BILL ANALYSIS Ó
SB 136
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Date of Hearing: July 6, 2011
ASSEMBLY COMMITTEE ON LABOR AND EMPLOYMENT
Sandre Swanson, Chair
SB 136 (Yee) - As Amended: June 22, 2011
SENATE VOTE : (vote not relevant)
SUBJECT : Energy services contracts: prevailing wages.
SUMMARY : Provides that specified "energy services contracts"
entered into pursuant to existing law are public works projects
and subject to applicable prevailing wage laws.
EXISTING LAW :
1)Authorizes a public agency to enter into an "energy service
contract" and any necessarily related facility ground lease on
terms that its governing body determines are in the best
interests of the public agency, as specified.
2)Defines an "energy service contract" as a contract entered
into by a public agency with any person whereby the person
will provide electrical or thermal energy or conservation
services to a public agency from an energy conservation
facility.
3)Requires the prevailing wage rate to be paid to all workers on
"public works" projects over $1,000.
4)Defines "public work" to include, among other things,
construction, alteration, demolition, installation or repair
work done under contract and paid for in whole or in part out
of public funds.
5)Defines "paid for in whole or in part out of public funds" as
used in public works as the following:
a) Payment of money or the equivalent of money by a state
or political subdivision directly to or on behalf of the
public works contractor, subcontractor, or developer;
b) Construction work performed by a state or political
subdivision in execution of a project;
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c) Transfer of an asset of value for less than fair market
value;
d) Fees, costs, rents, insurance or bond premiums, loans,
interest rates, or other obligations normally required in
the execution of a contract that are paid, reduced, charged
at less than fair market value, waived or forgiven;
e) Money loaned that is to be repaid on a contingent basis;
and
f) Credits applied against repayment obligations.
6)Exempts from the definition of "paid for in whole or in part
out of public funds" specified types of affordable housing,
private residential housing, private development projects,
qualified residential projects, low income housing projects,
state manufacturing tax credits, and single family residential
projects.
FISCAL EFFECT : Unknown
COMMENTS : This bill deals with "energy service contracts,"
sometimes also referred to as "energy performance contracting."
Energy performance contracting is an alternative procurement and
funding mechanism that allows public entities to enter into
agreements for new energy-efficient equipment and services.
Under this process, an "energy service contract" is an agreement
made between the public entity and an energy service company
(ESCO). The ESCO will generally perform an inspection and
identify energy-saving opportunities and recommend a package of
improvements to be performed. The ESCO will usually guarantee
that the energy savings meet or exceed annual payments to cover
all project costs - usually over a contract terms of seven to
ten years.
For example, a city or other public agency may enter into an
energy service contract with an ESCO to perform many types of
building improvements, such as new lighting technologies or more
efficient heating/air conditioning systems. The city will
subsequently realize energy savings from these improvements.
These savings (or a portion thereof) will be paid from the city
to the ESCO over a period of years to pay for the costs of the
improvements.
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In recent years, California and many other states have allowed
the use of energy service contracts to reduce energy consumption
in state-owned buildings. For example, the Department of
General Services (DGS) uses these contracts as part of its
"Green Building Initiative."
ARGUMENTS IN SUPPORT :
Supporters argue that this bill will "put to rest a convoluted
interpretation of the application of prevailing wages regarding
energy service contracts." They contend that some local
agencies have found a creative loophole to avoid paying
prevailing wages for energy service contracts. Despite the fact
that the work is being completed on public infrastructure and
will be paid back from energy savings that otherwise would have
been utilized by the public agency, some have argued that such
work is exempt from the prevailing wage requirement.
Supporters argue that these types of contracts could potentially
be a huge bonus to a number of unemployed workers suffering
through difficult times. Unfortunately, given this convoluted
reading of current law, the definition of public works needs
updating to provide these workers with a fair wage. Supporters
contend that without these provisions, contractors bidding for
state money could undercut prevailing wages in any given area by
20 to 30 percent and ultimately hurt vulnerable workers and
their families.
RELATED LEGISLATION :
AB 436 (Solorio) similarly provides that specified work related
to renewable energy generation is considered "public works" for
purposes of prevailing wage law. AB 436 is currently pending in
the Senate.
REGISTERED SUPPORT / OPPOSITION :
Support
California State Pipe Trades Council
International Brotherhood of Electrical Workers
State Building and Construction Trades Council
Western States Council of Sheet Metal Workers
Opposition
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None on file.
Analysis Prepared by : Ben Ebbink / L. & E. / (916) 319-2091