BILL ANALYSIS Ó 1
SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
ALEX PADILLA, CHAIR
SB 454 - Pavley Hearing Date:
April 5, 2011 S
As Amended: March 29, 2011 FISCAL B
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DESCRIPTION
Current law requires the State Energy Resources Conservation and
Development Commission (CEC) to adopt energy efficiency
regulations applicable to new construction and remodeling of
residential and commercial buildings.
Current law requires the CEC to adopt regulations that specify
energy efficiency standards required of appliances sold in
California.
Current law establishes within the Department of Consumer
Affairs the Contractors State License Board (CSLB) and requires
the CSLB to license and regulate California's construction
contractors, investigate complaints against licensed and
unlicensed contractors, issue citations, suspend or revoke
licenses, and seek administrative, criminal, and civil sanctions
against violators.
Current law specifies construction work for which a contractor
or building owner is required to obtain a permit from local
building officials and get required inspections to ensure that
the work complies with regulations, including energy efficiency
regulations.
This bill would require the CEC and CSLB to collaborate to
identify and investigate the failure of licensees and unlicensed
contractors to comply with energy efficiency building
regulations and to obtain required building permits.
Current law provides that, if the CEC finds any actual or
imminent violation of the provisions of law relating to CEC's
authority or operations, the Attorney General is required to
petition a court to enjoin the violation.
This bill would provide that, if the CEC finds that a violation
of the building or appliance regulations has occurred or is
threatening to occur, the CEC may, or the Attorney General upon
the request of the CEC shall, petition a court to enjoin the
violation and authorizes the court to enjoin the violation or
assess a civil penalty.
This bill would authorize the CEC to adopt regulations to
establish an administrative enforcement process to assess civil
penalties for violations of the energy efficiency building and
appliance regulations.
This bill would authorize a court in a civil action and the CEC
in an administrative enforcement action to impose a civil
penalty of up to $2,500 for each violation of energy efficiency
building and appliance regulations and would require
consideration of specified factors when assessing the amount of
the penalty.
This bill would require that civil penalties resulting from an
action brought by the Attorney General be deposited into the
General Fund and penalties resulting from an action brought by
the CEC be deposited into the Energy Resources Program Account
for the CEC to use for education and enforcement of energy
efficiency building and appliance regulations.
This bill would require a court to award to the CEC the
reasonable costs of investigating and prosecuting a civil action
for violation of energy efficiency building and appliance
regulations.
This bill would provide that a person is deemed to be in
violation of the energy efficiency building regulations if the
person does work subject to those regulations and is an
unlicensed contractor or fails to obtain a required permit.
This bill would require the CEC and CSLB to collaborate to
conduct an education and awareness campaign to increase
knowledge of permitting requirements among contractors and
consumers.
Current law requires the California Public Utilities Commission
(CPUC) to administer cost-effective energy efficiency programs.
Current decisions of the CPUC approved a $3.1 billion portfolio
of energy efficiency programs administered by the investor-owned
utilities (IOUs) for 2010-12 funded by a ratepayer surcharge and
including an incentive mechanism under which IOUs have been
awarded more than $200 million for their 2006-08 programs.
This bill would require that any rebates or incentives provided
by any public utility for energy efficiency improvements and
installation of energy efficient components, equipment, or
appliances in buildings shall be provided only if required
building permits are obtained.
BACKGROUND
Energy Efficiency Programs - Energy efficiency is the top
priority in California's policies to achieve energy savings and
reduce greenhouse gas emissions. The state's Title 24 energy
efficiency building regulations, which are updated every three
years, specify requirements relating to lighting, insulation,
windows, heating, ventilation, and air conditioning (HVAC)
systems, and other construction details designed to reduce
energy consumption and lower energy bills for consumers. The
state's Title 20 energy efficiency appliance regulations specify
energy use standards for most major household and commercial
appliances that must be met in order to be sold in California.
Numerous programs administered by the CEC, CPUC, IOUs, publicly
owned utilities (POUs) and local government agencies offer
consumers incentives or rebates to purchase energy efficiency
appliances and construct or install energy efficient devices or
technologies in residential and commercial buildings.
The CPUC has approved a $3.1 billion portfolio of energy
efficiency programs administered by the IOUs for 2010-12 funded
by a ratepayer surcharge. This investment is expected to
produce cost-effective energy savings of 10,000 GWh of
electricity, 1,982 peak MW, and 200 million therms of natural
gas, the equivalent of avoiding nearly four 500 megawatt power
plants. The IOUs administer these programs under the CPUC's
Risk/Reward Incentive Mechanism and can earn shareholder bonuses
or be penalized for the amount of verified energy savings
achieved. For the first three-year program cycle, the CPUC
awarded the IOUs more than $200 million in shareholder bonuses,
although the IOUs' claimed energy savings and the CPUC's
evaluation, measurement and verification (EM&V) of those savings
faced substantial challenges.
CSLB's Existing Investigation and Enforcement Structure - The
CSLB is the state's lead agency for investigating complaints
against contractors for alleged violations of state and local
permit requirements and contractor licensee requirements. CSLB
has nine investigative centers with about 100 investigators
located throughout the state which enable easy access to work
sites, contractors, building departments, and other resources
where alleged violations occur. Investigations of complaints may
result in a warning letter, disciplinary action, or referral to
a local prosecutor for criminal charges. According to CSLB
enforcement staff, the disposition of a complaint varies in each
county depending on whether a contractor is licensed or
unlicensed, with some local district attorneys wanting to
prosecute all complaints of unlicensed contractors. The CSLB
also handles complaints referred by local building officials who
enforce building standards established by the California
Building Standards Commission.
Ramping Up Energy Efficiency Enforcement - Even as the state has
continued to fund a wide array of energy efficiency programs, a
growing number of policymakers and stakeholders have been
sounding the alarm that potential energy savings are not being
realized because of lax enforcement of building regulations and
licensing requirements and improper installations by unlicensed
or unskilled contractors. In the HVAC sector, for example, less
than 10 percent of HVAC change-outs are carried out with
building permits, so code enforcement is rarely triggered.
Efforts to address this problem include the CSLB and CEC
entering a new Memorandum of Understanding (MOU) in July 2010
for the purpose of increasing collaboration on education and
enforcement of building and appliance regulations. The MOU
identifies many specific tasks the CEC will perform, including
preparation of outreach and education materials, training CSLB
enforcement staff, assisting CSLB with investigations of
complaints of contractor noncompliance, and participating in
enforcement sting operations. CSLB, with the assistance of the
CEC, conducted several sting operations in 2010 targeting
licensed contractors who were suspected of installing HVAC units
without obtaining required permits, which the CSLB claims led to
improvement in compliance.
In the past six months, the Attorney General has convened the
CPUC, CEC, CSLB and the IOUs to secure agreement on a plan for
ensuring compliance with energy efficiency regulations. A March
10, 2011, letter describes an agreement, still in the works, for
getting IOUs to increase consumer education and condition
issuance of rebates on certification that work was done by a
licensed contractor and with required permits.
According to the CPUC, its EM&V of IOU claimed energy savings
for the 2006-08 program cycle did not consider whether HVAC
installations were done in compliance with contractor licensing
and building permit requirements, although EM&V of new
construction programs did examine permit compliance. Southern
California Edison instituted a program in 2010 to give rebates
to about 1,000 homeowners who were required to show proof of a
permit and that the installing contractor was licensed by CSLB.
Sacramento Municipal Utility District, a POU, requires that the
contractor be licensed as a condition of receiving a rebate or
financing for installation of a HVAC unit. The CPUC indicates
that compliance with permit requirements as a condition to
receipt of incentives or rebates will be part of its EM&V of
programs in the 2010-12 cycle.
Current education and outreach efforts - This year the CEC
launched "Energy Upgrade California," a web portal that CEC
describes as "an unprecedented collaboration" between the CEC,
CPUC, utilities, local governments, non-governmental
organizations and the private sector to establish a "one-stop
clearinghouse" for energy efficiency information, incentives and
rebates and training for contractors and building professionals.
In October 2010 the CPUC launched "Engage 360," a new brand and
web portal to consolidate information and increase consumer
awareness of and participation in energy efficiency programs.
Appliance standards - The CEC maintains the Appliance Efficiency
Database listing all appliances currently certified by their
manufacturers as meeting appliance regulations. Sale in
California of an appliance not on this list is prohibited. The
CEC has an established procedure for decertifying an appliance
that does not meet the standards. The author claims that half
of appliances sold in California have not been properly
certified as meeting the standards.
COMMENTS
1. Author's Purpose . According to the author, this bill
will increase compliance with the state's energy efficiency
regulations for buildings and appliances with better
enforcement against building contractors who are unlicensed
and do not obtain required building permits and against
manufacturers who sell appliances that are not certified as
meeting the appliance regulations. The author claims that
this will level the playing field in the building industry,
ensure that contractors who violate the law do not have an
unfair advantage over law-abiding contractors, and help
ensure that California realizes the energy savings that
compliance with these regulations are designed to achieve.
The author claims that the CSLB "does not have energy
efficiency expertise" and, therefore, the CEC, as the
agency that adopted the energy efficiency building and
appliance regulations, should have authority to enforce the
regulations and impose civil penalties.
2. Current Efforts Address the Problem . Heightened
awareness of lax enforcement of building standards has
fueled several significant initiatives to address the same
problem this bill seeks to address. As described above,
the CEC has been an integral part of efforts by the CSLB,
Attorney General, and CPUC to improve compliance and step
up enforcement efforts. The CPUC's stated intent to
include greater review of code and permit compliance in its
EM&V of IOU energy efficiency programs is a critical step
forward. The CEC's new Energy Upgrade California and the
CPUC's new Engage 360 provide seemingly ideal venues for
the consumer education and awareness campaign required by
this bill. Ensuring the success of these efforts that are
already underway, and to which substantial resources
already are committed, should be a top priority.
3. CEC Enforcement . This bill seeks to increase compliance
with the state's building and appliance regulations by
granting the CEC authority to establish a new investigation
and enforcement unit rather than strengthening existing
enforcement operations of the CSLB, Attorney General, and
local prosecutors. The author claims that CEC's energy
efficiency expertise is essential to effective enforcement.
However, the bill authorizes the CEC to assess penalties
against any person who performs work subject to the energy
efficiency standards merely by showing that the person is
an unlicensed contractor or failed to obtain a required
permit with no consideration of whether the work performed
met the specific energy efficiency requirements. Such
license and permit matters are routine enforcement actions
for the CSLB and do not require energy efficiency
expertise. In addition, enforcement by two state agencies
- plus the Attorney General and local prosecutors - may be
duplicative, inefficient, and confusing to contractors and
local building officials whose cooperation is essential to
any investigation. Moreover, by requiring that penalties
from CEC enforcement go back to CEC while penalties under
existing law go to the General Fund or back to local
government, and by requiring a court to award the CEC costs
for investigation and enforcement, this bill could create
turf war for enforcement and provide a disincentive for
local building officials to cooperate with CEC
investigators. Thus, the author and committee may wish to
consider amending the bill to delete provisions granting
the CEC authority to enforce building regulations and
assess penalties for noncompliance and instead focus on
support for efforts already underway.
4. Ensuring Due Process . Provisions on page 11, lines 3 to
12 authorize the CEC to establish an administrative
enforcement process and assess civil penalties for a
violation of building and appliance regulations, but do not
specify that this process comply with standard procedures
for administrative hearings under the Administrative
Procedures Act (APA). If these provisions are not deleted,
the author and committee may wish to consider amending the
bill to specify that any process the CEC establishes shall
comply with the APA.
5. Scope of Violation . Provisions on page 10, lines 13 to
17 make it a violation if work subject to the building
standards is done by an unlicensed contractor even if
existing provisions of law do not require that this work be
done only by a licensed contractor. The author states
that it is not the intent of the bill to create a new
violation. If these provisions are not deleted, the author
and committee may wish to consider amending the bill to
refer to a person "who does not have a required
contractor's license or who fails to obtain a required
permit."
6. Appliance Enforcement . According to the author, no
agency is tasked with enforcement of energy efficiency
appliance standards other than the CEC maintaining the
database of appliances certified to meet the standards.
The provisions of this bill authorizing the CEC to
establish an administrative enforcement unit do not specify
details of how appliance violations will be investigated or
prosecuted.
7. Double Referral . Should this bill be approved by the
committee, it should be re-referred to the Senate Committee
on Judiciary for its consideration.
POSITIONS
Sponsor:
Natural Resources Defense Council
State Building and Construction Trades Council, AFL-CIO
Support:
California Energy Efficiency Industry Council (if amended)
Environmental Defense Fund
Sierra Club California
Oppose:
None on file
Jacqueline Kinney
SB 454 Analysis
Hearing Date: April 5, 2011