H.R. 4785: Rural Energy Savings Program Act

H.R. 4785

Rural Energy Savings Program Act

Sponsor
Rep. James E. Clyburn

Date
September 16, 2010 (111th Congress, 2nd Session)

Staff Contact
Communications

Floor Situation

H.R. 4785 is expected to be considered on the floor of the House on Thursday, September 16, 2010, under a structured rule.  The legislation was introduced by Rep. Jim Clyburn (D-SC) on March 9, 2010. 

A substantively different version of this legislation was reported from the Committee on Agriculture.  The House will consider a modified version of H.R. 4785 that contains provisions of the Home Star Energy Retrofit Act (H.R. 5019), that were removed before the bill (H.R. 5019) passed the House on May 6, 2010, by a vote of 246—161.

Bill Summary

H.R. 4785 would create a new federal re-lending program allowing the Department of Agriculture (USDA) to provide zero-interest loans to rural electric cooperatives that in return provide low-interest loans to customers for energy efficient projects to their homes.  The bill would also create a Home Star Energy Efficiency Loan Program administered through the Department of Energy (DOE).  The bill would authorize a total of $5 billion over Fiscal Years 2010-2014, including $850 million per year for the Home Star loan program and $150 million each year for the Rural Star program.

Rural Star Energy Program

The bill would create a Rural Star Energy Program under the USDA to make loans to entities such as rural utility providers that would in turn provide loans to consumers for the purpose of implementing energy efficiency measures or farm efficiency measures.  “Farm efficiency measures" would mean an energy saving application—at a total value of $50,000 or less—that would be an improvement to a building on a farm and would achieve energy savings sufficient to repay the cost of the measure within 10 years.

The bill would stipulate that in order for a consumer to receive a loan under the Rural Star program, an energy audit would have to be conducted to determine the impact of the proposed energy efficiency measures on the consumer's energy costs and energy consumption.  Recipients would have to be able to repay the loan, and could not simultaneously receive assistance under the Home Star program.  The loans made to a qualified consumer would bear interest, up to 3 percent, which would be used to offset personnel and program costs.

The loans would be used to finance energy efficiency measures for the purpose of decreasing a consumer's energy usage or costs within a loan term of 10 years or less.  The bill would bar the use of loan funds to fund purchases of, or modifications to, personal property, unless the property is attached to real property as a fixture or is a manufactured home.

Under the measure, loan funds would be repaid by a qualified consumer through charges added to the consumer's electric bill.  Consumers would not be prohibited from voluntarily prepaying a loan. 

The bill would authorize the USDA to establish energy efficiency loan demonstration projects consistent with the purposes of the bill.

The bill would authorize $150 million annually for the Rural Star Energy Program from Fiscal Years 2010-2014, but loans could be made over that five year period.

Home Star Energy Efficiency Loans:

H.R. 4785 would create a Home Star Energy Efficiency Loan Program, under which DOE would give interest-free loans to states or territories to support loans to consumers to finance energy efficiency home renovations. The bill would permit loans to be issued directly by states, or by other entities that meet certain requirements, such as having an underwriting mechanism in place.  States would also have to ensure that the federal government is repaid no later than 20 years from the date of the loan.

Under the bill, states would use the funds to support financing to consumers, including interest rate reductions, loan loss reserves, revolving loan funds from which qualified financing entities could offer direct loans, or other mechanisms to support deployment of energy efficiency programs.  States could permit financing entities to charge an interest rate of 3 percent for administrative costs.

Lastly, the bill would authorize $850 million annually for Fiscal Years 2010-2014 for the Home Star Loan Program, and permits funds to remain available until expended.

Background

This legislation attempts to address concerns about the demand for and cost of energy in rural areas.  Supporters of this legislation argue that federal programs to help residential home owners and business owners use energy more efficiently would be an important step in addressing these concerns.

One of the existing federal programs to promote energy efficiency in homes is the Energy Star program, which is administered by the Environmental Protection Agency (EPA) and the DOE.  This program conducts a range of activities, and is known for the "Energy Star" designation given to appliances if they meet certain efficiency standards.  The program also includes partnerships with new home builders to create more energy-efficient homes, partnerships with contractors to conduct energy audits of homes, and the promotion of energy efficiency in commercial buildings.  In addition, all states and the District of Columbia offer rebates on Energy Star appliances.  The original $1.2 trillion “stimulus” bill provided additional funding for energy efficiency in homes.  It provided $5 billion for weatherization programs, $2.3 billion for the modernization and renovation of low-income housing, and $1 billion for improving energy efficiency in public housing.  The “stimulus” also extended and increased the dollar limits for tax credits for energy efficiency in new and existing homes.

Member Concerns

Duplicative Program:  Some Members may be concerned that H.R. 4785 is duplicative. This legislation would create a new program that is similar to many existing federal programs.  If this new program becomes law it would compete with countless other home energy efficiency programs already authorized by Congress.

Increased Spending:  On May 6, 2010, the House approved a motion to recommit, which struck the Home Star Energy Efficiency Loan Program from H.R. 5019.  Democrats are now attempting to attach a much larger ($4.25 billion) version of the loan program to this legislation at a time of ballooning deficits and out-of-control spending.

Implementation Problems:  The “stimulus” law included $4.7 billion for a weatherization program which has been an implementation disaster.  Earlier this year, the DOE Inspector General reported that as of February 2010, only $368 million of the $4.7 billion had been used for weatherization.  Some Members may be concerned that this legislation could lead to similar implementation failures.

Cost

The Congressional Budget Office estimates that implementing H.R. 4785 would cost $800 million over five years.

Amendments

1.)   Rep. Tim Holden (D-PA):  The amendment would bar any entity with ongoing TARP repayment obligations from receiving a Home Star Loan.  The amendment would clarify that loan funds may not be used to purchase manufactured homes and prohibit provision of funds to contractors that employ an individual convicted of or plead guilty to sexual assault.  Additionally, the amendment would make ineligible for loans certain federal employees, including those that have seriously delinquent tax debt or have been disciplined for viewing pornography on a government computer or while performing government duties.  Lastly, the amendment would require the Secretaries of Energy and Agriculture to take steps to prevent misuse of funds.

2.)   Rep. Henry Cuellar (D-TX):  The amendment would direct the Secretary of Agriculture to provide assistance and technical advice to entities providing loans under this bill to increase the participation of economically distressed rural communities with unemployment rates above the national average.

3.)   Rep. Carolyn McCarthy (D-NY):  The amendment would require that lenders providing loans under the Act give priority to active duty members of the Armed Forces and to veterans.

4.)   Rep. Jay Inslee (D-WA):   The amendment would require the Department of Energy, in consultation with the Secretary of Agriculture, to consider “passive house” retrofits when identifying qualified energy efficiency measures.  According to the Passive House Institute US, a passive house is a well-insulated, virtually air-tight building that is primarily heated by passive solar gain and by internal gains from people, electrical equipment, etc.  Energy losses are minimized and any remaining heat demand is provided by an extremely small source.