The North Carolina Utilities Commission on Wednesday approved two programs for on-bill efficiency funding in Duke Energy’s territories.

Both Duke Energy Carolinas and Duke Energy Progress (DEP) won approval for a residential tariff on-bill (TOB) program that is meant to offer customers a way to pay for energy efficiency upgrades over time through their monthly bills.

“By using premises-specific modeling based on an in-home assessment, applying all available rebates and incentives and utilizing an initial copayment, if necessary, the customer’s TOB monthly charge will not exceed the customer’s projected average monthly savings over the repayment term of up to 12 years,” NCUC said in its order.

In a separate order issued Wednesday, NCUC approved a pilot program for DEP’s “Multi-Family New Construction Tariffed on Bill Pilot.” The five-year pilot program is meant to evaluate the effectiveness of on-bill funding for upgrading the efficiency of apartment buildings as they are under construction.

The program will be focused on apartment complexes with 700 to 1,000 units, and DEP can implement eligibility requirements so that participants are spread around its footprint and not dominated by a few residential developers.

The upfront costs for energy efficiency improvements have long been identified as a significant obstacle for customers wishing to improve their homes. The TOB program is meant to overcome that barrier, the commission said in its order.

The residential TOB tariff is linked to the meter at a specific address, so even if the customer who signed up moves, it would stay with whoever buys the residence. The TOB charges will recover the initial investment plus interest equal to Duke’s utilities most recently approved weighted average cost of capital.

The TOB program for both utilities is open to individually metered residential customers who are served under the residential rate schedule, regardless of whether the owner occupies the residence or leases it. Customers need a 12-month billing history to establish the baseline consumption used to model projected energy savings.

Duke will maintain and repay any equipment as required. Customers must notify it when they notice something in need of repair, and the utility will fix it within five business days. Customers have 30 days to report malfunctions.

The TOB program covers heating ventilation and air conditioning equipment, including smart thermostats, thermal boundary improvements, heat pump water heaters and other equipment on a case-by-case basis.

Initially, Duke plans to target customers who would stand to reap the biggest benefits, but over time it expects many of its customers will want to use the TOB program.

Though the NCUC ordered some changes to Duke’s filing, it found the program was in the public interest. The changes involved clarifications over how customers can repay Duke early for its work, at which point the utility will no longer be obligated to repair equipment.

Duke agreed to notify customers of any other programs that could pay for efficiency upgrades at lower costs — or for free — to the extent it is aware of them. Duke also agreed to work with the state to see how funding from the federal Inflation Reduction Act could be coordinated with the TOB program.

DEP’s apartment building pilot program can be used to add wall insulation, improved heat pumps, Energy Star appliances and heat pump water heaters when new buildings are being constructed. Duke will pay the incremental costs for more efficient equipment and recover their costs from tenants’ monthly bills, minus any applicable efficiency incentives.

Property owners will be responsible for maintaining all installed equipment and for timely repair measures. They are able to pay off Duke after three years in the program and thus end the extra monthly payments.

The commission required DEP to change the prepayment plan so that when an apartment complex owner pays off the utility early, it does not have to pay the interest it would have over the full term of the program. The regulator reasoned that the utility would be able to invest that money in other areas while having fully recovered its upfront costs.