BILL ANALYSIS                                                                                                                                                                                                    Ó          1





                SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
                                 ALEX PADILLA, CHAIR
          

          SB 37 -  De León                                  Hearing Date:   
          April 30, 2013             S
          As Amended:         April 9, 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.

           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.

           This bill  authorizes the CPUC to require IOUs to develop and  
          implement residential on-bill repayment (OBR) programs for  
          eligible energy efficiency, renewable energy, distributed  
          generation, energy storage, or demand response improvements  
          under which a customer pays down a loan from a third-party  
          lender with payments that are listed as a separate line item on  
          the customer's utility bill.

           This bill  requires an OBR obligation to "run with the meter,"  
          meaning that any subsequent owner or tenant of a property is  
          required to assume the obligation to make remaining OBR payments  
          on the loan as a condition of getting electric or gas service at  
          that location.

           Current law  and CPUC decisions establish an escalating series of  
          procedures for a utility to follow when a residential customer  
          fails to pay charges for utility service, including customer  
          notice, payment options, site visits, and culminating with  
          service disconnection.

           Current law  prohibits utilities from disconnecting residential  











          service for nonpayment of debt owed to a third party.

           This bill  would make a residential customer who fails to make an  
          OBR payment subject to service disconnection as an exception to  
          the prohibition on terminating service for nonpayment of  
          third-party debt.

           Current law  requires the CPUC to respond to customer complaints  
          about utility service, including billing issues, and to resolve  
          complaints informally or through formal hearing procedures.

           This bill  prohibits the CPUC, and the utility, from providing a  
          forum for any customer dispute regarding a customer's obligation  
          to make an OBR payment, including any customer complaint that  
          the OBR improvement did not reduce the monthly utility bill as  
          promised.

           This bill  requires "bill neutrality" for OBR programs so that a  
          utility customer's annual OBR repayment charges are less than or  
          equal to the projected annual electric and gas savings arising  
          from the energy improvements financed with an OBR loan.

           This bill  authorizes the CPUC to limit the application of the  
          bill neutrality requirement after two years, except that OBR  
          obligations for lower income households and tenants shall always  
          be bill neutral.

           This bill  requires the CPUC to establish a method to determine  
          bill neutrality for each utility customer's OBR project, and  
          authorizes the CPUC to include changes in an owner's "expected  
          operating and maintenance costs" in calculating bill neutrality.

           This bill  authorizes a multi-unit property owner to finance an  
          eligible energy improvement through an OBR loan with each tenant  
          allocated a portion of the monthly payment, which the tenant is  
          obligated to pay as a condition of getting utility service.

           This bill  requires every owner of real property subject to an  
          OBR obligation to deliver to a prospective tenant, prior to  
          signing a lease or rental agreement, a notice of any OBR  
          obligation under a standard notice and disclosure form but  
          provides that a lease shall not be invalidated because of  
          failure to provide the notice.











           This bill  requires every seller of real property subject to an  
          OBR repayment obligation to deliver to the buyer a notice of  
          that OBR obligation under a standard notice and disclosure form  
          and provides that, once that form is delivered, the seller is  
          not required to provide the buyer any additional information  
          about the OBR obligation.

           This bill  requires an OBR lender to record a notice of OBR  
          obligation, including that it survives changes in ownership,  
          with the county recorder's office where an affected property is  
          located. 

           This bill  authorizes the IOUs to recover actual costs of  
          establishing and administering the OBR program and requires the  
          CPUC to approve a utility's request for recovery of actual costs  
          for all judgments, settlements, costs, and expenses, including  
          attorney's fees, and other liabilities in connection with  
          federal lending, credit, and debt collection and servicing laws.

           This bill  requires the CPUC, to the extent feasible and  
          cost-effective, to develop a loan-loss reserve or loan guarantee  
          program as part of an OBR program for residential energy  
          efficiency improvements to be directed to "residential customers  
          who experience disproportionate bill impacts from summer cooling  
          and other demands on the electrical system that cause excessive  
          usage and potentially significant bill impacts." If these  
          customers fail to make an OBR payment, the loan reserve would  
          pay the lender rather than the customer getting service  
          disconnected.

           This bill  requires the CPUC to ensure that any OBR program  
          include consumer protections for residential customers,  
          including protections to prevent increases in the expected  
          number of service terminations.

           This bill  would require the CPUC to establish other OBR program  
          requirements including   eligibility criteria for types of  
          improvements and projects, the establishment of energy and cost  
          savings evaluation standards and requirements, prepayment  
          options, and project inspection services or requirements.
          
                                      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 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 the  
                 American Recovery and Reinvestment Act of 2009 (ARRA)  
                 administered by CDCS.

                     $280 million in one-time ARRA funds for energy  
                 efficiency programs administered or coordinated by the  
                 California Energy Commission (CEC), including Energy  
                 Upgrade California and several pilot programs designed to  










                 develop best practices for energy efficiency retrofits of  
                 California's buildings constructed prior to adoption of  
                 Title 24 energy efficiency building standards. These  
                 pilots are intended to help CEC develop a comprehensive  
                 energy efficiency strategy for this old building stock,  
                 as required by AB 758 (Skinner, 2009).

          On Bill Repayment - OBR allows repayment of a third-party loan  
          with a monthly payment on a utility bill. It can be an  
          affordable and attractive option for residential customers to  
          invest in energy efficiency measures if the loan repayment  
          period is long enough so that monthly payments are offset by the  
          energy savings from the measure. For example, a homeowner with a  
          monthly utility bill of $175 may borrow $7,200 for duct sealing,  
          a programmable thermostat, new windows, and a new refrigerator,  
          which together are projected to cut $70 from the monthly utility  
          bill. With a 15-year loan at 5 percent interest, the monthly  
          loan payment would be $57. The homeowner's total monthly payment  
          would be $162 ($105 for utility service plus $57 OBR payment),  
          for a monthly savings of $13. Lenders are likely to provide more  
          favorable loan terms when repayment is part of a utility bill  
          subject to utility collection procedures and the threat of  
          service disconnection for nonpayment.

          CPUC Pilots on OBR - To comply with AB 758's requirement to  
          investigate energy efficiency financing options to retrofit old  
          housing stock, 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." The report concluded that a $4 billion annual  
          investment in energy efficiency is needed to meet California's  
          aggressive energy goals, and it identified on-bill collection of  
          loan payments as one of many options for energy efficiency  
          financing but recognized legal and regulatory barriers to its  
          implementation.

          In its November 2012 decision approving $1.9 billion in  
          ratepayer funds for IOU energy efficiency programs for  
          2013-2014, the CPUC approved $220 million for financing to  
          increase customer adoption of energy efficiency measures,  
          including non-residential OBR, and a multi-family housing OBR  
          pilot. It declined to require residential OBR at this time and  
          instead required IOUs to collect data on performance of other  
          programs and build a database of California loan payment history  










          from all sources of energy project loans, in order to inform a  
          future decision on residential OBR. It also required  
          modification and expansion of Energy Upgrade California to  
          further leverage the hundreds of millions in ARRA energy  
          efficiency funds that expired last year.

          The CPUC previously identified many reasons for not requiring  
          OBR for single-family residential customers prior to conducting  
          pilot programs:

                     It is unclear how much of an advantage OBR provides  
                 to ensure customer payment of energy efficiency loans  
                 based solely on the likelihood that customers pay their  
                 utility bills, which would provide lenders sufficient  
                 security to offer low interest rates.

                     Lack of legal authority to allow utilities to  
                 initiate collection actions and disconnect for  
                 non-payment of portions of the utility bill not related  
                 to provision of utility services, citing Public Utilities  
                 Code Sections 779.2 and 771, which prohibit disconnect  
                 for third-party debt.

                     Lenders' desire to analyze long-term utility payment  
                 histories in order to assign a credit risk would require  
                 utilities to make customer payment information available.  

                     It is uncertain whether OBR can or should require  
                 "bill neutrality" so that the monthly loan payment does  
                 not exceed the amount of energy savings from the measure  
                 financed.

                     It is not clear that OBR, on its own, will be able  
                 to make significantly more financing or better rates and  
                 terms available than home equity loans.

                                       COMMENTS
           
              1.   Bill Failed Passage and CPUC Raises Concerns  .  The  
               author presented this bill to the committee on April 16,  
               but it failed passage.  Since then, the CPUC adopted an  
               official "Support if Amended" position, raising 19 separate  
               legal concerns and proposed amendments.  The CPUC raises  
               significant issues with the bill's "bill neutrality"  










               requirement, pointing out how many factors affect whether  
               bill neutrality will actually be achieved over the life of  
               a loan, especially for tenants.  The CPUC also states the  
               following about the loan loss reserve provisions:
               "The new section seems to propose to remove disconnect  
               provisions and instead require the CPUC to offer a loan  
               loss reserve to guarantee residential loans. This would  
               undercut the purpose of the bill, put ratepayer funds at  
               risk, and remove the incentive to repay the loan." 

              2.   Author's Purpose  .  According to the author, this bill  
               would provide Californians access to low-cost loans for  
               energy efficiency and clean energy projects that can be  
               repaid through monthly utility bills, thereby creating  
               energy savings and generating jobs. The author states that  
               OBR is necessary because existing clean energy financing  
               programs are "funded by insufficient ratepayer or taxpayer  
               moneys" and reach only a small number of Californians due  
               to restrictions in income level, credit score, project  
               size, or property and technology specific eligibility  
               criteria.

              3.   Does OBR "Not Rely on Public Funding"  ? The legislative  
               findings of this bill declare that the OBR program it  
               requires the CPUC to establish "does not rely on public  
               funding." Although the intent is that OBR will attract  
               private capital for residential energy improvement loans,  
               this bill also requires funding in an unspecified, but  
               likely substantial, amount for a loan loss reserve to  
               guarantee that lenders are paid if customers who  
               "experience disproportionate bill impacts from summer  
               cooling" fall behind on OBR payments. In addition, before a  
               single OBR loan can be made, this bill requires the CPUC  
               to, among other things, establish the requirements of an  
               OBR program each IOU will be required to develop, specify  
               which energy improvements are eligible and ensure that they  
               will achieve greenhouse gas reductions, establish a  
               methodology to calculate bill neutrality of individual OBR  
               projects (likely to be a highly complex and contentious  
               proceeding, according to stakeholders), adopt rules for  
               collection of unpaid OBR obligations on closed service  
               accounts, and establish the loan loss reserve program. The  
               $1.9 billion in ratepayer funds already approved for the  
               2013-14 IOU energy efficiency program years does not  










               include these costs for residential OBR or any loan loss  
               reserve program.

               This bill also expressly authorizes IOUs to collect from  
               ratepayers their costs to develop and implement OBR  
               programs, as well as the costs of all judgments,  
               litigation, attorney's fees, and other liabilities related  
               to their role as bill collectors for the lenders. Moreover,  
               the bill prohibits the CPUC and IOUs from handling customer  
               complaints about any aspect of an OBR obligation. Assuming  
               the CPUC would not leave customers without a place to lodge  
               a complaint, it likely will contract out a customer service  
               function, as is being considered for the CPUC's OBR pilot.  
               The bill also requires energy and cost savings calculations  
               (necessary for the bill neutrality requirement) and project  
               inspection services for each customer's OBR project, but  
               does not specify how those will be funded. 

               Thus, absent any indication of another funding source, it  
               appears that all of these OBR program costs would be paid  
               with ratepayer funds in an unknown amount on top of the  
               nearly $1 billion a year in ratepayer funds already  
               collected for IOU energy efficiency programs.

              4.   Pilots vs. Potentially Premature Prescription  . This bill  
               contains a lengthy list of prescriptions for implementing  
               OBR, reaching conclusions on complex issues that the CPUC  
               has concluded are best addressed through pilot programs it  
               has undertaken. It seeks to fill a perceived void in  
               availability of energy efficiency financing, but is it not  
               clear if it incorporates lessons learned from low customer  
               participation in existing loan programs, including CEC  
               pilots specifically aimed at developing best practices for  
               financing energy efficiency retrofits. The CPUC has  
               concluded that, in order to proceed with residential OBR,  
               legislation is necessary to make OBR an exception to the  
               statutory prohibition on service disconnection for  
               nonpayment of third-party debt (Public Utilities Code  
               Sections 777.1(e) and 779.2). But is it necessary to  
               prescribe detailed program elements and undertake extensive  
               start-up costs before learning from pilot programs?

               Will this bill conflict with elements of the CPUC's  
               residential OBR pilot already in the planning stages? Why  










               not follow the CPUC's approach of continue non-residential  
               OBR and pilot programs, focus on continuing ARRA funded  
               programs, and build a database of California loan payment  
               history from all current sources of energy project loans  
               that can inform a future decision on how to implement  
               residential OBR?  The author and committee may wish to  
               consider amending the bill by striking its provisions and  
               instead amend Public Utilities Code Sections 777.1(e) and  
               779.2 to authorize the CPUC to conduct residential OBR  
               pilot programs and report the results, including the number  
               of service disconnections, to the Legislature.

              5.   OBR Is Exception to Prohibition on Residential Service  
               Disconnection  . This bill seeks to eliminate the legal  
               barrier to residential OBR - current law prohibiting  
               termination of residential utility service for nonpayment  
               of debt owed to a third party. This bill makes OBR an  
               exception to this prohibition and expressly allows  
               utilities to treat underpayment of OBR obligations as  
               failure to pay for utility service. Thus, any customer who  
               falls behind in the monthly OBR payments would be subject  
               to the same escalating procedures required by CPUC rules  
               for nonpayment of a utility bill, including customer  
               notice, payment options, and eventually service  
               disconnection. This would be the case regardless of whether  
               that customer originated the OBR obligation, received the  
               required OBR disclosure or not (the bill provides no  
               enforcement of seller or landlord disclosure obligations),  
               and irrespective of whether the OBR obligation was "bill  
               neutral" (nothing in the bill relieves a customer of the  
               OBR obligation if the improvement turns out not to be bill  
               neutral over the term of the loan).

              6.   Will Utility Service Disconnections Increase With OBR  ?  
               Just over a year ago the CPUC updated its service  
               disconnection procedures for PG&E and Southern California  
               Edison, with special requirements for disabled and other  
               vulnerable populations, with the goal of reducing  
               disconnections, particularly as Californians still struggle  
               to come out of the economic recession. Some parties, such  
               as the Division of Ratepayer Advocates (DRA), oppose this  
               bill and express concern that residential OBR "will have  
               the unintended consequence of putting customers, in  
               particular middle- and low-income customers, at greater  










               risk for incurring disconnections." DRA points out that  
               low-income customers experience disconnection at a rate  
               three times higher than the average disconnection rate.

               The Utility Reform Network (TURN) also states that it has  
               had "concerns that ratepayers could be disconnected for  
               failure to pay third-party financing on the bill. . . when  
               the work was poorly done and/or did not provide the  
               promised energy reductions," although TURN states that a  
               loan loss reserve program obviates this concern. 

               Similarly, the California Association of Realtors expresses  
               concern that OBR "not create a liability trap for unwary  
               homeowners" but believes the bill neutrality requirement  
               will help prevent this: "We think it is particularly  
               important that actual savings, versus those projected by  
               providers, be verified. Our members have reported  
               complaints that projected savings have not been realized in  
               practice. . . . California has an unfortunate history of  
               abusive home improvement schemes targeting unsophisticated  
               homeowners with unsustainable obligations - requiring bill  
               neutrality will guard against unscrupulous contractors  
               taking advantage of homeowners."

              7.   Loan Loss Reserve: Protecting Consumers or the Bank  ?  
               TURN and other supporters of this bill state that the loan  
               guarantee program required by the bill will protect  
               customers from the risk of losing service. Although the  
               language is unclear, it appears the intent is that  
               specified customers with an OBR obligation will have unpaid  
               OBR payments made from a loan reserve fund rather than face  
               disconnect for nonpayment. The bill requires the CPUC to  
               develop a loan-loss reserve or loan guarantee program as  
               part of OBR "to the extent feasible and cost effective" and  
               requires the loan program to be directed to "residential  
               customers who experience disproportionate bill impacts from  
                                                             summer cooling and other demands on the electrical system  
               that cause excessive usage and potentially significant bill  
               impacts." Who is included in this definition and how big is  
               this universe of customers? Are low-income customers  
               included or given any priority for access to loan  
               guarantees instead of facing service disconnection? What if  
               the CPUC determines a loan loss reserve is not feasible or  
               cost effective?











               Other than potential protection from a loan guarantee  
               program the CPUC may establish if feasible and  
               cost-effective, nothing in the bill removes any customer or  
               group of customers from the threat of disconnect for  
               nonpayment of an OBR obligation. Indeed, this security that  
               OBR loans will be subject to utility collection procedures  
               and potential loss of service is precisely what lenders say  
               enables them to offer customers low interest rates and  
               attractive loan terms in an OBR program. What is the  
               incentive for customers to make OBR payments if they do not  
               face the threat of disconnect? Will these customers  
               eligible for loan protection face higher interest rates on  
               OBR loans?

               The utilities express concern that a loan loss reserve  
               program shifts costs that should  appropriately be assumed  
               by banks and lending institutions to utility ratepayers. "A  
               loan loss reserve is not protection of the consumer; it is  
               protection of the bank," states Sempra. According to  
               Edison, the loan loss reserve has "the direct effect of  
               increasing rates to all ratepayers for the sole purpose of  
               protecting the financial lending entity when they make bad  
               loans. This action will burden ratepayers and utilities  
               with costs and risks that should be borne by the financial  
               institutions that are in the business of lending capital."

              8.   Bill Neutrality Required, But No Recourse if Bills Not  
               Neutral  . This bill requires "bill neutrality" for OBR  
               programs so that a utility customer's annual OBR repayment  
               charges are less than or equal to the projected annual  
               electric and gas energy savings arising from the energy  
               improvements financed with an OBR loan. This promise of  
               utility bill reduction (or at least neutrality) from the  
               improvement is what makes the investment and monthly loan  
               payments worthwhile to the customer. Bill neutrality is  
               always required for tenants and "lower income households"  
               and for all OBR obligations incurred in the first two years  
               of an OBR program. Just as the OBR obligation "runs with  
               the meter," the bill neutrality requirement also continues  
               with each subsequent property owner or tenant. But the bill  
               fails to define any recourse for a customer when bill  
               neutrality is not realized. In fact, the bill prohibits the  
               CPUC and the utilities from providing a forum for customer  










               disputes on bill neutrality or any other OBR-related issue.  
               The customer, meanwhile, faces service disconnection for  
               refusal to pay.

             9.   Bill Neutrality Methodology Controversial  . The lack of  
               customer recourse related to the bill neutrality guarantee  
               could be problematic given the many variables that can  
               affect energy use over the lifetime of an OBR loan. These  
               include the behavior of the customer utilizing the new  
               equipment (whether a customer elects to enjoy more heat or  
               cooling once monthly bills go down), climate zone, quality  
               of contractor installation, changes in numbers of occupants  
               at a residence, new appliances or equipment added to a  
               household, and fluctuating energy costs. A change in owner  
               or tenant of a property introduces more uncertainty into  
               the bill neutrality calculation.

               This bill requires the CPUC to establish a methodology to  
               calculate bill neutrality that can be applied to each  
               individual customer project financed with OBR, which  
               stakeholders and CPUC staff indicate will be complex and  
               contentious. Just as the CPUC has struggled for more than a  
               decade with its methodology for evaluation, measurement and  
               verification (EM&V) of savings from IOU energy efficiency  
               programs at the portfolio level, the methodology for  
               calculating projected and actual energy savings at the  
               individual residential customer level will likely be  
               fraught with uncertainty. The CPUC authorizes 4 percent of  
               the IOU energy efficiency budgets - about $40 million per  
               year - for EM&V. What will be the cost of EM&V at the  
               individual customer level for OBR projects, and who will  
               pay?

               The only specific direction in the bill on this issue is  
               authorizing the CPUC to include changes in an owner's  
               "expected operating and maintenance costs" in calculating  
               bill neutrality. This appears to open the door for  
               including non-energy savings to offset bill increases from  
               the OBR payment, such as the avoided cost of repairs on a  
               new HVAC compared to an old one. What is the policy  
               justification for this provision, and will other non-energy  
               savings be included in the calculation of bill neutrality?

              10.  How Do Tenants Participate in OBR  ? The author states  










               that this bill will remedy the problem of the "split  
               incentive" that currently keeps multi-family housing from  
               participating in existing energy efficiency programs -  
               renters have no incentive to invest in improvements to  
               properties they don't own, and landlords have little  
               incentive to invest in clean energy measures when tenants  
               pay utilities and thus stand to benefit.

               The language of the bill in unclear, however, exactly how  
               tenants will participate in OBR and how that participation  
               differs for rental housing with master-meters where tenants  
               do not get individual utility bills, compared with housing  
               where each rental unit gets a bill directly from the  
               utility. The bill refers to a property owner authorizing an  
               OBR project that a tenant is responsible to pay for  
               "directly or indirectly through the provisions of the  
               applicable lease." Many support letters state that "SB 37  
               would allow landlords to initiate energy efficiency  
               projects that will be financed by the utility bills of  
               tenants who will benefit from the projects."

               Does the bill neutrality requirement apply to a tenant in a  
               master-metered property where the owner undertakes an OBR  
               obligation? Can a tenant in a master-metered property be  
               subject to service disconnection for nonpayment of an OBR  
               obligation that exists indirectly through the provisions of  
               a lease? For tenants in individual metered properties, how  
               does an OBR obligation undertaken by the landlord get  
               allocated to each rental unit, how is the bill neutrality  
               requirement applied to each tenant, and is the bill  
               neutrality requirement and allocation of the OBR obligation  
               recalculated each time a new renter assumes occupancy of  
               the unit? Who pays for an unpaid OBR obligation of a prior  
               tenant?

              11.  Does This Bill Protect Consumers  ? This bill requires the  
               CPUC to ensure that OBR programs include consumer  
               protections for residential customers, including  
               protections to prevent increases in the expected number of  
               service terminations, such as targeted use of a commission  
               approved loan loss reserve in lieu of service termination,  
               and bill neutrality at all times for lower income  
               households and tenants. However, the following provisions  
               of the bill have potentially harmful effects for consumers:











                     No recourse or enforcement of the bill neutrality  
                 requirement, even though the threat of service  
                 disconnection for nonpayment of an OBR obligation  
                 continues through the life of the loan and passes from  
                 one owner or tenant to the next regardless of differing  
                 energy use or other variables.

                     Authority for the CPUC to eliminate the bill  
                 neutrality requirement after two years (except for lower  
                 income households and tenants) if it determines bill  
                 neutrality has unnecessarily limited the types of  
                 projects that may be financed with OBR.

                     Prohibition on CPUC and utilities handling customer  
                 disputes about OBR issues, even though the OBR payment  
                 appears as a line item on the utility bill (and no  
                 provision for any alternative customer complaint forum or  
                 process).

                     No enforcement of landlord obligation to provide  
                 tenants notice of an OBR obligation; instead, a provision  
                 stating that failure of a landlord to provide notice does  
                 not invalidate a lease.

                     No enforcement of a seller obligation to provide a  
                 buyer of an OBR obligation; instead, a provision stating  
                 that a seller or real estate agent is not required to  
                 provide a buyer any additional information beyond a  
                 standard disclosure form.

                     No requirement that disclosures to buyers and  
                 tenants include information on bill neutrality of the OBR  
                 project.

              1.   Renewable Energy/Demand Response/Distributed Generation  .  
               The bill requires OBR programs for not only energy  
               efficiency, but also renewable energy, distributed  
               generation, energy storage, and demand response  
               investments. It is unclear how OBR for renewable generation  
               and distributed generation would overlap with existing  
               programs supporting these investments, such as the Self  
               Generation Investment Program, the New Solar Homes  
               Partnership, and the California Solar Initiative. Moreover  










               there are no parameters for the program specified including  
               performance requirements, evaluation of need (note that  
               customers now have options to install solar with no  
               up-front investment), or consideration of whether the cost  
               of the generator must have a pay-back less than the cost of  
               utility service, among other issues. Additionally, demand  
               response programs that have been designed to date are  
               generally a behavior and ratebased application calling on  
               the customer to reduced demand (aka turn off the lights) at  
               specified times. Consequently, that is no equipment  
               required of the customer to participate.

              2.   Ratepayer Impact  . Although OBR financing would be from  
               third-party lenders, it appears that the cost of other OBR  
               program requirements, including a potentially substantial  
               loan loss reserve fund, would be paid by ratepayers through  
               the energy efficiency surcharge that already funds about $1  
               billion per year for energy efficiency programs and also  
               through individual IOU rate increases for each IOU's  
               litigation and liability costs. 

              3.   Double Referral . Should this bill be approved by the  
               committee, it will be re-referred to the Senate Committee  
               on Judiciary for its consideration on May 2nd. 

                                       POSITIONS
           
           Sponsor:
           
          Environmental Defense Fund

           

          Support:
           
           ------------------------------------------------------------------ 
          |Abundant Power                     |Groom Energy Solutions        |
          |American Lung Association          |International Council of      |
          |Asian Pacific Environmental        |Shopping Centers              |
          |Network                            |Matadors Community Credit     |
          |Beutler Corporation                |Union                         |
          |Blue Earth                         |MaxLite                       |
          |BOMA California                    |Metrus Energy                 |
          |CalCEF                             |Mission Valley Bank           |










          |California Apartment Association   |Natural Resources Defense     |
          |California Business Properties     |Council                       |
          |Association                        |Nularis, Inc.                 |
          |California Environmental Justice   |Planning and Conservation     |
          |Alliance                           |League                        |
          |California Housing Partnership     |Renewable Funding             |
          |Corporation                        |SCIenergy                     |
          |Carbon Lighthouse                  |Shorenstein Properties        |
          |Clean Fund                         |Sierra Club California        |
          |Clean Power Campaign               |Small Business California     |
          |Coalition for Clean Air            |SolarCity                     |
          |DBL Investors                      |Solar Energy Industries       |
          |Efficiency First California        |Association                   |
          |Energi Insurance Services, Inc.    |The Greenlining Institute     |
          |Enlighted Inc.                     |The Utility Reform Network    |
          |Environmental Health Coalition     |The Vote Solar Initiative     |
          |Facility Solutions Group           |Tioga Energy                  |
          |Global Green USA Green Campus      |USGBC California              |
          |Partners                           |                              |
          |                                   |                              |
           ------------------------------------------------------------------ 
           Support, if amended
           
          California Public Utilities Commission

           Concerns:
           
          California Association of Realtors

           Oppose:
           
          Division of Ratepayer Advocates
          Pacific Gas and Electric Company, unless amended
          San Diego Gas and Electric Company, unless amended
          Sempra Energy Utilities, unless amended
          Southern California Edison
          Southern California Gas Company, unless amended

          

          Jacqueline Kinney 
          SB 37 Analysis
          Hearing Date:  April 30, 2013