City Council
Staff Report
From: City Manager
Report Type: CONSENT CALENDAR
Lead Department: Utilities
Meeting Date: September 8, 2025
Report #:2507-4921
TITLE
Approve Amendment #1 of the Memorandum of Agreement with the California Alternate Energy and Advanced Transportation Financing Authority, to Extend the Term of the Agreement from Two Years to Five Years, to Continue to Enable the Residents of Palo Alto to Participate in the GoGreen Home Energy Financing Program
RECOMMENDATION
Approve Amendment #1 of the Memorandum of Agreement (MOA) with the California Alternate Energy and Advanced Transportation Financing Authority (CAEATFA), to Extend the Term of the Agreement from Two Years to Five Years, to Continue to Enable the Residents of Palo Alto to Participate in the GoGreen Home Energy Financing Program.
EXECUTIVE SUMMARY
To meet Palo Alto’s ambitious greenhouse gas reduction goals, residents will need to implement energy efficiency and electrification projects at their homes. These projects may need thousands of dollars in capital expenditure. The GoGreen Home Program is a long-standing State-run 1 financing program with participating financing companies (PFCs) to provide consumer financing for these types of projects at competitive rates2.
Since Palo Alto is not served by any investor-owned energy utilities, a separate agreement with the State was required to enable participation of Palo Alto residents. In September 2023, the Council approved a $300,000 agreement with CAEATFA for a two-year term (Staff Report: 2212- 04753). This program was intended to support single-family electrification, with the 1 Description of GoGreen Financing Program: https://gogreenfinancing.com/residential 2 Current interest rates range from 4% to 9.75% depending on the term of the loan and the credit rating of the borrower. In January 2025, the average interest rate for the 415 loans processed statewide was 6.48%, with an average term of 139 months2. There has been one participant from Palo Alto in the Program to date. 3 September 2023 Staff Report: https://portal.laserfiche.com/Portal/DocView.aspx?id=67742&repo=r-704298fc
understanding that it would be most helpful for space heating rather than water heating projects.
As expected, the first loan for this program came after incentives for space heating electrification were launched in January 2025. The one loan, for a space heating project, was issued in May 2025 for $25,000 at an interest of 3.98% for a 30 month (2.5 years) term. As more space heating projects are completed more loans are expected.
BACKGROUND
The California Hub for Energy Efficiency Financing (CHEEF) was formed as a public-private partnership between the State and California’s investor-owned utilities (IOUs). It was authorized by the California Public Utilities Commission (CPUC) in 2013 and is administered by CAEATFA, an agency under the State’s Treasury Department. The GoGreen Home Program issued its first loan in 2016 and has only been available in areas served by an IOU such as Pacific Gas & Electric (PG&E).
The objective of the GoGreen Home Financing Program is to offer residential customers attractive financing options, through participating financial institutions, for energy efficiency and decarbonization projects by providing a ‘credit enhancement’ to lenders in the form of a loan loss reserve (LLR), funded by the IOUs and other participating entities (e.g., TECH Clean California).
CPAU’s participation to facilitate Palo Alto customer access to GoGreen Home would be the first credit enhancement funded by a municipal utility.
Current participating financing companies operating in Santa Clara County are Matadors Community Credit Union, California Coast Credit Union, Travis Credit Union, and Self-Help Federal Credit Union 4. The loans fund the following Eligible Energy Efficiency Measures:
appliances (including electrified appliances such as heat pumps), building envelope, demand response, HVAC, lighting, pool products, water heating. The Program also funds Solar PV, Battery Energy Storage and EV charger installation projects5.
The benefits to residential homeowners participating in the Program include:
• No lien on property (unsecured consumer loan)
• Available to borrowers with a wide range of credit scores and incomes • Loans of up to $50,000 per unit receiving upgrades, up to $75,000 for solar + battery projects
• A term of up to 15 years, up to 20 years for solar + battery projects • Finance 100% of the project cost, including required related upgrades (e.g. electrical upgrades)
4 Financing Companies Serving Santa Clara County: https://www.gogreenfinancing.com/energy-efficiency-home- loans-california/finance-options/?_counties_filter=santa-clara%2Call&zip_code=94301 5 Energy Efficiency Measures: https://www.gogreenfinancing.com/wp- content/uploads/2025/04/reel_eeemsList.pdf
• Up to 30% of loan amount can be used toward non-energy improvements (e.g. home remodels, drought tolerant landscaping)
• No prepayment penalties
• Currently no closing costs or origination fees (may change in the future) • No contractor fees (lenders often charge contractors thousands of dollars to finance projects)
• Below-market interest rates and extended payback periods (due to credit enhancement provided to lender)
ANALYSIS
Staff recommend that the City continues enabling the GoGreen Program for Palo Alto residents to finance higher-cost electrification projects. The program requires little staff time to implement, and the administrative cost is low. The City’s electrification program in 2023-24 period was focused on heat pump water heaters, a lower cost (thousands of dollars) compared to the high cost (tens of thousands of dollars) of whole home electrification projects the City started promoting in 2025. Staff anticipate the financing needs for these higher cost projects will increase in the coming years.
Cost of Participating in the Program and Funding Needs
The MOA in place is funded for up to $300,000 ($140,000 for administrative cost and $160,000 for LLR funding). During the past two years, the Palo Alto program incurred an administrative expense of $4,757 to start the program. The City is responsible for variable administrative costs for each loan processed. No ongoing administrative expense is incurred in the absence of a loan.
Additionally, $50,000 is being held by CAEATFA to fund the Loan Loss Reserve (LLR), which enables Palo Alto residents to receive lower interest rates. The contract provides for a monthly fee to cover administrative expenses, but such a fee has not been charged to date. Staff recommends continuing funding program costs from revenues gained from the auction of allowances allocated the City as part of its participation in the State’s Cap and Trade program.
As part of the program, City has to contribute ~8% (based on the statewide program experience) of the underlying loan amounts to the loan loss reserve (LLR) 6. A large part of this LLR would be returned to the City if the loan portfolio does not suffer large delinquencies. Statewide, the loss rate since program inception in 2016 is 1.42%, or 153 loans out of 10,755 loans enrolled have defaulted. Statewide, the $168 million loan portfolio has lossed incurred to date of $1.42 million.
Statewide the LLR currently has a balance of $16 million, most of it funded by the IOUs7, but will also be funded by the City as Palo Altans continue to enroll in the program. Currently approved 6 A loan loss reserve is a fund that lenders set aside to cover potential losses from borrowers who default on their loans. The LLR for this program is funded at 5% of the underlying loan (for borrowers with a credit score > 700) and at 15% (for borrowers with credit score <700). The $25,000 loan processed required a 5% LLR funding, or $1,250. 7 GoGreen Program Performance Report: https://www.treasurer.ca.gov/caeatfa/cheef/monthlyreel/2025/01.pdf $160,000 in LLR funding will support $2 million in loans by Palo Altans. This amount is expected to support around 100 loans, assuming loan sizes in Palo Alto match the statewide average (about $19,900 per loan).
Demand for Financing Energy Efficiency and Electrification Projects in Palo Alto The level of demand for the GoGreen Home financing products in Palo Alto is difficult to gauge.
As a relatively affluent community City residents have a wide array of options to finance projects.
Staff anticipate the GoGreen Home financing product (unsecured consumer loan) will be a unique and useful product for residents as they embark on larger investments to electrify their homes, for residents with lower credit scores, or for residents who do not want to tap into the equity in their home or who have limited equity available to tap into.
In the current climate of economic uncertainty and high interest rates, GoGreen Home’s relatively low interest rates may be compelling for interested Palo Altans.
Process to Select Contractor, Apply for Loan & Pay for the Home Improvement Project The process for implementing a project is illustrated below. It is designed to be simple and efficient, with minimal need for intervention (and thus, few delays) by Palo Alto Program staff.
FISCAL/RESOURCE IMPACT
$300,000 was previously approved for this Agreement in September 2023, no additional funding is needed at this time. Extending the Agreement by three years does not result in increased resource requirements. Administrative costs of $4,757 have been paid to date, and $1,250 in LLR funding has been provided.
If the loans approved exceed $2 million, meaning that the budgeted $160,000 for LLR is depleted, staff will seek Council approval for additional funding.
The loan loss reserve (LLR) is maintained in an escrow account between the state and lender. The State will track the LLR status and report to the City on a quarterly basis. The City will stop budgeting additional funding for the LLR if the State ends the GoGreen program, and any remaining LLR funding will be returned to the City after each loan is repaid and fully returned (less any default loan funding paid to lender).
STAKEHOLDER ENGAGEMENT
Staff have sought approval from the Utilities Advisory Commission (UAC) to recommend Council approval of the Amendment #1 of the MOA at their September 3 rd meeting. Staff will be providing the Council a Supplemental Memo on UAC’s action and discussion before September 8th when Council will be voting on this recommendation.
Through the Sustainability and Climate Action Plan (S/CAP) community engagement process and via the promotion of City’s electrification and energy efficiency programs, Palo Alto residents are aware of CPAU’s participation in the GoGreen Home Financing program and the availability of this financing option for the residents.
ENVIRONMENTAL REVIEW
Approval of the attached agreement described in this staff report does not meet the definition of a project under the California Environmental Quality Act (CEQA), pursuant to the California Public Resources Code Section 21065, because it is not an activity that will cause a direct physical change in the environment.
POLICY IMPLICATIONS
The MOA to facilitate energy efficiency and electrification project loans for Palo Alto residents supports the community’s climate goals as embodied in the S/CAP, the Council-approved Utilities Ten-Year Energy Efficiency Goals, and Comprehensive Plan Goals N4.2.1 (educate customers on efficient water use), N7.4.2 (implement cost effective energy efficiency programs for all customers) and N7.7.2 (explore the transition of existing buildings from gas to electric or solar water and space heating).
ATTACHMENTS
Attachment A: Amendment #1 of the Memorandum of Agreement (MOA) between CAEATFA and Palo Alto
APPROVED BY:
Alan Kurotori, Director Utilities
Staff: Jonathan Abendschein, Assistant Director, Climate Action, Public Works Staff: Shiva Swaminathan, Senior Resource Planner