BILL ANALYSIS                                                                                                                                                                                                    







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        |Hearing Date:May 2, 2011           |Bill No:SB                         |
        |                                   |454                                |
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                      SENATE COMMITTEE ON BUSINESS, PROFESSIONS 
                               AND ECONOMIC DEVELOPMENT
                          Senator Curren D. Price, Jr., Chair
                                           

                          Bill No:        SB 454Author:Pavley
                     As Amended:April 12, 2011          Fiscal:Yes

         
        SUBJECT:  Energy efficiency standards
        
        SUMMARY:  Requires the Contractors State License Board (CSLB) and the 
        State Energy Resources Conservation and Development Commission (CEC) 
        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; authorizes the 
        CEC to adopt regulations to assess civil penalties for violations of 
        the energy efficiency building and appliance regulations; establishes 
        civil penalties; prohibits a public utility from issuing rebates or 
        incentives without the required building permits, as specified.

         NOTE:   This measure was heard in Energy, Utilities and Communications 
        Committee on April 5, 2011, and passed out of Committee by a vote of 
        8-2.
        
        Existing law:
        
        1) Licenses and regulates more than 300,000 contractors under the 
           Contractors State License Law (Contractors Law) by the Contractors 
           State License Board (CSLB) within the Department of Consumer 
           Affairs (DCA), and requires the CSLB to investigate complaints 
           against licensed and unlicensed contractors, issue citations, 
           suspend or revoke licenses, and seek administrative, criminal, and 
           civil sanctions against violators.

        2) Specifies construction work for which a contractor or building 
           owner is required to obtain a permit from local building officials 
           and obtain required inspections to ensure that the work complies 
           with regulations, including energy efficiency regulations.





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        3) 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.

        4) Requires the CEC to adopt regulations that specify energy 
           efficiency standards required of appliances sold in California.

        5) 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.

        6) Requires the California Public Utilities Commission (CPUC) to 
           administer cost-effective energy efficiency programs.

        This bill:

        1) Requires the CSLB and the CEC 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, and to conduct an education and 
           awareness campaign to increase knowledge of permitting requirements 
           among contractors and consumers.

        2) Authorizes 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.

        3) Provides 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.

        4) Authorizes the CEC in an administrative enforcement action and a 
           court in a civil 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.

        5) Provides that an administrative action by the CEC must be subject 
           to the due process issues of the Administrative Procedures Act. 






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        6) Requires 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 Appliance Efficiency Enforcement Subaccount for the CEC to 
           use for education and enforcement of energy efficiency building and 
           appliance regulations.

        7) Requires 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.

        8) Makes Legislative findings and declarations.


        FISCAL EFFECT:  Unknown.  This bill has been keyed "fiscal" by 
        Legislative Counsel.

        COMMENTS:
        
        1. Purpose.  This bill is sponsored by the  Natural Resources Defense 
           Council  and the  State Building and Construction Trades Council, 
           AFL-CIO  .  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 who do not obtain required 
           building permits and against manufacturers who sell appliances that 
           are not certified as meeting the appliance regulations.  The Author 
           believes 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. 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 





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           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, investor owned utilities (IOUs), publicly owned 
           utilities 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.

        3. 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.

        4. Sharing Information Between CSLB and Other Agencies.  CSLB has 
           entered into MOUs for the purpose of sharing enforcement 
           information with the Employment Development Department (EDD), the 
           Division of Occupational Health and Safety (DOSH), the Division of 
           Labor Standards Enforcement (DLSE), the Division of Apprenticeship 
           Standards (DAS), the Department of Transportation (Caltrans), the 





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           Franchise Tax Board (FTB), and the Department of Industrial 
           Relations' (DIR) Office of Director - Legal (ODL).  These agencies 
           are members, along with CSLB, of the Joint Enforcement Strike Force 
           on the Underground Economy.  

           In addition, CSLB has entered into an MOU with the CEC which allows 
           the agencies to work jointly to enforce and educate the industry, 
           consumers, and contractors about California Building Standards, 
           appliance regulations, and Heating Energy Rating Standards (HERS) 
           regulations.  CSLB has further partnered with the CEC, the Public 
           Utilities Commission, and local building officials in undercover 
           sting operations targeting licensed contractors suspected of 
           performing warm-air heating, ventilating, or air-conditioning 
           (HVAC) repair or replacement without obtaining required building 
           permits.  

           The CSLB's efforts to cooperate and share information with other 
           state agencies was discussed during the Committee's CSLB Oversight 
           Hearing in March.  In its recommendations, this Committee has 
           encouraged the CSLB's efforts to share information with other state 
           agencies in order to better protect consumers in California.

        5. Proposed Author's Amendments.  The Author will be proposing 
           clarifying amendments to be adopted in Committee.  The amendments 
           do the following:

             a.     Clarify that the Attorney General rather than the CEC may 
               petition the court to enjoin a violation (page 7, lines 9-10).  


             b.     Specify that penalties collected pursuant to Section 
               25402.11 shall be deposited into the Appliance Efficiency 
               Enforcement Subaccount rather than into the General Fund (page 
               7, lines 17-21).

             c.     On page 7, between lines 28 and 28 insert:  

                    In a civil action brought on behalf of the commission 
               pursuant to this section, upon the granting of relief, the 
               court shall award to the commission the reasonable costs it 
               incurred in investigating and prosecuting the action.

             d.     Revise page 8, lines 20-23, to read:

                  (b) (1) Any rebates or incentives provided by any public 
               utility for energy efficiency improvements and installation 





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               of energy efficient components, equipment, or appliances in 
               buildings shall be provided only if  required building 
               permits are obtained  . the recipient certifies that a 
               licensed contractor was used, as appropriate, and any 
               applicable permitting requirements were followed, for the 
               improvement or installation. 
                 (2) This paragraph does not imply any authority or 
               responsibility for the enforcement of energy efficiency 
               building code, appliance standards, or appliance 
               certification on public utilities.

        SUPPORT AND OPPOSITION:
        
         Support:   

        Natural Resources Defense Council (Sponsor)
        State Building and Construction Trades Council, AFL-CIO (Sponsor)
        California Apollo Alliance
        California Association of Counties
        California Labor Federation
        California League of Conservation Voters
        Environmental Defense Fund
        OSRAM Sylvania, Inc.
        Sierra Club California
        United States Green Building Council California Advocacy Committee

         Opposition:   None received as of April 27, 2011.

        Consultant:G. V. Ayers