BILL ANALYSIS Ó ----------------------------------------------------------------------- |Hearing Date:May 2, 2011 |Bill No:SB | | |454 | ----------------------------------------------------------------------- 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. SB 454 Page 2 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. SB 454 Page 3 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 SB 454 Page 4 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 SB 454 Page 5 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 SB 454 Page 6 of energy efficient components, equipment, or appliances in buildings shall be provided only ifrequired 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