovers the cost of that payment through a charge on the participant's monthly utility bill. 

Upgrades eligible for a pay as you save program vary greatly depending on location and utility but are usually related to energy efficiency. Making a home more efficient serves multiple purposes, including reduced burden on the electric grid, improved sustainability and, of course, cost savings. Creating those cost savings allows the utility to be paid back over time without increasing costs for residents, which is designed to broaden access to these improvements. 

One broad takeaway from Deason's research is that these programs are indeed helping reach customers who may not have otherwise been able to afford the work. 

"Not all the programs have this as an expressed goal, but broadly speaking, this program model is getting some interest because of its potential to serve more underserved communities or households that might not be able to otherwise pay for the cost of these types of projects," he said. "And so in that sense, the program seems to be successfully reaching the demographic, the types of demographic that one might hope that it is." 

What upgrades are eligible for pay as you save programs

Pay as you save programs are relatively new for many utilities, so the types of upgrades available for these plans are still evolving and vary greatly. Most upgrades eligible for these plans are related to energy efficiency and -- as the name suggests -- cost savings. 

Upgrades that may be eligible for pay as you save programs can include: 

• More efficient heating or air conditioning systems
• The installation of energy-efficient heat pumps 
• Improved building insulation 
• Hot water pipe wrapping 
• Duct repair or upgrades 
• Installation of LED light bulbs and other efficient lighting
• Weatherization, including sealing, ventilation, moisture control and more 
• Roof repair or upgrades

Typically, each provider or plan will offer a list of qualifying upgrades, which can vary depending on a variety of factors. 

Benefits of a pay as you save program

By design, pay as you save programs are meant to be a positive for home or building owners, utility providers and, by extension, the environment. Here are some of the ways these programs can benefit the consumer: 

No upfront cost for the consumer: Whether you're a new homeowner on a tight budget or a business owner trying to modernize a building, the costs associated with making sustainable upgrades can be prohibitive. But letting the utility company take the brunt of that upfront cost can help clear a major hurdle. 

"The program really works well for homes that are very inefficient," Deason said. "It can make a pretty sizable reduction in the participant's energy costs if they have that kind of home." 

It's not debt: While some energy assistance programs function like loans and other debt, pay as you save programs are explicitly the opposite. In Deason's findings, there are no credit checks or burdens placed on owners. Instead, the funding is simply driven by the savings. 

"Because this isn't debt, you're not going to go to a collections agency," he said. "There are certain types of financial trouble that a loan can get you in that these arrangements will not." 

Programs are completely voluntary: One of the most favorable parts of pay as you save programs is that they're not mandatory. If you don't think that a plan makes sense for you, you aren't ready for the upgrades they fund or you just think your home is plenty efficient already, there's no obligation to participate in programs like these. That means people aren't feeling stuck or compelled to sign on to a pay as you save plan -- it exists only as an option.

Protections against getting stuck: Participation in any long-term agreement can become harrowing if life situations change. But pay as you save programs are specifically designed to not catch people in an agreement they no longer benefit from. For instance, Deason said many of the agreements his team researched included language protecting consumers in the case of upgrades being delayed or improperly performed. They also transfer to the new owners of a house if you sell in the middle of  the agreement, meaning you don't have to pay out huge sums just to move. 

"It's really, 'Can the home itself generate that kind of income through the savings to cover the cost?'" he said. 

Where are pay as you save programs available?

Because pay as you save programs are offered by utilities, electric cooperatives and other individual organizations -- rather than being part of national or state legislation -- their availability is largely determined by whether specific organizations have adopted them yet. 

Deason's research, however, found programs all over the country and even examples of legislative action to promote them. In general, his summary of where you can find these programs is "relatively available" but "certainly not universal." 

Frequently asked questions