BILL ANALYSIS � 1
SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
ALEX PADILLA, CHAIR
AB 489 - Skinner Hearing Date:
June 18, 2013 A
As Introduced: February 19, 2013 FISCAL B
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DESCRIPTION
Current law requires California's electric utilities to first meet
their energy needs through cost-effective energy efficiency
measures before renewable and conventional generation. (Public
Utilities Code 454.5)
Current decisions of the California Public Utilities Commission
(CPUC) require investor-owned utilities (IOUs) to administer
energy efficiency programs in multi-year portfolios designed to
meet pre-established energy savings goals and funded by ratepayer
charges, currently at about $1 billion per year, with many
programs dedicated to building retrofits.
Current law requires the California Energy Commission (CEC) to
develop and implement a comprehensive program to achieve greater
energy savings in California's existing residential and
nonresidential building stock, referred to as the "AB 758
Program." (Public Resources Section 25943)
Current law requires the CEC to fund the AB 758 Program with funds
from the American Recovery and Reinvestment Act of 2009 (ARRA) or
other sources of non-state funds. (Public Resources 25943)
Current law provides funding for CEC operations from, among other
sources, a usage-based monthly surcharge on electric utility
customers that is deposited in the Energy Resources Program
Account (ERPA). (Revenue and Taxation Code Section 40016)
Budget Acts since fiscal year 2010-2011 authorized 10 permanent
positions and $500,000 per year for outside contractors from ERPA
to fund for AB 758 Program.
This bill would delete the requirement that CEC fund AB 758
Program activities with ARRA or other non-state funds.
BACKGROUND
Billions for Energy Efficiency Programs - Energy efficiency is
California's top strategy for reducing energy use and meeting the
state's energy needs. Energy efficiency is at the top of the
"loading order," and California's utilities are required to first
meet their energy needs through cost-effective energy efficiency
measures before renewable and conventional generation. According
to a December 2012 LAO report, California has invested at least
$9.5 billion in ratepayer and taxpayer funds for energy efficiency
programs that provide financial incentives and rebates for
installing energy efficient appliances, lighting, windows, HVAC
systems, whole house retrofits, and other technologies or
measures, including:
$1 billion per year from IOU ratepayers for programs
approved by the CPUC through 2014, with $220 million for
financing and expansion of the "Energy Upgrade California"
program offering residential energy efficiency incentives
and rebates up to $4,500 per customer.
$25 million in ratepayer funds for a "Clean Energy
Upgrade Financing" program required by ABx1 14 (Skinner,
2011) to finance energy efficiency retrofits with loans
administered by the California Alternative Energy and
Advanced Transportation Financing Authority (CAEATFA)
within the State Treasurer's Office.
$300 million per year from IOU ratepayers for free
energy efficiency and weatherization services for IOU
low-income customers approved by the CPUC.
$30 million per year in federal funding for free
weatherization services for low-income residents
administered by the California Department of Community
Services and Development (CDCS).
$185 million in one-time funding for free
weatherization services for low-income residents from ARRA
administered by CDCS.
$280 million in one-time ARRA funds for energy
efficiency programs administered or coordinated by the CEC.
AB 758 Program History - California's Title 24 energy efficiency
building regulations, first adopted by the CEC in 1978 and updated
every three years, specify requirements for relating to lighting,
insulation, windows, HVAC systems, and other new construction
details designed to reduce energy consumption and lower energy
bills for consumers. There is general agreement that these
building standards have been a major contributor to the state
making progress toward achieving energy efficiency goals.
Recognizing that about half of California's residential and
nonresidential buildings were built prior to adoption of the
building standards, AB 758 (Skinner, 2009) required the CEC to
develop a comprehensive energy efficiency strategy for this old
building stock. At the time, the CEC was awarded $280 million in
one-time ARRA funds for energy efficiency programs. Thus, AB 758
required that the program be funded with ARRA money or other
non-state funds.
According to the CEC, the goal of AB 758 is to develop "a roadmap
of all statewide energy efficiency programs for existing
buildings." Staff describes the AB 758 Program as "aligning and
coordinating all energy efficiency programs statewide to count all
energy saved toward state goals?We study programs, avoid
duplication, identify gaps, fill the gaps." To date, in what CEC
describes as Phase I of its program, the CEC has conducted
ARRA-funded pilot programs to generate information for developing
the long-term strategy; administered "Energy Upgrade California"
with extensive statewide outreach, public relations and marketing
efforts, developed a "Scoping Report" that outlines market needs
and identifies barriers to implementation, and prepared a draft
action plan of future energy efficiency strategies expected to be
released soon.
The CEC's web site describes Phase II and III as follows:
"Phase II will focus on implementing the roadmap necessary
for foundational No Regrets Strategies to take hold and
Voluntary Pathways to scale to achieve energy efficiency
goals, partnerships, and market development. Phase III will
develop and institute Mandatory Approaches that will move
energy efficiency practices into the mainstream.
Transformation and maturation of the energy efficiency
marketplace will require the formation of partnerships and
cooperation among all stakeholders."
Budget action since the fiscal year 2010-2011 budget authorize CEC
to conduct the AB 758 Program with ARRA funds until they expired,
and then ERPA funds, including 10 permanent positions and $500,000
per year for outside contractors. ARRA funds expired in April
2012.
COMMENTS
1. Author's Purpose . According to the author, "California's
building efficiency standards - Title 24, for new
construction - have saved more than $56 billion in
electricity and natural gas costs since 1978. Currently, as a
result of AB 758 (Skinner 2009), Section 25943 of the Public
Resources Code calls for the Energy Commission to use
American Recovery and Reinvestment Act (ARRA or "stimulus"
funds) to pay for energy efficiency activities in existing
commercial and residential buildings. The law does not
specify the use of any other funding source. Now that ARRA
funds have expired, the removal of this section is necessary
in order to ensure that the Energy Commission is able to
continue these energy efficiency programs with alternative
funds."
2. CEC Already Using ERPA Funds . Although AB 758, enacted in
2009, required the CEC to fund the program with ARRA funds
"or other sources of non-state funds," the Legislature in
2010 authorized CEC to use ERPA funds for AB 758 activities
after ARRA funding expired. The Budget Act for fiscal year
2010-2011 authorized 10 permanent positions, plus $500,000
per year for outside contractors, authority that continues
with subsequent budgets including for 2013-14. Thus, the
Legislature's budget actions have effectively nullified the
requirement to use non-state funds for AB 758
3. Is the AB 758 Program Cost-Effective ? With CEC's AB 758
Program now funded entirely by ratepayers, contrary to the
original legislative intent, the question arises whether this
"program" is cost-effective? Other energy efficiency
programs, such as the IOU programs funded at $1 billion per
year by ratepayers, are subject to detailed
cost-effectiveness tests, with about $40 million per year
spent on evaluation, measurement and verification of claimed
energy savings. The AB 758 Program does not require any
measure of the cost-effectiveness of its use of ratepayer
funds for energy efficiency.
Moreover, there is a question whether the AB 758 Program is
really a program at all or merely a series of activities to
develop an action plan for some future implementation of
strategies to achieve energy efficiency in old building
stock. Although enacted four years ago, the most significant
program cited as an AB 758 Program activity is administration
of Energy Upgrade California, which utilized at least $33
million in ARRA funds, most of it for outside contractors, to
develop a web portal, and conduct marketing and outreach, to
encourage homeowners to use rebates and incentives for home
upgrades. Due to very low participation (about 5,130 homes
and 3,728 businesses statewide by late 2012), the CPUC, in
its energy efficiency proceeding, directed IOUs to use
ratepayer funds to revamp and expand the program and hire an
outside contractor to improve the Energy Upgrade branding.
AB 758 also required the CPUC to investigate the ability of
utilities to provide energy efficiency financing options to
their customers to implement the comprehensive strategy that
CEC is required to develop for California's old building
stock. Although the CEC is still in the planning stages of
developing its comprehensive strategy, the CPUC has proceeded
with various financing initiatives. The CPUC hired a
consultant, which released a report in July 2011 called
"Energy Efficiency Financing in California - Needs and Gaps -
Preliminary Assessment and Recommendations," which concluded
that a $4 billion annual investment in energy efficiency is
needed to meet California's aggressive energy goals. That
report is frequently cited as the justification for a variety
of energy efficiency programs launched in the past few years
by IOUs as required by the CPUC, and by CAEATFA. Thus, it
does not appear that completion of the comprehensive strategy
AB 758 required CEC to develop has been a necessary predicate
to the state moving ahead with numerous energy efficiency
programs for old building stock.
4. Ratepayer Impact . This bill removes the requirement that
the AB 758 Program be funded with non-state funds and does
not change budget action authorizing CEC to use ERPA funds,
thereby not precluding the current use of ratepayer funds for
this program.
5. Related Legislation . AB 2408 (Skinner 2012), as
introduced, was identical to this bill but was amended to
address an unrelated matter.
ASSEMBLY VOTES
Assembly Floor (53-25)
Assembly Appropriations Committee (12-5)
Assembly Natural Resources Committee
(6-2)
POSITIONS
Sponsor:
Author
Support:
American Lung Association
Breathe California
Environmental Defense Fund
Oppose:
None on file
Jacqueline Kinney
AB 489 Analysis
Hearing Date: June 18, 2013