By Matthew Hirsch

EARLIER THIS YEAR the San Francisco Chronicle reported that two Bayview-Hunters Point restaurants had replaced their refrigerators and freezers. Big deal, right?

The appliances were ancient, each more than 50 years old, and they kept food cold just like newer kitchen equipment but at a much higher price. Electric bills for Jordan's House of Ribs (4004 Third St., S.F. 415-282-4003) ran up to $1,000 a month, including about $620 for the freezer alone, according to the article. A more efficient freezer would do the job for just $76 a month.

In this case refrigerator regime change was a very big deal, a simple business decision that allowed the restaurant to cut a monstrous monthly expense, freeing owner Allen Jordan to focus more resources on his barbecue ribs. He had the assistance of the San Francisco Community Power Cooperative (2325 Third St., Ste. 344, S.F. 415-626-8723, www.sfpower.org), which helps small businesses invest in energy-efficient technology. Without the power co-op, he may not have been able to raise the $2,800 he needed to improve the efficiency of his kitchen equipment.

Many small businesses may never realize the potential savings from energy efficiency because of the high initial cost. But as local businesses continue to devour expensive energy, they're stuck perpetuating two of San Francisco's age-old plagues: air pollution and Pacific Gas and Electric Co. profits. Clearly, there must be a better way.

Hank Ryan, a consultant representing the San Francisco Small Business Network (2261 Market, Ste. 288, S.F. www.sfsbn.org) and the Center for Small Business and the Environment, based in Washington, D.C., said the problem lies with the way energy efficiency is financed.

Traditionally, state and local governments offer energy-efficiency incentives in the form of rebates, which have helped bring down the cost of things like spiral-shaped fluorescent light bulbs and low-flow toilets. But rebates have been less effective when it comes to big-ticket investments, like refrigerators and freezers.

Last month Ryan asked the California Public Utilities Commission (505 Van Ness, S.F. 415-703-2782, www.cpuc.ca.gov) to take a closer look at PG&E's energy-efficiency program. Instead of rebates based on high-cost purchases, Ryan believes PG&E should offer on-bill financing – a system that would allow utility customers to purchase energy-efficient products at no initial cost. Instead, customers would make monthly payments based on the amount they save consuming less energy.

"We brought this issue forward because small business is not getting the straight poop, so to speak, as far as getting the best energy efficiency," Ryan said. He also pointed out that on-bill financing is successfully in effect in Connecticut, Massachusetts, and Rhode Island – proof that the program works.

When small businesses assume sole financial risk of investing in energy-efficient services, the results are much better for the environment but aren't always cost-efficient. Three years ago Cliff Waldeck, president of the Small Business Network and owner of Waldeck's Office Supplies (500 Washington, S.F. 415-981-3381), paid $1,900 to install an energy-efficient lighting system in his store. He liked the idea of conserving energy, but he especially wanted to lower his utility bills, which ran as high as $500 a month. Three years later, Waldeck is still paying $400 to $500 a month for electricity.

"I can have a warm fuzzy when I go to bed at night knowing that I have efficient lights in my place, but it's questionable if I came out ahead on the investment," Waldeck said. He added that he might be paying a higher rate for electricity now but that he also might have gotten less energy savings than expected.

It's environmentally positive yet financially questionable experiences like these that make small-business owners reluctant to shell out hundreds of dollars or more for energy efficiency. But Ryan is quick to mention that many proprietors wouldn't hesitate to make the investment if they had access to on-bill financing.

Paul Liotsakis, an account manager with the power co-op, said he's curious about on-bill financing and wants to learn more. Liotsakis, who helped Jordan's House of Ribs get its new freezer, said he was able to distribute more than 50 new refrigerators and freezers to co-op members. But now the organization's grant money is dwindling, and the city needs to find other methods of making efficient appliances available to small-business owners.