BILL ANALYSIS Ó
SB 1268
Page 1
SENATE THIRD READING
SB 1268 (Pavley)
As Amended August 20, 2012
2/3 vote
SENATE VOTE :33-0
UTILITIES & COMMERCE 12-0 NATURAL
RESOURCES 9-0
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|Ayes:|Bradford, Fong, Fuentes, |Ayes:|Chesbro, Knight, |
| |Furutani, Gorell, Roger | |Brownley, Dickinson, |
| |Hernández, Huffman, | |Grove, Halderman, |
| |Knight, Ma, Nestande, | |Huffman, Monning, Skinner |
| |Swanson, Valadao | | |
|-----+--------------------------+-----+--------------------------|
| | | | |
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APPROPRIATIONS 17-0
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|Ayes:|Gatto, Harkey, | | |
| |Blumenfield, Bradford, | | |
| |Charles Calderon, Campos, | | |
| |Davis, Donnelly, Fuentes, | | |
| |Hall, Hill, Cedillo, | | |
| |Mitchell, Nielsen, Norby, | | |
| |Solorio, Wagner | | |
| | | | |
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SUMMARY : Extends the operation of an existing energy
efficiency loan program administered by the California Energy
Commission (CEC) that assist local governments. Specifically,
this bill :
1)Extends the sunset date, from January 2013 to January 2018, of
the existing Energy Conservation Assistance Account (ECAA) at
CEC.
2)Expands the scope of the use of the funds to include reducing
peak electricity demand.
3)Expands the definition of a local government to include a
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joint powers authority.
4)Specifies requirements for unexpended funds:
a) Funds from bond sales shall remain in ECAA account.
Once bond obligations are satisfied, unexpended funds are
to revert to the General Fund.
b) Funds from the federal American Recovery and
Reinvestment Act (ARRA) of 2009 (Public Law 111-5)
remaining in ECAA account on January 1, 2018, are to revert
to the Federal Trust Fund.
5)Specifies that unexpended funds in ECAA account, appropriated
from the Renewable Resources Trust Fund (RRTF) are to be
available for appropriation by the Legislature to be used for
the benefit of ratepayers.
FISCAL EFFECT : According to the Assembly Appropriations
Committee, with extension of ECAA sunset to 2018, and based only
on currently outstanding loans, at least $40 million (an average
of $8 million annually) will flow back into ECAA rather than to
the General Fund absent the sunset extension. The actual amount
would be greater based on future repayment of additional loans
expected to be approved prior to the current sunset date.
According to CEC, ECAA currently has about $32 million in
restricted and unrestricted accounts, with loan applications for
about $9 million now under review. CEC staff expects the
remaining funds to be encumbered by the end of 2012.
Extending the sunset will continue CEC's administrative costs
for ECAA, which total 12 positions in the current year.
Author's statement . ECAA was established in 1979 and has
offered low interest loans (3%) to local governments, school
districts, and hospitals to improve their energy efficiency for
over three decades. ECAA is set to sunset on January 1, 2013.
ECAA has funded more than 800 loans, allowing local
jurisdictions to install new lighting systems, efficient pumps
and motors, automated energy management systems, replace heating
and air condition, and much more. It can provide loans of up to
$3 million with interest rates as low as 3%. This bill will
extend ECAA until January 1, 2018, thereby ensuring that these
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beneficial programs can continue to help California meet its
energy usage goals and save taxpayer funds.
ECAA loans for energy efficiency . ECAA 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% 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 approximately $34 million in ARRA funds
that CEC awarded as grants to 279 small cities and counties for
energy efficiency projects. SB 679 (Pavley), Chapter 597,
Statutes of 2011, appropriated an additional $25 million to CEC
for ECAA loans. That $25 million originated as ratepayer funds
deposited into RRTF and was part of the $50 million transferred
by SB 77 (Pavley), Chapter 15, Statutes of 2010, from 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.
Need for the program . According to the U.S. Environmental
Protection Agency, "upfront costs of energy efficiency retrofits
can present a barrier to improving energy efficiency in school
buildings. However, delaying energy efficiency improvements can
also be costly: an activity not undertaken can result in
increased operating costs."
Program quality controls . Existing law authorizes 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,
each project applicant receives 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% of the loan, and after project completion to
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verify energy savings.
Program results and distribution of loans . CEC maintains a
comprehensive database on the recipients of ECAA loans, the
amount of the loans, and energy efficiency improvements made as
a result of the loans. It is not clear whether CEC has
established criteria to ensure that loan funds are distributed
equitably throughout the state or whether CEC has prioritized
distribution of the loans in areas with high summer peak
electricity demand or limited availability of natural gas.
This bill directs CEC to take steps to perform loan
solicitations in a manner that results in an equitable
distribution of loans statewide, prioritizes awards to regions
with high summer peak loads or have electrical or natural gas
system distribution constraints; and, place an emphasis on
offering these loans in disadvantaged communities.
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.
Ratepayers unaffected . Southern California Edison points out in
its support letter for this bill that the program has provided
financing through measures that do not require ratepayer
funding. Similarly, the South San Joaquin Irrigation District
points out in their support letter that revenue bond funding is
used to support energy efficiency upgrades.
Analysis Prepared by : DaVina Flemings / U. & C. / (916)
319-2083
FN: 0005040