BILL ANALYSIS Ó 1
SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
ALEX PADILLA, CHAIR
SB 1268 - Pavley Hearing Date:
April 17, 2012 S
As Amended: April 10, 2012 FISCAL B
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DESCRIPTION
Current law , effective until January 1, 2013, establishes the
Energy Conservation Assistance Account (ECAA) program and
requires the California Energy Commission (CEC) to administer
the program and provide grants and loans at not less than one
percent interest for local governments, public schools,
hospitals, government buildings and non-profit organizations to
finance energy efficiency projects.
Current law , effective until January 1, 2016, establishes the
Local Jurisdiction Energy Assistance Account (LJEAA) program and
requires CEC to administer the program and provide grants and
loans at not less than three percent interest for local
governments, public schools, hospitals, government buildings and
non-profit organizations to finance energy efficiency projects,
with funding from the Petroleum Violation Escrow Account.
Current law authorizes issuance of revenue bonds to provide
funding for ECAA and LJEAA.
Current law appropriated $25 million of funds from the American
Recovery and Reinvestment Act of 2009 (ARRA) to CEC for the ECAA
program.
Current law establishes the Renewable Resources Trust Fund
(RRTF) to support renewable energy programs administered by the
CEC. Law that expired on December 31, 2011, provided about $70
million per year to the RRTF from an electric utility customer
surcharge.
Current law that became effective January 1, 2012, appropriates
$25 million to ECAA for making energy efficiency loans and
requires that any funds remaining in that account on January 1,
2013, revert to the RRTF.
This bill would extend the sunset date of the ECAA program to
January 1, 2028, and require that unexpended funds on that date
deriving from bonds and the RRTF revert to the General Fund and
that funds deriving from ARRA revert to the Federal Trust Fund.
This bill would extend the sunset date of the LJEAA program to
January 1, 2028, and require that unexpended funds on that date
revert to the Petroleum Violation Escrow Account.
Current law makes a unit of local government or special district
eligible for an ECAA loan.
This bill would make a joint powers authority eligible for an
ECAA loan.
This bill would require CEC to establish the interest rate for a
LJEAA loan at not less than one percent.
BACKGROUND
ECAA and LJEAA Loans for Energy Efficiency - ECAA, which sunsets
in 2013, was established more than 30 years ago by the Energy
Conservation Assistance Act of 1979 and is one of the oldest of
California's many programs designed to reduce statewide energy
consumption through energy efficiency measures. The program
makes low-interest loans to cover up to 100 percent of a project
with a maximum repayment term of 15 years. A loan repayment
amount cannot exceed the estimated energy savings from a funded
project.
Funding for ECAA loans has been from a variety of sources over
the years, including the General Fund and tax-exempt revenue
bonds. In 2009, ARRA provided $25 million to CEC for ECAA loans,
to supplement about $34 million in ARRA funds that CEC awarded
as grants to 279 small cities and counties for energy efficiency
projects. SB 679 (Pavley, 2011) appropriated an additional $25
million to CEC for ECAA loans. That $25 million originated as
ratepayer funds deposited into the RRTF and was part of the $50
million transferred by SB 77 (Pavley, 2010) from the RRTF to the
California Alternative Energy and Advanced Transportation
Financing Authority (CAEATFA) within the State Treasurer's
Office for a Property Assessed Clean Energy (PACE) loan program
that has since been put on hold for residential energy
efficiency loans.
The LJEAA program, which was established in 1986 and sunsets in
2016, is substantially similar to the ECAA program but has
funding from a one-time appropriation from the federal Petroleum
Violation Escrow Account, which was funded by a federal
settlement with oil companies for overcharging customers in the
1970s. In addition to different sunset dates, program
differences include that LJEAA loans are available to any "local
jurisdiction" defined to include a joint powers authority, while
ECAA loans are available to any "unit of local government" not
including a joint powers authority.
Three Separate Loan Categories - ECAA and LJEAA loans are
administered in three separate categories: Energy Partnership
Program for local governments, Bright Schools Program for public
schools, and the ECAA/ARRA program for any loan using ARRA
funds. According to CEC, these two programs have made loans to
more than 771 entities totaling more than $267 million, with
about 58 percent of the total loan amount going to local
governments, 12 percent to K-12 public schools, 10 percent to
public colleges, 10 percent to hospitals and public care
facilities, and 2 percent to special districts. Since 2000, the
programs have provided $130 million in loan funds for lighting
(32 percent), LED traffic signals (6 percent), HVAC (27
percent), renewables (18 percent), self-generation (13 percent)
and other miscellaneous improvements (4 percent).
Program Quality Controls - Current law authorizes the CEC to
contract and provide grants for performing services for eligible
loan recipients, including feasibility analysis, project design,
field assistance, and operation and training. According to CEC
staff, each project applicant gets a technical evaluation and
feasibility study to ensure that the project is realistic and
has baseline information to monitor energy savings. Inspections
are conducted during project construction, prior to payment of
the final 10 percent of the loan, and after project completion
to verify energy savings.
Current Account Status - According to CEC, ECAA currently has
about $30 million in unrestricted accounts, with loan
applications for about $12 million now under review. CEC staff
predicts that, with additional loan applications coming in,
remaining funds are likely to be encumbered by the end of 2012.
COMMENTS
1. Author's Purpose . According to the author, this bill
will extend and harmonize the sunset dates for the ECAA and
LJEAA programs and make other minor changes to streamline
and update the programs.
2. Sunset Dates . This bill pushes the sunset date of the
ECAA and LJEAA program to 2028 - an extension of 15 and 12
years, respectively. CEC states that this lengthy
extension is warranted because of a loan repayment period
of up to 15 years with loans now being made with the new
$25 million. CEC also states that this sunset period will
indicate to the bond market that the programs are of
sufficient duration to support issuing more bonds to
recapitalize the programs using cash flow from existing
loans in repayment, thereby leveraging existing funds to
increase availability of energy efficiency financing.
3. Reversion of Remaining Funds . This bill designates that
any unexpended funds in the ECAA account on the sunset date
revert to the appropriate account depending on its source -
bond funds to the General Fund, ARRA funds to the Federal
Trust Fund, and RRTF funds to the General Fund. Similarly,
the bill designates that unexpended LJEAA funds revert to
the Petroleum Violation Escrow Account. With respect to
funds from the RRTF, which were made available for ECAA
loans by SB 679, those funds are derived from a surcharge
on electric utility ratepayers. Thus, RRTF funds should be
subject to appropriation by the Legislature for a purpose
that benefits ratepayers from whom the funds were
collected, not revert to the General Fund. Thus, the
author and committee may wish to consider amending the bill
as set forth below to provide that any unexpended funds in
the ECAA account upon sunset that derived from the RRTF be
subject to appropriation by the Legislature.
4. Minor Program Changes . This bill makes several minor
changes to conform the ECAA and LJEAA programs to make a
joint powers authority eligible for a loan, authorize an
interest rate of not less than one percent, and provide
flexibility in scheduling loan repayment dates.
5. Ratepayer Impact . None.
POSITIONS
Sponsor:
Author
Support:
None on file
Oppose:
None on file
Jacqueline Kinney
SB 1268 Analysis
Hearing Date: April 17, 2012