BILL ANALYSIS SENATE TRANSPORTATION & HOUSING COMMITTEE BILL NO: AB 1106 SENATOR ALAN LOWENTHAL, CHAIRMAN AUTHOR: Fuentes VERSION: 8/3/10 Analysis by: Carrie Cornwell FISCAL: yes Hearing date: August 10, 2010 URGENCY: YES SUBJECT: AB 118: Alternative and Renewable Fuels and Vehicle Technology Program DESCRIPTION: This bill permits the California Energy Commission to contract with small business financial development corporations to expend Alternative and Renewable Fuels and Vehicle Technology Program funds. ANALYSIS: AB 118 (N??ez), Chapter 750, Statutes of 2007, created the Alternative and Renewable Fuel and Vehicle Technology Program, which the California Energy Commission (CEC) administers to provide grants, revolving loans, loan guarantees, loans, or other appropriate funding measures to public agencies, vehicle consortia, businesses, consumers, recreational boaters, and academic institutions to develop and deploy innovative technologies that transform California fuel and vehicle types to help attain the state's climate change policies. Existing law provides, upon appropriation by the Legislature, approximately $120 million annually through 2015 for this program comes from additional fees on vehicle registrations, special identification plates for various vehicles, and vessel registrations, plus $10 million annually from the Public Interest Research, Development, and Demonstration Fund, which is derived from a portion of electric utility rates. The CEC, through a competitive process, allocates these funds to alternative fuel and vehicle technology projects. To set AB 1106 (FUENTES) Page 2 priorities for the allocation of funds, the CEC must develop an investment plan in consultation with a wide array of stakeholders. The CEC adopted its first investment plan at its April 22, 2009 meeting. It is now in the process of updating that plan for 2010, which the CEC plans to adopt this month. Existing law makes the following projects eligible for funding under the Alternative and Renewable Fuel and Vehicle Technology Program: Alternative and renewable fuel infrastructure, fueling stations, and equipment. Projects to develop and improve vehicle technology that provide for better fuel efficiency and lower greenhouse gas emissions. Alternative and renewable fuel projects to develop, improve, demonstrate, deploy, produce, and commercialize alternative and renewable fuels, plus reduce the overall carbon footprint of these fuels. Vehicle retrofit projects to create higher fuel efficiencies. Infrastructure projects that promote alternative and renewable fuel infrastructure development for existing fleets, public transit, and existing transportation corridors. Workforce training programs related to alternative fuels and vehicle technology. Block grants administered by not-for-profit technology consortia for specified purposes. Analyses and assessments performed by state agencies to determine the impacts of increasing the use of low-carbon transportation fuels and technologies. In addition, AB 109 (N??ez), Chapter 313, Statutes of 2008, allowed the CEC, until January 1, 2012, to contract with the Treasurer to expend Alternative and Renewable Fuels and Vehicle Technology Program funds through programs that the Treasurer implements, provided the program is consistent with either the Alternative and Renewable Fuels and Vehicle Technology Program or another AB 118 program, the Air Quality Improvement Program, that the Air Resources Board administers. This bill : 1.Allows the CEC to contract with small business financial development corporations that the Business, Transportation and AB 1106 (FUENTES) Page 3 Housing Agency (BT&H) establishes to expend Alternative and Renewable Fuels and Vehicle Technology Program funds through the Small Business Loan Guarantee Program provided that the expenditure is consistent with all of the requirements of the program and of AB 118. 2.Deletes obsolete language included in AB 118 and AB 109. 3.Contains an urgency clause. COMMENTS: 1.Purpose . State law authorizes BT&H under its Small Business Loan Guarantee Program to establish small business financial development corporations (FDCs) that provide guarantees for loans private financial institutions issue to small businesses. These are loans that banks would not issue without the loan guarantees. Under the program, loan guarantees cover a percentage, typically 80 percent, of the loan balance and interest upon defaults. FDCs are nonprofit corporations that BT&H designates to market the program, coordinate the packaging of the loan and loan guarantee applications between the small business and financial institution, issue the loan guarantees, and ensure that lenders have followed required procedures before requesting payment on defaulted loans. A total of 11 FDCs operate throughout the state. Recent state budgets have borrowed or otherwise used for unrelated purposes moneys in the Small Business Expansion Fund, which supports the loan guarantees that FDCs make under the Small Business Loan Guarantee Program. This bill permits the use of AB 118 funds to restore some of those lost funds. This bill enables the CEC to contract with the FDCs to use its AB 118 moneys to fund loan guarantees for small business borrowing that is consistent with the Alternative and Renewable Fuels and Vehicle Technology Program and BT&H's Small Business Loan Guarantee Program. 2.Gut and amend . Until July 15, 2010, this bill related to private utilities purchasing renewable electricity. While the bill was pending in the Senate Appropriations Committee, the author deleted those provisions from the bill and inserted the current language. These amendments caused the Senate Rules Committee to withdraw the bill from the Appropriations AB 1106 (FUENTES) Page 4 Committee and referred it here for a hearing of the new language. 3.Suggested amendments . The author or the committee may wish to make the following amendments: On page 6, line 3, delete "January 1, 2012" in order to allow the CEC to exercise its authority to contract with the Treasurer or the small business financial development corporations throughout the life of the Alternative and Renewable Fuels and Vehicle Technology Program, funding for which sunsets at the end of 2015. On page 6, line 7, and on page 6, line 12, delete "chapter" and insert "article" to clarify that expenditures under these contracts must be consistent with the Alternative and Renewable Fuels and Vehicle Technology Program rather than another AB 118-created program that the Air Resources Board administers. 1.Chaptering amendments . This bill has chaptering conflicts with SB 1340 (Kehoe). In order to resolve these conflicts, the author will need to make chaptering amendments either in committee or at a later date. Assembly Votes are not relevant. POSITIONS: (Communicated to the Committee before noon on Wednesday, August 4, 2010) SUPPORT: Association of Financial Development Corporations OPPOSED: None received.