BILL ANALYSIS Ó
AB 122
Page 1
Date of Hearing: May 15, 2013
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Mike Gatto, Chair
AB 122 (Rendon) - As Amended: April 23, 2013
Policy Committee: Banking and
Finance Vote: 8-3
Utilities and Commerce 10-5
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill establishes the Nonresidential Building Energy
Retrofit Financing Act of 2012 and requires the California
Energy Commission (CEC) 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. Specifically, this bill:
1)By July 1, 2014, requires CEC to develop a request for
proposals to develop the program by a third-party
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
program is self-supporting, with costs to be covered by loan
recipients, administrator or bond purchasers.
2)Requires the administrator to establish underwriting
guidelines that consider an applicant's qualifications and
other appropriate factors, as specified. Requires any owner
who wishes to participate in the program to submit an
application to the administrator.
3)Establishes requirements for the application and related
information and requires the administrator to recommend to the
CEC the approval or disapproval of an application.
4)Requires the administrator to establish an annualized schedule
for the repayment required by the agreement. Requires the
Board of Equalization (BOE) to collect the repayment
AB 122
Page 2
installments.
5)Authorizes the California Alternative Energy and Advanced
Transportation Financing Authority (CAEATFA), on behalf of
CEC, to incur indebtedness and issue and renew specified forms
of debt. Specifies that all indebtedness shall be payable
solely from moneys received from the program, and limits total
indebtedness to $2 billion. States that the Program shall not
include General Fund costs or liabilities, except start-up
costs as specified.
FISCAL EFFECT
1)Special fund administrative expenses to CAEATFA, the CEC and
BOE in the millions of dollars.
2)Initial administrative expenses to be financed by a loan from
the General Fund of no more than $7 million. The program must
reimburse the General Fund by 2023 with interest paid to the
General Fund at the pooled money investment rate.
COMMENTS
1)Purpose . According to the author, commercial property owners
across California seek to maximize energy efficiency, rely on
renewable energy and minimize energy costs. Financing for
energy retrofitting for an individual property owner can be
difficult, but AB 122 will allow the Energy Commission to
bring property owners together to gain the benefits of lower
cost financing. The author argues the capital markets have a
robust appetite for secure mortgage-backed securities. The
author notes investment banks have funds to loan but require
loan volumes of $50 million or greater to offer the kind of
pricing that would mean lower borrowing costs for the
consumer. AB 122 addresses this problem, according to the
author, because the Energy Commission will aggregate the loans
and ensure a project meets their energy efficiency guidelines.
The author also notes this bill will help put people to work
on energy efficiency upgrades and distributed solar projects.
2)Background . In response to a directive in the 2012-13 Budget
Package the Legislative Analyst's Office (LAO) released a
report in December 2012 titled "Energy Efficiency and
Alternative Energy Programs." The report explored over a dozen
major programs that are intended to support the development of
AB 122
Page 3
energy efficiency and alternative energy in the state. It
found that over the past 10 to 15 years, the state has spent a
combined total of approximately $15 billion on such efforts,
the majority of which has been funded by utility ratepayers.
In November 2012, the California Public Utilities Commission
(CPUC) adopted 2013-2014 budgets for ratepayer-funded energy
efficiency programs at $1 billion per year over the two year
program.
In addition, the state has some of the most aggressive energy
efficiency and appliance standards. Building owners replacing
obsolete or broken equipment will automatically acquire high
efficiency improvements when replacing this equipment.
3)Commercial Building Energy Usage . According to the PUC's
January 2011 Energy Efficiency Strategic Plan, the commercial
sector accounts for 38% of the state's power use and over 25%
of natural gas consumption. The PUC established a goal to
achieve energy efficiency improvements and clean, distributed
generation throughout commercial buildings by 2030.
According to the CEC, One of the biggest challenges for
private lenders who are interested in creating loan products
for energy efficiency upgrades is that there are no
established underwriting standards. Without these, risk
analysis is challenging because of a lack of data on the
performance of energy efficiency upgrades. The lack of
standardization makes it difficult for the primary lender to
package multiple loans to sell onto a secondary market.
4)Financing. CAEATFA provides financing for facilities that use
alternative energy sources and technologies. CAEATFA can
issue revenue bonds, make loans, establish loan loss reserves,
guarantee loans, and issue other financial instruments to
develop and commercialize advanced transportation technologies
that conserve energy, reduce air emissions and promote
economic development and jobs. CAEATFA's board consists of
the Treasurer, Controller, Director of Finance, Chair of the
CEC and President of the PUC. Current law limits CAEATFA's
total debt to $1 billion.
5)Proposition 39. This ballot initiative was approved by voters
at the November, 2012 election. Titled the California Clean
Energy Jobs Act of 2012, it requires most multistate
AB 122
Page 4
businesses to determine their California taxable income using
a single sales factor method, a change that increases state
corporate tax revenue.
For a five-year period (2013-14 through 2017-18), Proposition
39 requires that half of the annual revenue raised from the
measure, up to $550 million, be transferred to a new Clean
Energy Job Creation Fund to support projects intended to
improve energy efficiency and expand the use of alternative
energy. Proposition 39 specifically requires that the funds
maximize energy and job benefits by supporting:
a) Energy efficiency retrofits and alternative energy
projects in public schools, colleges, universities, and
other public facilities;
b) Financial and technical assistance for energy retrofits;
and
c) Job training and workforce development programs related
to energy efficiency and alternative energy.
Proposition 39 also requires that funded programs be
coordinated with the CEC and California Public Utilities
Commission (CPUC) in order to avoid duplication and leverage
existing energy efficiency and alternative energy efforts. In
addition, Proposition 39 states the funding is to be
appropriated only to agencies with established expertise in
managing energy projects and programs.
1)Related legislation.
a) AB 39 (Skinner, 2013) requires the CEC to administer
grants, loans, or other financial assistance to K-12
public schools and community colleges to reduce energy
demand and requires moneys in the fund to be available
for appropriation during specified fiscal years. The
bill uses funds from Proposition 39. This bill is in
this Committee.
b) SB 39 (De Leon & Steinberg, 2013) 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.
The bill uses funds from Proposition 39. This bill is in
the Senate Appropriations Committee.
AB 122
Page 5
1)Previous legislation. SB 1130 (De Leon) of 2012 was similar
to AB 122. This bill was held on the Suspense File of this
committee.
Analysis Prepared by : Roger Dunstan / APPR. / (916) 319-2081