BPI Supports Strong Consumer Protection in Residential PACE Financing Programs
On Nov. 18, 2016, the U.S. Department of Energy (DOE) released Best Practice Guidelines for Residential PACE Financing Programs. Since 2009, more than 100,000 homeowners have made energy efficiency and renewable energy improvements to their homes through residential Property Assessed Clean Energy (R-PACE) programs. The updated release provides guidance to states and communities looking to implement residential R-PACE programs. The document includes guidance on program design and protections for consumers and lenders. The Building Performance Institute (BPI) provided extensive comments to DOE during the open comment period regarding the need for a trained and certified workforce, strong consumer protections, companies who commit to following quality standards in installation, and the inclusion of health and safety upgrades as qualified measures. BPI is pleased to outline in this paper an approach for communities to take when designing R-PACE programs that are consistent with the revised DOE Best Practices Guidelines and ensure strong consumer protections through the work of a qualified workforce.
States and communities see R-PACE as a mechanism to deliver accessible financing for energy efficiency upgrades, creating local jobs and making homes more comfortable, healthy, safe, and durable. However, R-PACE programs could experience strong, negative consumer reactions if assurances for consumer protections against unscrupulous contractor and lender practices are not embedded into program design. BPI stands ready to work with state and local governments in the design of R-PACE programs that ensure consumer protection.
Residential home improvement has long been riddled with unscrupulous contractors not looking out for the customer’s best interest and performing subpar work that does not get completed. To curtail such activity, many Energy Efficiency (EE) Program Administrators point to BPI credentials and technical standards. The New York State Energy Research and Development Authority (NYSERDA) and the New Jersey Clean Energy Program have included BPI credentials for technicians and contracting companies participating in their programs since their inception. With 62 counties and over 900 towns and virtually no licensing requirement for home improvement contracting in NYS, it made sense to have one entity responsible for administering risk management for the program, and to provide a safety net for its customers. Consumers need assurances that the contractors they select have been vetted to an industry accepted criteria, have the proper business practices and quality management controls in place, utilize trained and certified staff in their installations, and conduct whole-house assessments to recommend prioritized, cost-effective upgrades to homeowners based on home assessment findings. Not putting these safeguards in place sets the stage for unhappy customers, lawsuits, and media backlash. The Wall Street Journal, for example, compared PACE to the subprime crisis.
The DOE Best Practice Guidelines for Residential PACE Financing Programs points to specific areas in which states and local governments should focus when developing their R-PACE program design in order to protect consumer interests and set minimum criteria for contractors, disclosure, quality assurance and standards. The following illustration and sections outline language from the DOE Best Practices documents and specific areas in which BPI capabilities will enhance R-PACE program design.
Define the PACE Program Scope and Eligible Improvements
PACE programs should establish criteria for eligible improvements that are consistent with the public purpose of the programs, as defined by each state or locality. In addition to financing energy efficiency and renewable energy improvements, PACE programs can also establish eligibility criteria for financing health and safety measures necessary to install and ensure performance of energy efficiency measures and protect occupants, such as removal of asbestos prior to installing efficiency measures, electrical system upgrades, roof repairs, radon mitigation, and similar measures.
Many energy efficiency projects are hampered when a health and safety matter is revealed during an audit or while upgrades are being completed. However, funding to address the problem is not always available sometimes leaving the contractor no option other than to walk away from the project or not correct the issue, putting the occupant(s) at risk. Including health and safety as an eligible measure is an important element for any R-PACE program and is good public policy. The original draft of the DOE Best Practices eligible improvements did not include language pertaining to health and safety measures. BPI provided comments to the DOE pointing out the importance of having access to funding to address health and safety, and this language is now included in the Best Practices. BPI supports the EE industry with the Healthy Homes Evaluator certification for individuals completing energy audits and/or assessments aimed at health and safety.
Energy Assessments and Advising
DOE encourages energy assessments to identify comprehensive, cost-effective energy efficiency improvements relevant to an individual home.
ANSI/BPI-1100-T-2014 Home Energy Auditing Standard (BPI-1100) and ANSI/BPI-1200-S-2015 Standard Practice for Basic Analysis of Buildings (BPI-1200) were developed through an industry consensus program that meets the rigorous requirements of the American National Standards Institute (ANSI) and are referenced by numerous EE Program Administrators for energy assessments and recommended upgrades.
Only a qualified energy assessor or rater should perform assessments.
The BPI Building Analyst (BA) and BPI Home Energy Professional Energy Auditor (EA) professional certifications require that individuals demonstrate competency through written and field practical exams to the BPI-1100 and BPI-1200 standards. There are over 15,000 active certified BA or EA technicians across 49 states and 2 US territories. Additionally, BPI GoldStar Contractors (GSC) are required to employ at least one BA or EA certified technician who can conduct energy assessments and complete work to the BPI standards.
Establish Consumer and Lender Protections
PACE programs and participating contractors should provide homeowners with PACE assessment consumer disclosures in a form that clearly explains and provides information in writing to homeowners.
BPI-1100 and BPI-1200 standards include disclosure requirements and other consumer protections that must be discussed by GSCs with potential customers. Below is language from BPI-1100 pertaining to disclosure and ethics:
The energy auditor shall act in a professional and ethical manner while conducting all energy audits, completing energy audit reports, and interacting with the homeowner/occupants. (See Annex B, Code of Ethics for the Energy Auditor for guidance.)
The energy audit report shall include the following:
- Clear and accurate information on home performance upgrades and health and safety improvements.
- The cost-effectiveness of the recommended home performance upgrades, based on energy modeling, utility-bill history or typical usage and energy cost for similar homes in the area.
- Disclosure of any current or potential conflict of interest of the auditor.
- Disclosure of any products and services that the auditor or his/her company provides in addition to energy auditing.
- The energy audit report shall not include recommendations for measures based primarily on a specific product line, services of a contractor, or convenience.
The BPI GoldStar Contractor program is a company level accreditation that requires companies to commit to follow applicable standards in the work they perform, establish, and follow consumer dispute resolution policies, commit to an internal program of quality management improvement, and use BPI Certified Professionals in overseeing the work that is performed for their customers.
Program Execution and Compliance with Applicable Laws
Participating homeowners should receive information about whom to contact if they have problems or concerns with their PACE project, contractor, or assessment.
BPI GSCs are required to comply with all state and local laws and codes and must have a documented Customer Dispute Resolution (CDR) policy and process should there be an issue with completed work or customer/contractor relationship. Failure to comply with these requirements and/or not deploy the CDR results in suspension or termination of GoldStar status.
Quality Assurance and Anti-Fraud Measures
Quality assurance and anti-fraud measures are essential protections for property owners, mortgage holders, investors, and local governments. These measures should include:
PACE programs should establish minimum contractor requirements, including training and a registry of approved contractors. In addition:
• Contractors should have certifications appropriate to the installed measures (e.g., Building Performance Institute (BPI) certifications for weatherization and North American Board of Certified Energy Practitioners (NABCEP) for solar PV);
• Only licensed auditors and contractors (where licensing boards exist) that adhere to PACE program terms and conditions should be permitted to conduct energy assessments and upgrades financed through PACE programs.
The BPI GSC program encourages companies to improve their bottom line by committing to instill quality management systems in the work they conduct for their customers. A strong focus on quality installation means that there is a lower likelihood for call-backs. However, mistakes do occur and there is embedded in the BPI GSC program a third-party quality assurance process for inspecting work that was not installed properly and correcting it.
Program administrators should have clearly defined work standards outlined for all projects eligible for program financing.
Pointing to BPI technical standards and credentials as the minimum requirements for contractors participating in and implementing upgrades under R-PACE programs is the best option for consumer protections and maintaining quality control and quality assurance for any PACE Program administrator. The US DOE recognizes this as do many EE Program Administrators. BPI develops standards for energy efficiency retrofit work using an open, transparent, consensus-based process built on sound building science through committee of subject matter experts from across the country. From these standards, we develop professional certifications for individuals, companywide credentials for contractors, home energy rating systems and quality assurance services. The BPI GoldStar Contractor program introduces established problem solving techniques, tools, templates, and process improvement methods and resources for contracting companies to imbed within their business practices. The focus is on reducing company waste and achieving consistency in day to day operations while maintaining a high level of quality meeting customer expectations.