BILL ANALYSIS Ó 1 SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE ALEX PADILLA, CHAIR SB 343 - De León Hearing Date: May 3, 2011 S As Amended: April 25, 2011 FISCAL B 3 4 3 DESCRIPTION Current law sets targets for the state's utilities, in procuring energy, to first meet their resource needs through cost-effective energy efficiency and demand reduction resources before renewable and conventional generation. Current law that sunsets January 1, 2012, requires the CPUC to require each investor owned utility (IOU) to assess as a ratepayer surcharge, commonly known as the Public Goods Charge (PGC), $228 million per year for energy efficiency and conservation activities, $65.5 million for renewable energy, and $62.5 million per year for research, development and demonstration. Current law requires the $65.5 million of the PGC for renewable energy to be deposited into the Renewable Resources Trust Fund (RRTF) for renewable energy resources programs administered by the California Energy Resources Conservation and Development Commission (CEC). This bill would require the CEC to expend, upon appropriation by the Legislature, an unspecified amount of the funding in the Emerging Renewable Resources Account of the RRTF for energy efficiency retrofits for commercial buildings. Current law requires publicly owned utilities (POUs) to collect a PGC and gives them discretion to use it to fund programs for any or all of energy efficiency, renewable energy, energy research, and rate discounts and other services for low-income customers. This bill would require each POU to dedicate a portion of funds collected for energy efficiency to a program for energy efficiency retrofits for commercial buildings. Current law requires the CPUC, by December 31, 2020, to ensure that low-income customers eligible for reduced rates are given the opportunity to participate in low-income energy efficiency programs, including customers occupying apartments or similar multiunit residential structures, and requires IOUs to make all reasonable efforts to coordinate ratepayer-funded programs with other energy efficiency programs. This bill would require IOUs to dedicate an unspecified portion of the moneys collected for low-income energy efficiency to a program of grants to be made available on a competitive basis to community-based organizations (CBOs) for purposes of energy efficiency retrofits. This bill would require the CPUC to open a new proceeding or expand the scope of an existing proceeding to consider establishment of a program by electrical and gas corporations to provide on-bill financing for energy efficiency retrofits. BACKGROUND Commercial Buildings - Commercial buildings consume more electricity than any other end-use in California and provide a major opportunity for achieving energy savings, especially old buildings that do not meet the state's Title 24 energy efficiency standards first adopted in 1982. AB 758 (Skinner, 2011) required the CEC, by March 1, 2010, to open a proceeding to develop a comprehensive program to achieve greater energy savings in the state's residential and nonresidential building stock. To date, the CEC has authorized pilot programs, including commercial building retrofits, to determine how best to achieve cost-effective savings. Information from CEC states that its plan will incorporate the commercial building energy use disclosure requirements mandated by AB 1103 (Saldana, 2007), for which implementing regulations are pending, as well as a system of energy assessments and ratings for commercial buildings that are being developed. In September 2009, the CPUC opened a proceeding to investigate the ability of utilities to provide energy efficiency financing options to implement the CEC's AB 758 program, as required by that legislation (D.09-09-047). The CPUC expects a comprehensive energy efficiency financing report to be released by the end of June. PGC for Energy Efficiency - The $228 million in PGC funds for energy efficiency is retained by the IOUs and is the base of the budgets for their energy efficiency programs approved in three-year cycles by the CPUC and supplemented with funding from rates. The IOUs' total annual energy efficiency program cost is about $1 billion. According to the CPUC, about 29 percent of IOU energy efficiency budgets for the 2010-2012 program cycle are for commercial buildings with a variety of offerings for whole-building retrofits. COMMENTS 1. Author's Purpose . According to the author, the intent of this bill it to require that a portion of all funding for energy efficiency under existing programs be dedicated to energy efficiency retrofits for commercial buildings. 2. Commercial Energy Efficiency Retrofits . This bill would require the CEC to dedicate an unspecified amount of funding in the Emerging Renewable Resources Account in the RRTF to a program for energy efficiency retrofits for commercial buildings. The Emerging Renewables program, for which this account is intended, is for fostering the development of wind and fuel cell technologies in distributed applications and not for energy efficiency. The author indicates that the intent of the bill is to provide CEC discretion to develop and administer this new program upon appropriation of RRTF funds for this purpose. Current law requiring the PGC that funds the RRTF sunsets on January 1, 2012. 3. Energy Efficiency Grants for CBOs . This bill appears to require that IOUs dedicate an unspecified portion of the moneys collected for low-income energy efficiency programs to a program of grants to be made available on a competitive basis to CBOs for purposes of energy efficiency retrofits. The Low-Income Energy Efficiency (LIEE) program, recently renamed the Energy Savings Assistance Program (ESAP), currently offers eligible residents no-cost weatherization services that include 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. IOUs choose weatherization contractors through a competitive process. In addition, IOUs already use CBOs as an effective means to implement energy efficiency programs that are part of their portfolios approved by the CPUC, especially to reach populations where culture and language may present a challenge. The CPUC has given IOUs discretion to administer these programs and select contractors that best meet the needs of their service territories. If it is the author's intent to make energy efficiency retrofits part of the no-cost services available under ESAP, then the author and committee may wish to consider amending the bill to require each IOU to identify and develop a plan for offering ESAP-eligible customers energy efficiency retrofits, in coordination with their energy efficiency portfolios, which may include contracting with CBOs. 4. POUs and Energy Efficiency . This bill requires the POUs to dedicate a portion of funds they collect for energy efficiency for retrofits for commercial buildings. Current law gives POUs discretion to spend their PGC on any of the four program areas identified, one of which is energy efficiency. No other law requires POUs to collect funding specifically for energy efficiency. To achieve his intended purpose, the author has indicated he would accept a technical amendment to clarify that the bill would require POUs to dedicate a portion of PGC funds for energy efficiency retrofits for commercial buildings. The California Municipal Utilities Association (CMUA) argues that POUs should retain flexibility to determine how their PGC funds are spent based on the needs of their service territories. CMUA also claims that this bill is unnecessary because POUs already are making investments in energy efficiency upgrades for commercial buildings. POU reports to the CEC on their energy efficiency expenditures indicate that not all POUs spend PGC funds on energy efficiency. 5. On-Bill Financing . On-bill financing is a way to finance energy efficiency upgrades without incurring any up-front costs. A utility provides customers with unsecured loans that cover 100 percent of equipment and installation costs (minus rebates and other incentives) at 0 percent interest. Customers then re-pay the loans through charges added to their regular utility bills. IOUs currently offer on-bill financing as part of their energy efficiency portfolios approved by the CPUC. In addition, on-bill financing is being reviewed in the pending CPUC proceeding opened in response to AB 758. Thus, the author has indicated that he would like to amend the bill to delete the provisions requiring the CPUC to open a proceeding on on-bill financing. POSITIONS Sponsor: Author Support: None on file Oppose: California Municipal Utilities Association Jackie Kinney SB 343 Analysis Hearing Date: May 3, 2011