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Too Good, But True (Gwen Moritz Editor’s Note)

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Our older son was a toddler in 1992 when a sheet of copier paper folded in thirds arrived in the mailbox of our first house in Nashville, Tennessee, the one we had bought for $78,500 when I was pregnant. It was a simple flyer from a Missouri mortgage broker called the Charles F. Curry Co. offering to help us lower the interest rate on our FHA mortgage from 10 percent to 8.5 percent.

This was a “streamline” refinance approved by the FHA, it claimed. If we were current in our payments — which we were, but it was a stretch — we would not have to pay for an appraisal. And the closing costs could be added back into the principal, so we would have no out-of-pocket expense.

My mother had explained mortgage amortization to me when I was a kid, but refinancing was something exotic. The tantalizing idea that we could save nearly 100 precious dollars every month without any cash up front sounded too good to be true. I carried that flyer in my purse for weeks, getting comfortable (in those pre-Google days) with the idea that Charles F. Curry’s offer was for real.

It never crossed my mind that some local Nashville company would have done the same and maybe better. Besides, Curry deserved our meager business for opening my eyes to a good deal. I became a serial refinancer and an evangelist for refinancing.

It’s best not to think about the fact that that clueless young woman would, seven years later, be named editor of Arkansas Business. The point of this story is that, every once in awhile, something that sounds too good is really true. And one of those things is the Ouachita Electric Cooperative Corp.’s PAYS program, featured on the front page of this issue.

I’ve been excited about this story since Assistant Editor Kyle Massey first described it to me weeks ago, and I knew it would be a perfect fit for this week’s issue spotlighting environmental and green businesses. PAYS — Pay As You Save — finances energy-efficiency upgrades for OECC ratepayers and allows them to pay it back with the monthly savings that result from using less electricity.

Of course, the idea of using energy savings to pay for improvements is nothing new. All energy-efficiency upgrades help pay for themselves, and there have long been third-party companies eager to finance energy-saving equipment for commercial and industrial clients who have the most to save.

But OECC’s PAYS program truly is something new in Arkansas and rare in the nation. It’s being used mainly for residential customers — homeowners and landlords — who can finance big-ticket improvements like HVAC systems at an interest rate that is half what a contractor can offer and better even than a HELOC without a lien on the property.

Thanks to a very smart, practical decision by the Arkansas Public Service Commission, the cost of the improvements is paid through a special rate tariff on the individual electric meter. Whoever is paying the bill on the property, a tenant or even the next owner, inherits the responsibility for paying off the improvements that lowered the bills in the first place. The risk to the lender, a nonprofit created by electric co-ops called National Rural Utilities Cooperative Finance Corp., is low because the note is being paid as long as someone is paying the electric bill.

Linda Hodges, a grandmother whose health forced her to stop working as a nurse, is saving $300 a month on her summer electric bills — even after making her monthly payment toward $11,000 worth of improvements. That kind of personal savings would have been worth financing even at a higher interest rate.

But the PAYS program’s biggest promise lies with landlords, who have far less incentive to improve the energy efficiency of units when tenants are paying the electric bills. PAYS turns that disincentive on its head: Their tenants are actually paying for long-term improvements to the investment property, and tenants with lower electric bills are better able to afford their rent.

The benefit is not limited to the property owner or tenant. PAYS participants can select from a list of approved contractors for HVAC and other energy-efficiency upgrades. In Camden and the rest of the OECC territory, $1.5 million in new business has been created in a year and a half.

Imagine the impact across the state and nation if every electric utility offered something similar. Hundreds of millions of dollars formerly wasted through inefficiency could be put to much better use creating jobs and value and comfort, all while slowing the need for expensive new electric generation.

OECC and PAYS have shown us the way. There’s no reason every nonprofit, member-owned electric co-op or municipal power company in Arkansas couldn’t follow suit, and maybe even investor-owned utilities like Entergy. I haven’t been this excited since my first mortgage refinance.

Gwen Moritz is editor of Arkansas Business. Email her at GMoritz@ABPG.com.
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