BILL ANALYSIS Ó 1 SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE ALEX PADILLA, CHAIR AB 1124 - Skinner Hearing Date: June 19, 2012 A As Amended: June 12, 2012 Non-FISCAL B 1 1 2 4 DESCRIPTION Current law requires California's electric utilities to first meet their energy needs through all available, feasible, and cost-effective energy efficiency measures before renewable and conventional generation. Current decisions of the California Public Utilities Commission (CPUC) require investor-owned utilities (IOUs) to administer energy efficiency programs in multi-year portfolios designed to meet pre-established energy savings goals and funded by ratepayer charges, currently at about $1 billion per year. Current law and CPUC decisions establish the Energy Savings Assistance Program (ESAP) to provide eligible low-income households free weatherization and energy efficiency services administered in multi-year portfolios by the IOUs as approved by the CPUC and funded by ratepayer charges, currently at about $320 million per year. Current law requires the CPUC to ensure that by December 31, 2020, all eligible low-income customers are given the opportunity to participate in ESAP, including customers occupying apartments or similar multiunit residential structures. Current law requires multifamily rental housing to maintain specified characteristics, including adequate heating and hot water systems, in order to meet health and safety habitability standards. This bill provides that the law establishing multifamily habitability requirements shall not be interpreted to prohibit a tenant or owner of rental properties from qualifying for heating and hot water system repair or replacement under a utility energy efficiency program. BACKGROUND LIEE Becomes ESAP - The California Alternate Rate for Energy (CARE) program provides a minimum 20 percent energy rate discount to eligible low-income households earning at or below 200 percent of the federal poverty level. Customers who meet the CARE requirements also are eligible for the ESAP, formerly known as Low Income Energy Efficiency (LIEE) program, which provides no-cost weatherization and other services such as attic insulation, energy efficient refrigerators, energy efficient furnaces, weatherstripping, caulking, low-flow showerheads, water heater blankets, and door and building envelope repairs that reduce air infiltration. The ESAP is administered in multi-year portfolios by the IOUs as approved by the CPUC and funded by ratepayer charges, currently at about $320 million per year. A proposed decision to approve the ESAP program elements for the next three-year cycle is pending before the CPUC. CPUC Cites Habitability Requirements - In several prior ESAP decisions the CPUC has denied eligibility for furnace and hot water repair and replacement in rental buildings. Advocates claim that these large central systems present the primary opportunity for significant energy savings in multifamily buildings. But the CPUC ruled in 2007 and 2008 that these systems are the responsibility of the landlord, citing the Civil Code habitability requirements (D.07-12-051 and D.08-11-031). The CPUC states that the staggering costs of upgrading these central systems could derail the CPUC from meeting its statutory mandate to provide energy efficiency measures to all low-income customers and could result in "over-subsidizing landlords." The ESAP proposed decision currently pending before the CPUC also concludes that these systems are the responsibility of landlords and that their repair and replacement should not be funded by ratepayers. Social Justice and Energy Efficiency - Affordable housing advocates, including the sponsor of this bill, claim that energy efficiency in multifamily housing is an issue of social justice and equity as well as energy policy. They claim that low-income households, especially those residing in multifamily buildings, represent the greatest need for energy efficiency improvements, but have a very low participation rate in existing programs. According to the author, more than one-third of low-income households that are eligible for ESAP live in multifamily buildings but get only minimal energy savings from weatherstripping and limited measures suited to individual rental units. Thus, these advocates claim that existing programs are leaving behind the poorest of the poor, who live in the oldest, least efficient buildings and pay the highest percentage of household income on energy costs. Other Energy Efficiency Programs for Multifamily Housing - In addition to ESAP, the larger energy efficiency programs the IOUs administer include some programs for multifamily housing. For example, San Diego Gas and Electric Company and Southern California Gas Company offer multifamily rebate programs for common area systems including central water heaters and boilers. More multifamily programs, including whole building pilot programs, are pending approval by the CPUC. COMMENTS 1. Author's Purpose . According to the author, this bill clarifies that the habitability requirements for rental housing in the Civil Code have no bearing on public policy goals to increase energy efficiency in residential housing and shall not be interpreted to prohibit a tenant or owner of a rental property from qualifying for heating and hot water system repair or replacement under ESAP. 2. Removing Legal Barrier . As stated by the sponsor, this bill is "narrowly focused" to prevent the CPUC from citing the Civil Code habitability requirements as a reason for making rental property heating and hot water repair and replacement ineligible for ESAP measures. The bill makes no change to habitability requirements. 3. Policy Discretion Remains with CPUC . Other than eliminating the Civil Code habitability requirements as a barrier to eligibility in ESAP, this bill makes no change to law governing the ESAP and does not affect the CPUC's policy discretion in administering the ESAP and establishing program criteria consistent with applicable statutory provisions. 4. Ratepayer Impact . To the extent this bill removes a legal barrier to large central systems in rental housing eligible for ESAP funds, and the CPUC exercises its discretion to make them eligible, this bill could require an increase in the ratepayer surcharge that funds these programs. ASSEMBLY VOTES Assembly Floor (54-21) Assembly Appropriations Committee (12-5) Assembly Utilities and Commerce Committee (11-2) POSITIONS Sponsor: California Housing Partnership Corporation Support: BRIDGE Housing Corporation California Housing Consortium Century Housing Corporation Coalition for Economic Survival East Bay Housing Organizations Enterprise Community Partners MidPen Housing Corporation Napa Valley Community Housing National Housing Law Project Non-Profit Housing Association of Northern California San Diego Housing Federation Sheet Metal Worker's Local Union #104 Ward Economic Development Corporation Oppose: None on file Jacqueline Kinney AB 1124 Analysis Hearing Date: June 19, 2012