BILL ANALYSIS Ó AB 122 Page 1 Date of Hearing: April 8, 2013 ASSEMBLY COMMITTEE ON BANKING AND FINANCE Roger Dickinson, Chair AB 122 (Rendon) - As Amended: April 1, 2013 SUBJECT : Energy: energy assessment: nonresidential buildings: financing SUMMARY : Establishes the Nonresidential Building Energy Retrofit Financing Act of 2013 (Act) and requires the California Energy Commission (CEC) to establish the Nonresidential Building Energy Retrofit Financing Program (Program) by July 1, 2014 to provide financial assistance through revenue bonds for owners of eligible buildings to implement energy efficiency improvements and renewable energy generation. Specifically, this bill : 1)Establishes the Act and states that its purpose is to facilitate private financing to enable private, nonresidential building owners and eligible public entities to invest in clean energy improvements, renewable energy, and conservation to incentivize private equity managers to invest in clean energy improvements, integrate the smart energy economy, and to stimulate the state economy by directly creating jobs. 2)Defines terms used in the Act, including in part: a) "Alternative sources of energy" as energy from renewable cogeneration or gas-fired cogeneration technology that meets the greenhouse gas (GHG) emissions and efficiency standards in Self-Generation Incentive Program (SGIP), energy storage technologies, or energy from solar, biomass, wind or geothermal systems, or fuel cells. Specifies that alternative energy systems shall be sized appropriately to offset part or all of the applicant's electricity demand and shall be located on-site. b) "Conventional energy fuel" as any of the following: i) A fuel derived from petroleum deposits, as specified; ii) Natural gas, including liquefied natural gas; and, iii) Nuclear fissionable materials; and, AB 122 Page 2 iv) Coal. c) "Eligible building" as a nonresidential building that completed construction on or before January 1, 2014 and located within the state. d) "Energy efficiency improvement" as one or more installations or modifications for which a building permit is issued after January 1, 2014 to an eligible building that is designed to reduce the energy consumption of the building that qualifies for investor-owned utility (IOU) or publicly-owned utility (POU) energy efficiency programs, as specified. e) "Energy remittance repayment agreement" (agreement) as a contractual agreement between an eligible building owner and the CEC, secured by a lien, that establishes the repayment schedule, as specified. f) "Energy efficiency specialist" as an individual or business certified by the CEC to analyze, evaluate, or install a renewable energy source, energy efficiency improvement, or water efficiency improvement for an eligible property. g) "Financial assistance" as loans, loan loss reserves, interest rate reductions, secondary loan purchase, insurance, guarantees or other credit enhancements or liquidity facilities, contributions of money, property, labor, or other items of value, or any combination thereof, as determined by CEC, and other types of assistance determined by the CEC. h) "Third-party administrator" as an entity selected by the CEC through a request for proposal to manage project applications and make recommendations to the CEC as to individual project's compliance with this chapter. i) "Warehouse financier" means a financial entity, bank, or pension fund, chosen by the CEC through a request for proposal to provide an ongoing and revolving source of financing for projects. j) "Nonresidential Building Energy Retrofit Bond" as a bond issued pursuant to the Act that is secured by an agreement. aa) "Program administration cost fee" as a fee imposed for the costs incurred by CEC, CAEATFA, and the State Board of AB 122 Page 3 Equalization (BOE) to administer the Act. bb) "Qualified applicant" as a person or business entity that: i) Owns an eligible building that has a ratio of loan balance to appraised value not to exceed 85 percent and subject to adjustment by the Program administrator at the time the application is approved, unless the holder of the deed of trust or mortgage recorded against the eligible property "that has priority over all other deeds of trust or mortgages recorded against the eligible property has consented in writing to the recording of an agreement pursuant to [the Act] against the eligible property." ii) Timely submits a complete application to CEC, which notes the existence of any first priority mortgage or deed of trust on the eligible property and the identity of the holder of the mortgage or deed of trust, and consents to the special assessment. iii) Meets standards of credit worthiness as established by CEC. cc) "Renewable energy" as heat, processed heat, space heating, water heating, steam, space cooling, refrigeration, mechanical energy, electricity, fuel cells, or energy in any form convertible to these uses, including energy storage technologies, and that uses biomass, solar thermal, photovoltaic, wind, or geothermal technologies. 3)Specifies that the Program shall provide financial assistance for improvements when the total energy and water cost savings realized by the property owner and any successor(s) during the useful life of the improvements, as specified, are expected to equal or exceed the total costs incurred by the owner under the Program. Authorizes CEC to waive this requirement if it adopts a finding that additional improvements may be undertaken that significantly increase energy efficiency and improve public health. 4)By July 1, 2014, requires CEC to develop a request for proposal to develop the Program by a third-party administrator (administrator) to administer the Program and establish an automated, asset-based underwriting system for all eligible buildings. The administrator shall only be selected if the AB 122 Page 4 Program requires all costs, including start-up costs, to be covered by the loan recipients, the administrator, the bond purchasers, or some combination thereof. States that the Program shall not include General Fund costs or liabilities, except start-up costs as specified by the bill. 5)Requires the administrator to establish underwriting guidelines that consider an applicant's qualifications and other appropriate factors, as specified. Requires the administrator to disclose to an owner all fees imposed under the Act prior to the submission of an application by the owner. Requires any owner who wishes to participate in the Program to submit an application to the administrator. Specifies that the submission of an application is a voluntary agreement by the owner for the CEC to record the agreement on the deed of the eligible building upon approval of the application. 6)Establishes requirements for the application and related information and requires the administrator to recommend to the CEC on the approval or disapproval of the application. Requires CEC to approve the application when both of the following conditions are met: a) The applicant is qualified; and, b) Prior to receiving funding the applicant shall demonstrate evidence of intent to make feasible energy efficiency upgrades recommended and evidence of intent to enroll in eligible demand response programs. 7)Requires CEC to determine the appropriate guarantees to ensure cost neutrality of the improvements and may require the owner to obtain insurance issued by an "A.M. Best or 'A' or better rated insurance carrier" or a similar product approved by CEC. 8)Upon mutual agreement of the participant and the administrator, requires the administrator to establish an annualized schedule for the repayment required by the agreement, including the interest charged administrative cost fee, and loan loss fee. Requires the Board to collect the repayment installments. 9)Specifies that the period for repayment shall not exceed the effective useful life of the improvements or 20 years, whichever is shorter. The effective useful life of the energy efficiency improvements shall be calculated using methodologies adopted by AB 122 Page 5 CEC, in consultation with the PUC, at a publicly noticed meeting. Exempts the calculation method from Office of Administrative Law review. 10)Upon the failure of a participant to pay any installment of the energy remittance payment, requires the Board to assess a penalty of 10 percent of the unpaid installment. Within 60 days of a failure to pay the scheduled payment, requires the Board to issue a demand letter to the participant with notice to the CEC. If the participant fails to "cure" the default within the time allotted, the Board may declare the entire outstanding amount, including any interest due, penalties assessed, and costs of collection incurred, immediately due and owing and foreclose on the building by either judicial or nonjudicial foreclosure. Requires that revenue generated from the sale of an eligible building be distributed to satisfy liens on the building in accordance with the priority of the liens. 11)Upon the full repayment of the balance of the agreement, including any interest and penalties, the Board shall notify the CEC and record a release of the agreement with the county. 12)Prior to approving an application or a modification of an approved application, requires CEC to conduct a public hearing, as specified. Specifies that the CEC approve an application by adopting a resolution and recording the agreement on the deed of the building, as specified. 13)Requires CEC to consider the creditworthiness of the applicant and the effectiveness of the improvements using the following criteria: a) Whether the applicants are legal owners of the underlying building; b) Whether the applicants are current on any outstanding mortgage and property tax payments; c) Whether the applicants are in default or in bankruptcy proceedings; d) Whether the applicants have applied for incentives available through the energy efficiency programs offered by an electrical or gas corporation; and, AB 122 Page 6 e) Whether improvements financed by the program follow applicable standards, including any guidelines adopted by CEC. 14)Specifies that the agreement lien that is secured by a lien recorded, shall have a prominent header on the document that reads "Energy Remittance Repayment Agreement Lien" in 14-point type and contains all of the following information related to the affected real property: a) The assessor's parcel number; b) The owners of record; c) The legal description; and, d) The street address. 15) Specifies that, except as otherwise required by law, the agreement is superior in priority to all subsequent liens recorded on the deed, except where the first mortgage is refinanced, in which case the agreement shall remain secondary to the primary mortgage. 16)Specifies that the sale of the building to enforce the payment of general ad valorem taxes shall not extinguish the agreement. Specifies that in the event of foreclosure, the agreement shall not be "due and owing" during the time when the building is owned by a financial institution taking title by way of foreclosure. The amount owing does continue to accrue and becomes due 60 days after a new, nonfinancial owner takes title. States that notwithstanding any other law, in the event of a foreclosure, the agreement shall not be extinguished, unless the outstanding balance is fully paid through the foreclosure proceeding. 17)Sixty days after the notice of recording of the agreement, requires CEC to include the application in a portfolio posted on its website. 18)Requires the Board to deposit any moneys collected pursuant to this Act into the Nonresidential Building Energy Retrofit Debt Servicing Fund (Fund), which the bill establishes in the State Treasury and continuously appropriates to pay the principal and interest on bonds issued under the Act. AB 122 Page 7 19)Authorizes the Board to charge a program administration cost fee on the owner of an eligible building to cover its costs, as well as CAEATFA's and the CEC's costs, in implementing the Act. 20)Specifies that a local government that has issued revenue bonds for renewable energy, water efficiency, or energy efficiency retrofit projects for nonresidential buildings may apply to the CEC for participation in the Program. 21)Authorizes CEC to: a) On or before July 1, 2014, analyze and evaluate standards for nonresidential energy building retrofits previously developed by various national and international organizations to provide uniformity and transparency for financial institutions evaluating loan proposals for energy improvements, as specified. b) Establish standards, guidelines, and procedures that are necessary to ensure the financial stability of the program and otherwise prevent fraud and abuse. c) Establish measurement and verification standards necessary to ensure that the energy efficiency improvements financed pursuant to the Act are realized at a level specified by CEC. d) Consider reliance on existing trade certifications or licensing requirements applicable to occupations that perform the work funded by the agreement. e) Establish qualifications for the certification of contractors to construct or install energy efficiency improvements. f) Contract with a public or private party to provide various monitoring and verification activities. g) Develop a model "energy aligned lease provision" that modifies, upon the agreement of the owner and tenants of an eligible building, a commercial lease agreement to allow the owners to recover the costs of the renewable energy, water efficiency, or energy efficiency retrofit improvements that result in operational savings. AB 122 Page 8 h) Develop a request for proposal to contract with one or more financial institutions to secure a short-term, revolving credit facility (warehouse line of credit) for the purpose of creating an interim financing mechanism for the loans that would be aggregated to issue a revenue bond. i) Adopt a standard notice and disclosure form. 22)Requires CEC to do all of the following: a) Consult with the PUC, representatives of IOUs and POUs, local governments, real estate licensees, commercial builders, commercial property owners, small businesses, financial institutions, commercial property appraisers, energy rating organizations, and other entities the CEC deems appropriate; b) Hold at least one public hearing; and, c) Adopt regulations and standards to implement the Act at a public hearing. 23)Beginning June 30, 2015, and every fifth year thereafter, requires the State Auditor to conduct a performance audit of the Program and to report the results and recommendations to the Legislature. 24)Authorizes CAEATFA, on behalf of CEC, to "incur indebtedness and issue and renew negotiable bonds, notes, debentures, or other securities of any kind or class" (bonds). Specifies that all indebtedness shall be payable solely from moneys received pursuant to the Act. Limits total indebtedness to $2 billion. 25)Requires CAEATFA to conduct a semiannual meeting to authorize the issuance of bonds and establishes related requirements. Specifies that every issue of bonds shall be general obligations of CAEATFA or CEC payable from revenues or moneys received pursuant to the Act. Establishes various requirements and limitations relating to the management of the bonds. 26)Specifies that bonds issued pursuant to the Act shall not be deemed to constitute a debt or liability of the state or of any political subdivision thereof, other than CAEATFA, or a pledge of the faith and credit of the state or of any such political subdivision. States that all bonds be payable solely from funds obtained pursuant to the Act. AB 122 Page 9 27)Authorizes CAEATFA to provide for the issuance of bonds for the purpose of refunding any bonds, notes, or other securities of [CAEATFA] then outstanding, including the payment of any redemption premium thereon and any interest accrued or to accrue to the earliest or subsequent date of redemption, purchase, or maturity of such bonds. Specifies that any such bonds may be applied to refund other bonds may be used at maturity or placed in escrow. 28)Pending this use, specifies that any such escrowed proceeds may be invested and reinvested by CAEATFA in obligations of, or guaranteed by, the federal government, or in certificates of deposit or time deposits secured by obligations of, or guaranteed by, the federal government, maturing at such time to ensure the prompt payment of the outstanding bonds. 29)Specifies that bonds issued by CAEATFA are legal investments for all trust funds, the funds of all insurance companies, commercial and savings banks, trust companies, savings and loan associations, and investment companies, for executors, administrators, trustees, and other fiduciaries, for state school funds, and for any funds that may be invested in county, municipal, or school district bonds, as specified. 30)Exempts bonds issued under the Act from all taxation and assessments imposed under state law. 31)By February 1, 2014, requires CEC to apply to the US Department of Treasury under the Energy Tax Incentives Act of 2005 for CAEATFA to issue tax advantage bonds under the federal Clean Renewable Energy Bonds program or any other applicable program. 32)Establishes the Loan Loss Reserve Account in the Fund, into which the Board is required to deposit the loan loss reserve fee. Continuously appropriates the Account to CAEATFA to pay outstanding balances due under an agreement on a building that has been foreclosed if the proceeds from the foreclosure are insufficient to pay any past due payments. 33)Establishes the Administration Account in the Fund, into which CAEATFA is required to deposit the administration fee and any penalties collected. Continuously appropriates these funds to CAEATFA, CEC, and the Board for the costs of implementing the Act. AB 122 Page 10 34)Allocates a loan from the General Fund of $1 million to the Board and allocates a loan of up to $7 million from the General Fund to CEC to implement the Act. Requires these loans to be repaid by January 1, 2024 with interest at the pooled money investment rate. If there are insufficient funds to repay the loan by this date, requires the Director of Finance to "discuss alternative repayment terms" with the borrowing agencies. 35)Authorizes CEC, the Board, and CAEATFA to promulgate regulations to implement the Act. 36)Makes finding and declarations. EXISTING LAW 1)Requires the CEC to establish criteria for adopting a statewide home energy rating program for residential buildings, and requires the CEC to adopt the program in consultation with representatives of the Department of Real Estate, the Department of Housing and Community Development, the California Public Utilities Commission (PUC), investor-owned and municipal utilities, cities and counties, real estate licensees, home builders, mortgage lenders, home appraisers and inspectors, home energy rating organizations, contractors who provide home energy services, consumer groups, and environmental groups. 2)Establishes several natural gas public purpose programs, including a low-income rate assistance program, a research and development program, and energy efficiency programs, which are funded by a surcharge on natural gas bills of customers of pipelines regulated by the PUC. 3)Establishes subsidy programs for the installation of solar photovoltaic systems administered by the PUC and CEC. These programs, known collectively as the California Solar Initiative (CSI), are to provide $3.2 billion in subsidies over 10 years in the form of rebates for the installation of photovoltaic projects. CSI authorizes the PUC to award $101 million in subsidies for solar thermal and solar water heating devices. 4)Establishes the Solar Hot Water and Efficiency Act of 2007 to fund the installation of 200,000 solar hot water systems in California by 2017. AB 122 Page 11 5)Establishes the SGIP within the PUC to incentivize clean, renewable distributed generation resources. 6)Requires the CEC to adopt an integrated energy policy report (IEPR) every two years. The objective of the IEPR is to evaluate market trends and develop energy policies that will "conserve resources, protect the environment, ensure energy reliability, enhance the state's economy, and protect public health and safety." The IEPR includes "progress toward statewide renewable energy targets and issues facing future renewable development; efforts to increase energy efficiency in existing and new buildings; progress by utilities in achieving energy efficiency targets and potential; improving coordination among the state's energy agencies; streamlining power plant licensing processes; results of preliminary forecasts of electricity, natural gas, and transportation fuel supply and demand; future energy infrastructure needs; the need for research and development efforts to support statewide energy policies; and, issues facing California's nuclear power plants." 7)Requires the PUC to have each electrical corporation identify a separate rate component to collect revenue to fund cost-effective energy efficiency and conservation activities. 8)Requires all electric and natural gas utilities to meet energy efficiency savings targets established by the CEC and the PUC. 9)Requires all electric utilities, in procuring energy, to first acquire all available energy efficiency and demand reduction resources that are cost effective, reliable, and feasible. 10)Under the California Constitution and the General Obligation Bond Law, authorizes the Legislature to issue general obligation bonds for specified purposes with a two-thirds vote of both the Senate and the Assembly. These bonds only become enacted if they are approved by a majority vote of the state's electorate. State law authorizes specified state agencies to issue revenue bonds and other credit instruments without voter approval. 11)Authorizes the California Alternative Energy and Advanced Transportation Financing Authority (CAEATFA) to provide financing for facilities that use alternative energy sources and technologies. CAEATFA can issue revenue bonds (without voter approval), make loans, loan loss reserves, and loan guarantees to develop and commercialize advanced transportation technologies AB 122 Page 12 that conserve energy, reduce air pollution, and promote economic development and jobs. State law limits CAEATFA's total debt to $1 billion. FISCAL EFFECT : Unknown COMMENTS : NEED FOR THE BILL: According to the author, AB 122 is needed for "commercial property owners across California who seeks to maximize energy efficiency, rely on renewable energy, and minimize energy costs. In the current economy, however, financing for energy retrofitting on a property-by-property basis can be difficult. AB 122 will allow the CEC to bring property owners together to gain the benefits of lower-cost financing." Under AB 122, a commercial building owner would secure a private loan with a commercial bank or through a warehouse line of credit to finance the retrofits. The borrower then would apply to enroll in the State's Commercial Building Energy Retrofit Financing Program. The State then aggregates the loans and issues the revenue bonds, which will pay off the commercial bank loans. Once enrolled in the program, the building owner begins to send an energy remittance repayment every 30 days to the BOE. These remittances are then used to pay off the bonds. According to a Legislative Analyst's Office (LAO) report released December 19, 2012, titled, "Energy Efficiency and Alternative Energy Programs," California currently maintains over a dozen major programs that are intended to support the development of energy efficiency and alternative energy in the state. Over the past 10 to 15 years, the state has spent a combined total of roughly $15 billion on such efforts, the vast majority of which has been funded by utility ratepayers. The LAO went on to recommend that the Legislature develop a comprehensive strategy for meeting the state's energy efficiency and alternative energy objectives. Given that the state has numerous programs administered by multiple departments, the LAO recommend that the Legislature designate a lead agency to develop such a comprehensive strategy such as CEC. Accordingly, the LAO recommended that the Legislature adopt legislation requiring CEC to develop, in coordination with other relevant departments (such as California Public Utilities Commission (PUC) and the Air Resources Board (ARB)) - a AB 122 Page 13 comprehensive strategy to be submitted for legislative consideration by January 2014 with the Governor's proposed budget. AB 122 AS IT RELATES TO THE BANKING AND FINANCE COMMITTEE: AB 122 establishes that the energy remittance repayment agreement lien shall havea prominent header on the document that reads "Energy Remittance Repayment Agreement Lien" in 14-point type and contains all of the following information related to the affected real property: the assessor's parcel number; the owners of record, the legal description; and, the street address. If a commercial property has any mortgage liens, these liens will come before the energy remittance repayment agreement and take priority. This is very unique because it seems most energy efficiency financing programs such as the Property Assessed Clean Energy (PACE); the lien takes priority over any mortgage lien. AB 122 also provides that the lien will stay with the property so if the commercial property forecloses, the new owner will be responsible for all past due payments, unless somehow all payments are taken care of through foreclosure proceedings. As far as the bond process, under AB 122, CAEATFA would issue bonds for the program proposed under the bill. The administration of the program (evaluating and approval of the applicants into the loan program and other front-end work) would reside with CEC. CAEATFA's role would be in the back-end through issuance of a bond to replenish the moneys for the program. CAEATFA's board consists of the Treasurer, Controller, Director of Finance, Chair of the CEC and President of the PUC, which determines which projects to receive funding. PACE: PACE is an important program to note because it has similarities to AB 122. It is a program to finance energy efficiency and renewable energy upgrades to buildings. Interested property owners evaluate measures that achieve energy savings and receive 100% financing, repaid as a property tax assessment for up to 20 years. The assessment mechanism has been used nationwide for decades to access low-cost long-term capital to finance improvements to private property that meet a public purpose. PACE is voluntary. Property owners, acting in their own self-interest, implement building upgrades that can save them money, increase the value of their property. PACE was introduced as a pilot program in 2008. Today, 28 states and the District of Columbia adopted legislation that AB 122 Page 14 enables local governments to offer PACE benefits to building owners. PACE is available for residential and commercial buildings. California enacted the PACE model in statute through AB 811 in 2008. Unfortunately, in 2010, the Federal Housing Finance Agency (FHFA) brought forward concerns with PACE. Federally controlled mortgage lenders Fannie Mae and Freddie Mac told lenders that they would refuse loans associated with PACE. Regulators also asked state and local governments to put the programs on hold, claiming that first liens for PACE loans were a departure from traditional mortgage lending standards and present "unusual and difficult risk management challenges" for lenders, servicers and mortgage securities investors. The FHFA ruling has effectively ended residential PACE financing, with many local governments suspending their programs as a result. Commercial PACE programs were not affected by the FHFA decision and have been moving forward in various places. A federal district court in California while not ordering the FHFA to reverse its current position on underwriting mortgages for properties with a PACE assessment, directed the agency to proceed with a notice and comment period for rulemaking. The FHFA took comments on proposed rules until September 2012 and it is not clear how long it will take to finalize the proposed rules or what the outcome will be. In addition, there have been a number of attempts to resolve the residential PACE issue through legislative action, including the PACE Assessment Protection Act (H.R. 2599), introduced in July 2011, that would prevent the FHFA and mortgage underwriters from discriminating against localities participating in or implementing a PACE program. To date, however, no legislation supporting residential PACE programs has passed. BOE ROLE: As drafted, this measure provides a great deal of responsibility to the BOE. AB 122 requires the BOE to collect repayment installments and transfer payments, issue penalties for unpaid installments, issue demand letters, and allows the BOE to foreclose on the lien either through a judicial or non-judicial foreclosure. The bill also allows the BOE to prescribe, adopt, and enforce guidelines relating to the collection of the energy remittance repayment installments. For all essential purposes and how to best describe the role of the BOE in banking and finance terms would be, AB 122 requires the BOE to act as a commercial mortgage servicer. BOE AB 122 Page 15 currently is responsible for administering tax programs such as sales and use taxes, property taxes, special taxes and the tax appellate programs. The BOE is a revenue generating department for the State of California. Overall, the mission of the BOE is to serve the public through fair, effective, and efficient tax administration. While the BOE is fully capable of collecting taxes, what AB 122 provides is not a tax; it is an energy remittance repayment agreement which as defined is a contractual agreement between an eligible building owner and CEC, secured by a lien that establishes the repayment schedule. It is questioned whether the BOE is the best department to be collecting these payments, administering the fees and potentially foreclosing on a commercial property. Under California's Code of Civil Procedure, it grants the BOE the ability to enforce a state tax lien, therefore, the BOE could commence a foreclosure action by filing a complaint in state court seeking to have its lien enforced against real property. The BOE has only used their ability to foreclose once in the last twenty years and should the procedure commence, the BOE passes the case to the Attorney General. According to a previous BOE analysis on SB 1130 (discussed below), "the BOE does not presently perform any collection duty associated with installment payment collections from private property owners nor does it service loans. The mission of the BOE is to serve the public through fair, effective, and efficient tax administration. The provisions in this bill represent a departure from our traditional "tax collection" functions." RELATED LEGISLATION PERTAINING TO PROPOSITION 39: SB 39 (De Leon & Steinberg, 2013 Legislative Year) On November 6, 2012, California voters passed Proposition 39, The California Clean Energy Jobs Act, that establishes the Clean Energy Job Creation Fund and requires moneys in the fund to be available for appropriation during specified fiscal years for, among other things, the purposes of funding energy efficiency projects in school facilities. This bill would enact the Clean Energy Employment and Student Advancement Act of 2013 and would require the Office of Public School Construction (the office), in consultation with the State Energy Resources Conservation and Development Commission and the Public Utilities Commission, to establish a school district assistance program to distribute grants, on a competitive basis, AB 122 Page 16 for energy efficiency upgrade projects pursuant to the California Clean Energy Jobs Act. The bill would require the office, upon the approval of the State Allocation Board, to award a school district grants for energy efficiency upgrade projects meeting specified criteria. The bill would require the office to give priority applications meeting specified criteria. The bill would require the office, in consultation with the State Energy Resources Conservation and Development Commission, to establish a program to evaluate the potential to fund energy efficiency and clean energy projects for schools, including colleges and universities, through the use of matching funds, low-interest loans, or other financing methods. PREVIOS LEGISLATION : SB 1130 (De Leon, 2012 Legislative Year) Establishes the Nonresidential Building Energy Retrofit Financing Act of 2012 (Act) and requires the California Energy Commission to establish the Nonresidential Building Energy Retrofit Financing Program by July 1, 2013 to provide financial assistance through revenue bonds for owners of eligible buildings to implement energy efficiency improvements and renewable energy generation. Died in the Assembly Appropriations Committee. AB 811 (Levine & Beall, Chapter 159, Statutes of 2008) This bill authorizes all cities and counties in California to designate areas within which city officials and willing property owners may enter into contractual assessments to finance the installation of distributed generation renewable energy sources and energy efficiency improvements. AMENDMENTS : The author's office commits to working through some technical, clarifying amendments should the bill move forward and reach the Assembly Utilities and Commerce Committee. In the definition of warehouse financier, "financial entity, bank" should be struck and "financial institution" inserted. In addition, in the latest set of amendments, the author struck language stating, the lien shall have "the force, effect, and priority of a judgment lien, and shall be subordinate to any and all secured mortgage liens recorded against the deed of the eligible building at the time of recording of the energy remittance repayment agreement." This language may be needed to clearly point out that mortgage liens take precedence. AB 122 Page 17 Furthermore, to provide fluidity, the definition of "energy remittance repayment agreement" should add the word "lien" at the end and "lien" should be added every time it is referenced throughout the bill. REGISTERED SUPPORT / OPPOSITION : Support California Energy Efficiency Industry Council East Bay Municipal Utility District (EBMUD) John Chiang, California State Controller OSRAM SYLVANIA, Inc. Pacific Gas and Electric Company (PG&E) Sierra Club California South Coast Air Quality Management District (SCAQMD) Opposition None on file. Analysis Prepared by : Kathleen O'Malley / B. & F. / (916) 319-3081