First on national financial
Financing usually comes
from banks, savings and loans, credit-card
companies and other traditional financial
institutions that make money off of money.
Now, in a new trend, utilities find themselves
in the loan business.
The latest to join this
trend is a New England utility, Yankee Energy
System Inc., of Meriden, Conn., which found a
way to expand its financing subsidiary, Yankee
Financial Services, using customers from its
main business, Yankee Gas Services, as a
In June, Yankee Financial
Services signed on as the first utility for
the National Loan Center, a new project by
Fannie Mae and Viewtech Financial Services, Inc. (Viewtech), to provide a
centralized place for the processing of
low-interest home loans for energy-saving
appliances and other improvements for
single-family residential customers.
The center offers
below-market, tiered interest rates, quick
loan approvals and streamlined underwriting
guidelines to Yankee Financial Services,
launching many contractors to spread the
message to interested customers.
Through the program,
homeowners can borrow up to $15,000 for up to
10 years to install things like
high-efficiency heating and cooling equipment.
At the center, Viewtech of Anaheim, CA, serves as the
facilitator of the program: receiving
applications from approved contractors,
underwriting and originating the loan to the
program guidelines, and even issuing the loan
check and tracking monthly payments.
In turn, Fannie Mae, a
congressionally chartered shareholder-owned
company and the nation's largest source of
home mortgage funds, purchases the loan
In 1994, Fannie Mae
launched Showing America a New Way Home, a
pledge to provide $1 trillion in targeted
housing financing by the end of the decade. As
part of this initiative, Fannie Mae is working
with utilities to help customers through a
low-cost source of funds, to finance
Right match, right time
As a subsidiary that
provides financing alternatives to customers,
Yankee Financial Services looked for a new
kind of customized financing when it
discovered the National Loan Center, according
to Matthew Ide, Yankee's manager of financial
Ide explains Yankee
Financial Services was first introduced to the
concept at a convention of the American Gas
Association in March 1996, through a
presentation by Fannie Mae and Viewtech.
"I went into it knowing I had to do
something," he says. The company wanted to
offer financing services, like those in the
retail appliance market, without a great deal
Ide adds Yankee already had
a gas conversion program (gas furnace) set up,
but no financing program for established
customers. He says two essential motivations
Better financing for the
services to established customers.
"Allocating capital for
homeowners, who are customers, seemed very
attractive to us," Ide says.
Fannie Mae's David Carey
and Viewtech are co-marketing this
venture throughout the country. The loan
Loan terms for up to 10
Loan amounts ranging from
$1,000 up to $15,000;
rates (set periodically based upon market
conditions, but fixed for the term of the
loan). Yankee Financial Services offers
loans at interest rates as low as 8.5
percent per annum for qualified equipment;
No security requirements
(an unsecured loan unless the utility
company prefers a secured-loan plan);
include central heating and cooling systems,
domestic hot water, insulation, windows,
energy-saving appliances, etc.
Carey explains that Fannie
Mae's mission is to reduce the costs of home
ownership. "After a mortgage, energy costs are
the next greatest costs for a home-owner."
The main reasons for
targeting utility companies are they tend to
work well with contractors, understand the
technologies, want to provide good customer
service and have high-quality name recognition
with homeowners, he adds.
Both Viewtech and Carey
tout the benefits to utility customers. Those
Receiving more efficient
equipment than they might not have otherwise
Providing an unsecured
Increasing the value and
comfort-level of the home;
Allowing for home
improvements while reducing energy-related
Receiving a lower
interest rate than is generally available
through credit cards or other unsecured
The benefits to the
Providing a new product
for the competitive retail market;
Increasing the number of
positive customer transactions;
Providing a significant
customer service needed by many customers
(conversion and existing);
Building stronger trade
Lowering the cost of
demand-side management by replacing rebates
Shifting the customer
focus from equipment cost to monthly payment
for more efficient heating and cooling
Promoting a "whole house"
or bundled approach to efficiency upgrades;
Allowing flexibility and
control in providing financial services;
financing with little effort or cost;
Promoting new technology
(such as geothermal heat pumps and gas
cooling) and services (including extended
warranties, home security, etc.).
Experience plays a key role
in promoting the product and it also weighed
heavily on Yankee's decision to pioneer as the
first utility to sign with the national
First of all, Ide says
Yankee markets the program using its
established name and reputation as
Connecticut's largest utility. He says an
overwhelming share of customer base is coming
from the regular gas utility base.
The biggest selling point
for Yankee, he adds, was Viewtech's
experience. "You look at somebody who is doing
what you want," he says. "It has a proven
Since July, 1995, Viewtech operated a similar loan program for
Pacific Gas & Electric Company of San
Francisco. Through that program, more than
12,000 loans totaling an excess of $80 million
were approved in two years.
Describing the negotiations
as "quite a balancing act," Ide says that it
was a three-way financial agreement between
Yankee, Viewtech and Fannie Mae that made
the project finally come together.
The initial enrollment was
in May with a very concerted effort by the
Yankee Gas Services marketing department,
which company spokesperson Geralyn Johnson
says was integral. They conducted a series of
breakfasts for contractors in a "face-to-face"
rollout, where they distributed the material
needed, including loan documents, to
Of the 75 interested
contractors who attended the breakfasts, 35
became authorized to handle the program, Ide
believes the contracting force will grow as
the program gains momentum.
"The biggest strength of
this program is that we can give all of the
documents to the contractors," Ide explains."
The contractor goes to the customer's house
and, for the first time, he has all of the
Ide says that fact saves
valuable time and proves less of a hassle for
contractors, who set the loan process into
motion by simply faxing it over to the center
for financing approval.
The contractors fill out
the loan document monthly agreement and a
financing agreement, which takes about five to
ten minutes on an average, and the loan center
goes through the retail installment contract.
"Unless there's a problem
with the credit, then everything's set . . .
it streamlines the whole process," Ide adds.
There is a two-hour window to check the
credit, but after that the deal is solid.
"They basically take care
of it soup to nuts," Johnson says, noting that
Viewtech handles the payment books, and
the day-to-day activities of the program. "Our
major responsibility is to manage the
contractor network and to do marketing," Ide
says. Yankee has two primary marketing
Targeting Yankee Gas
customers through bill inserts and other
follow-up materials. (Johnson said many
times there are inquiries from Yankee
As for the second
responsibility, Ide says the financing program
will always be offered through a contractor.
The company expects to increasing interest
from potential contractors as the loan program
To join the center, Yankee
marshaled its reserves and paid a one-time
fee. "We got premium services for an excellent
price," Ide says, without discussing specific
terms. He noted that technically it is not
"customer lending," it is "retail installment"
because of regulatory limitations.
Without the Fannie Mae
National Loan Center, such a program was
cost-prohibitive for the company, Ide
explains. Although Yankee Energy is the
largest utility in the state of Connecticut,
he says the company is not large enough to lay
down the necessary capital for its own
customized financing program. It has a
residential customer base of about 100,000 and
30,000 industrial and commercial, Johnson
When asked if they mind
being the first to join the center, Yankee's
representatives say "No way. We are very
comfortable being out there first," Ide says.
"Our company prides itself on trying to be
innovative and to think out-of-the-box."
"First-on-the-block at Yankee encourages us.
Our motto is to provide imaginative,
responsive energy solutions."
Ide says it allows Yankee
to offer services to residential customers
once reserved for commercial customers. Yankee
Financial Services provides such things as
traditional installment loans and equipment
leasing for many commercial clients, from
large casino hotel to a small local body shop.
"We've been able to fill the gap as far as
leasing," Ide says.
Ide thinks the central
service center will help streamline the
residential segment, which failed once at
Yankee when they initiated a natural gas
conversion association with a local bank. "The
process was very confusing," he says.
Because consumers use
modern communications technology for approval
for things like credit cards, the center
should work easily and be accessible to any
contractor, no matter from where they are
"I foresee this as laying
the foundation to expanding even more
services," Ide adds.