BILL ANALYSIS                                                                                                                                                                                                    



                                                                  AB 46
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          Date of Hearing:   March 23, 2009

                    ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
                                Felipe Fuentes, Chair
                  AB 46 (Blakeslee) - As Amended:  February 19, 2009
           
          SUBJECT  :   Energy: energy conservation assistance.

           SUMMARY :   Authorizes the California Energy Commission (CEC) to  
          deposit funds received pursuant to the federal American Recovery  
          and Reinvestment Act of 2009 (ARRA) into two energy program  
          assistance accounts, and extends the sunset date for the two  
          state accounts to 2020. 

           EXISTING LAW  :   

          1)Establishes the Energy Conservation Assistance Account (ECAA)  
            to provide loans to schools, hospitals, public care  
            institutions, and local government entities for financing  
            energy conservation related projects.

          2)Establishes the Local Jurisdiction Energy Assistance Account  
            (LJEA) as a separate account within the General Fund as a  
            depository for all money received from local jurisdictions  
            from loan repayments, for energy project assistance.  Permits  
            the CEC to contract for project services including feasibility  
            analyses, project design, field evaluation, and operation and  
            training assistance.  

           THIS BILL :  

          1)Permits the CEC to receive and deposit funds from the federal  
            government pursuant to the ARRA into the ECAA and LJEA.

          2)Extends the sunset date for the ECAA and the LJEA from 2011 to  
            2020.

          3)Includes an urgency clause declaring the bill to take effect  
            immediately.

           FISCAL EFFECT  :   Unknown.

           COMMENTS  :   According to the author, the purpose of this bill is  
          to "?allow a working program to continue."  Both accounts fund  
          energy efficiency projects and energy efficiency is widely  








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          recognized as the cleanest and most cost-effective resource for  
          meeting California's energy needs.  The state has a rich history  
          dating back to the 1970's of implementing energy efficiency and  
          conservation programs. As a result, for the past 30 years, while  
          per capita electricity consumption in the U.S. has increased by  
          nearly 50 percent, California electricity use per capita has  
          been approximately flat.   

           1)   The ECAA  :   The ECAA was created in 1979 to provide grants  
          and loans to fund energy efficiency measures in schools,  
          hospitals, public care institutions, or units of local  
          government and their ancillary services.  The repayment of the  
          loan is based on the amount of money saved as a result of the  
          installation of efficiency measures.  In the short run the  
          borrower's energy payment doesn't decrease because the amount  
          saved due to the energy efficiency project is used to pay back  
          the loan.  After the loan is fully repaid, the borrower entirely  
          benefits by the savings.

          The CEC notes that this program has had no defaults.   The CEC  
          calculates the amount of the loan based upon a 15-year payback  
          solely from energy savings.  The payback is pretty quick for  
          less-expensive measures that reduce energy consumption, like  
          replacing interior and exterior incandescent light bulbs with  
          more efficient lamps or replacing mechanical thermostats with  
          programmable thermostats. Some of the larger more expensive  
          items require a longer payback period, such as upgrading heating  
          ventilation and air conditioning (HVAC) systems.  
           
           2)   The LJEA  :  In the 1980s the federal government had several  
          lawsuits against the Organization of Petroleum Exporting  
          Countries (OPEC). There were five total overcharge cases against  
          domestic oil producers in California that settled for a total of  
          $426 million. The penalties levied against oil producers were  
          intended to provide restitution to victims of the oil  
          overcharges. Expenditure of the funds was required to benefit  
          energy consumers and could not supplant state funds already  
          allocated for energy-related programs.  To fund projects of  
          statewide benefit, the state created the Petroleum Violation  
          Escrow Account (PVEA).  The LJEA was created from a $40.5  
          million appropriation from the PVEA for energy training and  
          management assistance, and to provide loans to local  
          jurisdictions for energy project assistance.  

          To date, the JLAC has funded over 600 projects including public  








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          transportation, computerized school bus routing, highway  
          projects, airport maintenance and reduction in airport user  
          fees.   

          3)   The American Recovery and Reinvestment Act of 2009  :  On  
          February 17, 2009, the President signed H.R. 1, the ARRA, a $787  
          billion stimulus package hailed as the most sweeping financial  
          legislation enacted in our nation's history.  According to the  
          authors of H.R. 1, the goal of the ARRA was to create and  
          protect jobs.  With California's 10.1% unemployment rate, the  
          need for such a stimulus is timely.  They targeted job creation  
          in specific industries, such as health, education, and science.   
          Significant investments were also made in critical  
          transportation, water, energy, and broadband infrastructure.  

          The ARRA reflects an energy policy that mirrors long-standing  
          California policy.  There is an emphasis on encouraging  
          renewable energy and energy efficiency, with additional  
          consideration for low-income households.

          The ARRA includes a State Energy Program.  The CEC expects  
          California to receive about $239 million for energy efficiency  
          and renewable energy programs.  The federal guidelines encourage  
          long-term funding mechanisms such as revolving loans and energy  
          savings performance contracting.  In 2006, the CEC allocated  
          previous State Energy Program funds toward numerous new and  
          existing programs, including:  the Appliance Efficiency Program,  
          the Bright Schools Program, the Energy Partnership Program, the  
          California Community Colleges Program, the Building Efficiency  
          Program, the "PLACE3S" Educational Materials Project, the Energy  
          in Agriculture Program, the Energy Conservation Assistance  
          Program, the CEES Safe-Bidco Energy Efficiency Improvement Loan  
          Program, the Removing Barriers to Improved Light-Duty Vehicle  
          Fuel Economy Project, the Energy Efficient School Bus  
          Demonstration Program, and the Clean Fueling Infrastructure and  
          Vehicle Efficiency Incentive Program.

          The ARRA also includes an appropriation for the Energy  
          Efficiency and Conservation Block Grant Program, which was  
          created in the Energy Independence and Security Act of 2007  
          (2007 Energy Act) to provide grants to eligible entities to  
          reduce fossil fuel emissions, reduce energy use, and improve  
          energy efficiency in the transportation, building, and other  
          appropriate sectors.









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          The 2007 Energy Act requires the Department of Energy (DOE) to  
          provide $10 billion over a 5-year period ($2 billion per year)  
          for grants.  Modeled after the existing Community Development  
          Block Grant program, these energy block grants fund local  
          initiatives including building and home energy conservation  
          programs, energy audits, fuel conservation programs, building  
          retrofits to increase energy efficiency, "smart growth" planning  
          and zoning, and alternative energy programs.  

          The 2007 Energy Act requires the DOE to directly allocate 68% of  
          the funds directly to local governments with relatively high  
          populations.  Twenty-eight percent of the $2 billion per year  
          ($560 million) goes directly to states.  Of the amount allocated  
          to states, the 2007 Energy Act requires that the state use not  
          less than 60% of the amount received to provide subgrants to  
          units of local government that are not eligible to apply  
          directly to DOE.  AB 2176 (Caballero), Chapter 229, Statutes of  
          2008, requires the CEC to administer funds allocated to the  
          state, upon federal appropriation.  The ARRA appropriated the  
          funds.

          The ARRA includes additional programs for which the state is  
          eligible to apply.  Two significant programs include competitive  
          grants to implement an Energy Efficient Appliance Rebate  
          program, and an Energy Efficiency and Renewable Energy Worker  
          Training Program.  The provisions of this bill would capture  
          these funds as well, if the state applies and is granted funds.

          AB 46 permits the CEC to deposit funds from the ARRA into the  
          ECAA and the LJEA.  The ECAA is continuously appropriated  
          without regard to fiscal year, and the LJEA funds are disbursed  
          by the Controller as authorized by the CEC.  As such, as long as  
          the expenditures are consistent with federal guidelines, the  
          department has wide latitude to determine which programs and  
          projects it chooses to fund.  However, the CEC may compete for  
          some funds that may not comport with the authorities granted for  
          the ECAA and the LJEA.  

          In order to ensure that ARRA funds are allocated toward the  
          appropriate state programs that qualify the state to compete for  
          the federal funds, and in order to resolve the disparate bills  
          that will attempt to allocate ARRA funding,  this committee may  
          wish to delete the section that addresses the ARRA in order to  
          deal with all ARRA funds appropriately and comprehensively.
           








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           RELATED LEGISLATION  :  

          AB 262 (Bass) requires any moneys received pursuant to the ARRA  
          that are directed toward energy related activities, programs, or  
          projects, to be administered by the appropriate state energy and  
          water agencies and adhere to existing state environmental and  
          conservation policies.

          AB 234 (Huffman) states legislative intent to develop an  
          implementation plan for federal stimulus dollars to promote  
          energy efficiency programs including weatherization of buildings  
          and other energy efficiency upgrades.

          AB 2176 (Caballero), Chapter 229, Statutes of 2008, requires the  
          CEC to administer funds allocated to the state from the 2007  
          Energy Act for cost-effective energy efficiency measures.

           REGISTERED SUPPORT / OPPOSITION  :   

           Support 
           
          None on file.

           Opposition 
           
          None on file.
           
          Analysis Prepared by  :    Gina Adams / U. & C. / (916) 319-2083