BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                               AB 628
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       Date of Hearing:   April 30, 2013

          ASSEMBLY COMMITTEE ON JOBS, ECONOMIC DEVELOPMENT AND THE ECONOMY
                                 Jose Medina, Chair
                AB 628 (Gorell and Hall) - As Amended:  April 24, 2013
        
       SUBJECT  :   Energy management plans for harbor and port districts.

        SUMMARY  :   Authorizes a harbor or port district to prepare one or more  
       energy management plans in order to reduce air emissions and promote  
       economic development.  Further, this bill authorizes the financing for  
       harbor and port district improvements through the issuance of conduit  
       revenue bonds by the state.  Specifically,  the bill  :  

       1)Makes findings and declarations, including, but not limited to, the  
         need for the state to promote the efficient use of low-cost,  
         low-emission energy sources in the operations of the ports and  
         harbors, the need to develop new businesses and retain existing  
         businesses within harbor and port boundaries, the value of greater  
         stability and certainty in the cost of energy services to these  
         businesses, and the optimal position that investor-owned and  
         publically owned utilities have in facilitating these objectives.

       2)Specifies that if a harbor or port district chooses to prepare an  
         energy management plan it is required to include the following  
         elements:

          a)   An electric or natural gas load forecast, as specified;

          b)   An assessment of the role that distributed generation,  
            combined with accurately priced utility services, could play in  
            providing greater rate stability and energy cost certainty, as  
            specified;

          c)   A list of recommendations for the enhanced use of  
            cost-effective energy efficiency and demand-side management in  
            existing buildings and the inclusion of energy efficiency  
            measures as part of the development of new buildings;

          d)   A plan to reduce air emissions for vehicle use within the  
            district boundaries, as specified;

          e)   Consideration of projects that provide greater certainty of  
            energy costs over a period of up to 15 years for businesses  
            developing in the district.  








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          f)   Other proposed actions and associated utility services that  
            may be implemented in connection with an energy management plan;  
            and

          g)   Proposed methods of funding the activities in the energy  
            management plan, including the California Infrastructure and  
            Economic Development Bank (I-Bank).

       3)Specifies that the energy management plan is to be jointly developed  
         by the harbor or port district and one or more of the following:   
         servicing electoral corporation, gas corporation, and a local  
         publicly owned electric utility.

       4)Requires expedited review of jointly developed elements of an energy  
         management plan by the California Public Utilities Commission (PUC),  
         as specified.

       5)Requires the PUC and governing boards of local publically owned  
         utilities and rural electric cooperatives to encourage electric or  
         gas corporations to participate in developing, implementing, and  
         administering viable energy management plans for districts.  

       6)Requires projects that promote economic development in harbor or  
         port districts, pursuant to a specified energy management plan, to  
         be eligible for conduit revenue bond financing through the I-Bank.

        EXISTING LAW  

       1)Makes findings and declarations, including, but not limited to, the  
         electric and natural gas utilities having a principal goal in  
         resource planning and investment to minimize the cost to society of  
         the reliable energy services, improve the environment, encourage  
         conservation and energy efficiency, and to encourage the diversity  
         of energy sources including wind, solar, and geothermal energy.

       2)Creates the I-Bank, within the Business, Transportation and Housing  
         Agency (BTH), to promote economic revitalization, enable future  
         development, and encourage a healthy climate for jobs in California.  
          The I-Bank is authorized to offer a variety of financial  
         undertakings including, but not limited to, issuance of conduit  
         revenue bonds for financing economic development facilities.

       3)Defines economic development facilities to mean real and personal  
         property, structures, buildings, equipment, and supporting  








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         components that are used to provide industrial, recreational,  
         research, commercial, utility, or service enterprise facilities,  
         community, educational, cultural, or social welfare facilities and  
         any parts or combinations thereof, and all facilities or  
         infrastructure necessary or desirable in connection therewith,  
         including provisions for working capital, but shall not include any  
         housing. 
        
       FISCAL EFFECT  :   Unknown

        COMMENTS  :  

        1)Framing the Policy Issues  :  AB 628 proposes to encourage port and  
         harbor districts to adopt comprehensive energy management plans by  
         offering an expedited PUC review of projects that flow from the  
         plan.  Given the significance of the international trade and goods  
         movement network to the California economy it is important to  
         improve energy efficiency within port and harbor districts.

         The authors believe that energy management plans can provide a  
         missing component to sustainable port operations.  This analysis  
         includes additional information on energy management plans, an  
         analysis of how plans may provide an advantage to port and harbor  
         districts, background on California's trade economy, and a list of  
         related legislation.  Suggested amendments are included in Comment  
         8.

        2)Energy Management Plans  :  Energy management plans are comprehensive  
         strategies for monitoring, controlling, and conserving energy.  This  
         is primarily accomplished through a systemic analysis of current  
         energy consumption in order to identify areas of suboptimal energy  
         usage.  The resulting data is used to identify baseline energy usage  
         metrics and opportunities for cost-effective energy savings measures  
         through upgrades to high-efficiency equipment and systems, and  
         promoting efficient behaviors by workers. 

         Efficiency improvements can be found in many different areas.   
         Upgrades to existing infrastructure can be substantially  
         cost-effective because advances to HVAC systems, lighting,  
         refrigeration systems, motors, and transformers have been  
         significant enough in recent years that the cost of replacement of  
         decades-old equipment can be cost-neutral in little time.  Modern  
         design techniques allow for new construction and renovations to be  
         designed to be highly energy efficient.  Strategic purchasing of  
         energy, avoiding peak hours and choosing an appropriate rate plan  








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         can also yield significant energy savings.  Finally, education and  
         institutional culture are of the utmost importance, as a successful  
         energy management plan takes the full commitment of the entire  
         organization.   

        3)California's Trade Economy  :  California's $1.9 trillion economy  
         naturally functions as an independent nation and is highly dependent  
         on industry sectors that participate within the larger global  
         economy.  In fact, compared to other nations, California has one of  
         the 10 largest economies in the world, due to it being a top-tier  
         trade partner, a best-in-class investment location, a high quality  
         producer of goods and services, and the home and key access point  
         for a massive consumer-base.  In 2012, California exported $161  
         billion in products to over 220 foreign countries.  While California  
         has been significantly impacted by the recession, exports continued  
         to increase in almost every quarter from 2010 through 2012.

         California businesses rely on fast, flexible, and reliable  
         manufacturing, transportation, and shipping to link national and  
         global supply chains to California producers, as well as bring new  
         products to California's retail markets.   It is estimated that one  
         in five manufacturing jobs in California is related to trade.   
         Employment, business profit, and state and local tax revenue are  
         highly dependent on the manufacturing, trade, and goods movement  
         industries.
           
         Changes in U.S. and global trade patterns since the enactment of the  
         North American Free Trade Agreement and the continuing development  
         of foreign markets place challenges on California's goods movement  
         logistic network.  These challenges are only expected to become  
         greater as the rate of innovation within manufacturing,  
         transportation, and communication technologies get faster and the  
         ability of multiple geographic locations to successfully use these  
         technologies expands.  California's historic and singular dominance  
         is diminishing as the state's infrastructure, particularly at our  
         ports of entry, fail to keep pace.

        4)California Ports  :  Nationally, the Port of Los Angeles continued to  
         hold the top rank in terms of two-way trade in 2010 (valued at $237  
         billion).  It is followed by JFK International Airport ($162  
         billion) and the port of Chicago ($135 billion).  Data on  
         California's other major ports are as follows: Long Beach ($89  
         billion, ranked 9th); LAX ($77 billion, ranked 12th); San Francisco  
         International Airport ($50 billion, ranked 18th); Port of Oakland  
         ($40 billion, ranked 25th); Otay Mesa Station ($31 billion); and  








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         Calexico-East ($10 billion).

        5)Energy Management Plans for Ports  : Port authorities can benefit  
         significantly from energy management plans, primarily because of  
         their organizational structure.  Energy consumption is a significant  
         overhead cost for port operators, and is often treated as a fixed  
         cost over which port operators have little control.  Many variables  
         can influence the cost of electricity such as time of day of use,  
         delivery charges, fuel fees, and which rate plan is selected.  Often  
         times management and maintenance staff have little understanding of  
         how their utility costs are structured, resulting in additional  
         costs and fees. 

         One primary factor of a successful energy management plan is the  
         ability of it to integrate with all levels of the organization.  The  
         port authority typically has jurisdictional control over the  
         operation, construction, and maintenance of the infrastructure of  
         the port, and can therefore exert the necessary control needed to  
         implement a comprehensive energy plan. 

         Other port authorities around the U.S. have successfully implemented  
         efficiency initiatives.  For example, the Port Authority of New York  
         and New Jersey have aggregated all of their electricity accounts and  
         performed online reverse auctions for energy, allowing them to sell  
         their accounts to the lowest bidders, resulting in a reduction of  
         over $2.2 million in annual utility expenses.  They have also  
         increased their efficiency through the use of advanced utility  
         meters and a demand response program that reduces their usage during  
         times of peak demand. 

        6)Doubling Exports in Five Years  :  In January 2010, the President  
         announced a national goal of doubling U.S. exports within five  
         years, setting a 2015 target for U.S. exports of $3.14 trillion.  In  
         accomplishing this goal, the federal government will be proposing  
         new programs, targeting existing trade related activities, and  
         increasing funding and technical assistance within its current  
         programs.  

         Since the announcement of a new national goal, exports from  
         California were up $41 billion over 2009.  For California, the  
         second largest exporter of products in the U.S. and the largest  
         receiver of foreign direct investment in the nation, this federal  
         goal could result in significant new economic opportunities.   
         California has already received nearly $4 million in federal funds  
         to administer a state export assistance program for small  








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         businesses.  In the President's 2013 State of the Union address he  
         announced the development of a new trade agreement with the European  
         Union.  To the extent the national goal is even partially realized,  
         California ports could face even greater pressure to perform.  AB  
         628 will assist California in meeting this national goal. 

        7)California Infrastructure and Economic Development Bank  :  The I-Bank  
         was established in 1994 to promote economic revitalization, enable  
         future development, and encourage a healthy climate for jobs in  
         California.  The I-Bank administers two categories of programs: 1)  
         The Infrastructure State Revolving Fund which provides direct  
         low-cost financing to public agencies for a variety of public  
         infrastructure projects; and 2) Bond financed programs which provide  
         financing for manufacturing companies, nonprofit organizations,  
         public agencies and other eligible entities.  There is no commitment  
         of the I-Bank or state funds for any of the category #2 conduit  
         revenue bonds.  Even in the case of default, the state is not  
         liable.

         Since its inception, the I-Bank has loaned over $400 million to  
         local agencies, developing a high-level of expertise in the  
         financing of public infrastructure.  The I-Bank also serves as the  
         state's only general purpose financing authority with broad  
         statutory powers to issue revenue bonds.  Over $30 billion in  
         conduit revenue bonds have been issued by the I-Bank since 2000.   
         Effective July 1, 2013 the I-Bank will be administered through the  
         Governor's Office of Business and Economic Development (GO-Biz),  
         pursuant to the 2012 Governor's Reorganization Plan.

         AB 628 would state that projects that come from the energy  
         management plan would be eligible for conduit bond financing through  
         the I-Bank.  Technical amendments are proposed in Comment 8 to  
         expand the code reference to include all of the I-Bank financing  
         programs.

        8)Implementing Amendments  :  This measure calls for the development of  
         energy management plans for the purpose of supporting the  
         development and expansion of businesses within the district,  
         creating more certainty in energy costs, and improving the  
         environment.  Below is a list of technical and implementing  
         amendments.

          a)   Modify the energy management plan requirement by:
            i)     Adding an assessment of the current energy consumption  
              within the zone by energy source and user;








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            ii)    Setting short, mid and long term goals for projects and  
              actions;
            iii)   Address how the Energy Commission can assist in  
              developing, implementing, and/or funding the projects in the  
              plan.
            iv)    Identify government and nongovernmental impediments to  
              implementing projects and actions;

          b)   Clarify the meaning of prohibiting the PUC from limiting the  
            role of utilities who jointly developed recommendations.

          c)   Make technical corrections to the I-Bank provisions and expand  
            the program to reference all I-Bank financing options.

          d)   Require the districts to engage business and industry-related  
            partners to identify innovations in process and technologies that  
            may impact domestic and international logistical networks.

          e)   Require districts to engage small business technical  
            assistance providers and business and industry-related partners  
            in identifying energy efficiency opportunities, public education  
            activities, and the development of funding options and packages.

          f)   Add energy management plan-related definitions to Chapter 2 of  
            the Public Resources Code. 

          g)   Clarify that ports established by municipalities are covered  
            under the bill.

        9)Related Legislation  :  The following is a list of related  
         legislation.

           a)   AB 886 (Allen) Trade Tax Credit  :  This bill authorizes a $500  
            million tax credit program for exporters and importers who make  
            prescribed increases in cargo tonnage or value, net increases in  
            the number of qualified full-time employees hired in California,  
            or capital investment in a cargo facility.  Status:  Pending in  
            the Assembly Committee on Revenue and Taxation.

           b)   AB 1081 (Medina) Goods Movement-Related Infrastructure  :  This  
            bill requires goods movement-related infrastructure to be  
            included within the state five-year infrastructure plan and  
            international trade and foreign investment strategy.  Status:   
            Scheduled to be heard in the Assembly Committee on Transportation  
            on April 29, 2013.








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           c)   SB 810 (Price) Trade Tax Credit  :  This bill authorizes a $500  
            million tax credit program for exporters and importers who make  
            prescribed increases in cargo tonnage or value, net increases in  
            the number of qualified full-time employees hired in California,  
            or capital investment in a cargo facility.  Status:  Pending in  
            the Senate Committee on Transportation and Housing.

       10)Double Referral  :  This measure was referred to two policy  
         committees by the Assembly Committee on Rules.  On April 22, 2013,  
         AB 628 was heard and passed by the Assembly Committee on Utilities  
         and Commerce on a 14-0 vote.  

        REGISTERED SUPPORT / OPPOSITION  :   

        Support 
        
       California Manufacturers & Technology Association 
       California Pacific Chamber of Commerce 
       Chula Vista Chamber of Commerce 
       Mayor, City of National City 
       Three individuals 

        Opposition 
        
       None received 
        

       Analysis Prepared by  :    Toni Symonds and Zach Hutsell / J., E.D. & E.  
       / (916) 319-2090