Michigan: Holland On-Bill Loan Program

In 2011, the City of Holland in southwest Michigan published a comprehensive, long-range Community Energy Plan  as a pathway to becoming a leader in energy security, affordability, sustainability, and efficiency. The Holland Energy Fund, Inc. was incorporated as a nonprofit corporation to facilitate and finance aspects of the plan, including a project to substantially increase the energy efficiency of Holland’s 7,400 single-family homes. To accomplish this goal, the Holland Energy Fund partnered with the Holland Board of Public Works and the nonprofit Michigan Saves to create the Holland On-Bill Loan Program.

The Holland On-Bill Loan Program was designed to help city residents overcome the barrier of high initial costs of energy efficiency investments, with the goal of increased access to energy upgrades and deep energy savings. The program does so by covering the initial project costs and allowing participating customers to repay the program over time as a loan folded into their utility bill.

The Holland On-Bill Loan Program was launched in late 2016. Over the program’s first three years, Holland invested more than $2 million into 116 homes. 

Program Details

Under the Holland Energy Fund On-Bill Loan Program, owners of residential buildings (four units or less) within the City of Holland can finance any eligible energy-efficiency improvement. City of Holland residents can borrow between $5,000 and $30,000. Customers will receive an interest rate of 4.99% if they select a term up to ten years. Customers who select a term between ten and 15 years will receive a 5.99% interest rate. The interest rate is set periodically by the Holland Energy Fund Board of Directors and, per statute, can never exceed the prime interest rate plus 4%.

The primary underwriting criteria is that the customer must have 12 consecutive months of on-time, electric utility bill payment history. Also, the customer may not have any delinquent taxes, bankruptcies, foreclosures, or repossessions greater than $1,000 within three years (from discharge), and no unsatisfied money judgments.

Customers repay the loan through a per-meter charge on the monthly electric bill. The payment is considered part of the charges for electric services to the property. Thus, nonpayment of the loan can trigger disconnection of electric service.

The loan is unsecured and may be added to a customer’s tax bill and enforced against the property through the tax lien foreclosure process in the same manner and with the same priority as the charges for electric service and real property taxes. Notice of the loan is recorded with the county register of deeds. The loan obligation runs with the land and is binding for future customers contracting for electric service to the property.

The improvements must be implemented by an authorized contractor following the completion of a comprehensive, whole-home energy audit. Eligible energy-efficiency improvements include any measure or piece of equipment that has energy savings documented in the Michigan Energy Measures Database, such as air conditioners, air sealing, air-source heat pumps, appliances, boilers, doors, furnaces, geothermal systems, insulation, roofs, skylights, water heaters, and windows. Renewable energy improvements are permitted once a home exceeds a Home Energy Score of eight, as defined by the U.S. Department of Energy.