BILL ANALYSIS Ó 1
SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
ALEX PADILLA, CHAIR
SB 39 - De León and Steinberg Hearing
Date: April 30, 2013 S
As Amended: April 24, 2013 FISCAL B
3
9
DESCRIPTION
Current law requires electric and gas corporations to develop
programs in cooperation with local school districts to reduce
their electricity and gas bills through conservation and
improvements in efficiency. (Public Utilities Code 749)
Current law establishes the Clean Energy Job Creation Fund to
provide financial assistance to projects that create jobs in
California improving energy efficiency and expanding clean
energy generation. Up to $550 million is available fiscal years
2013-14, 2014-15, 2015-16, 2016-17, and 2017-18 the source of
which is increased state corporate tax revenues. (Proposition
39, Public Resources Code 26200 et seq.)
Current law requires the California Energy Commission (CEC) to
develop and administer a series of programs to provide
cost-effective energy efficiency and conservation contracts,
grants, and loans to eligible entities. (Public Resources Code
25410-25474)
This bill establishes the Clean Energy Employment and Student
Advancement Act of 2013 and requires the Office of Public School
Construction (OPSC) to establish a competitive grant program for
the distribution of Proposition 39 funds to school districts and
county offices of education for energy efficiency upgrades.
This bill defines an energy efficiency upgrade project as a
school facility project that reduces energy consumption and
operational costs through specified improvements.
This bill requires that grants be ranked and awarded with
priority given to projects with:
above average energy consumption, located in economically
disadvantaged communities, located in areas with above average
unemployment compared to the statewide average, provide training
and information to students and classified school employees to
better understand and support energy efficiency, enhance
workforce development, and is a joint partnership between two or
more agencies. The OPSC would be required to consult with the
CEC, Public Utilities Commission (PUC), and the State Department
of Education SDE. All applications would have to be approved by
the State Allocation Board (SAB).
This bill requires the CEC to develop guidelines for a financing
program for energy efficiency and clean energy projects for the
community colleges, California State University, and University
of California.
BACKGROUND
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 businesses
to determine their California taxable income using a single
sales factor method. (Previously, state law allowed such
businesses to pick one of two different methods to determine the
amount of taxable income associated with California and taxable
by the state.) This change has the effect of increasing 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.
"Moneys in the fund shall be available for appropriation for the
purpose of funding projects that create jobs in California
improving energy efficiency and expanding clean energy
generation." Proposition 39 specifically requires that the funds
maximize energy and job benefits by supporting:
Energy efficiency retrofits and alternative energy
projects in public schools, colleges, universities, and
other public facilities;
Financial and technical assistance for energy retrofits;
and
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 that the funding is to be appropriated
only to agencies with established expertise in managing energy
projects and programs.
Governor's Proposed Budget - The Governor appropriates $450
million of Proposition 39 revenues in the 2013-14 fiscal year
for a K-14 education energy efficiency program in order to
satisfy the energy efficiency requirements of Proposition 39. Of
this amount, the Governor appropriates $400.5 million to the
California Department of Education (CDE) for allocation to K-12
school districts, charter schools and county offices of
education and $49.5 million to the CCC for allocation to
community college districts. The Governor requires CDE and CCC
to allocate these funds on a per student basis.
For subsequent fiscal years in which Proposition 39 revenues
continue to be dedicated to clean energy programs, the
Governor's proposal continues energy efficiency funding for K-12
schools and community colleges at $500 million for four
additional years, from 2014-15 through 2017-18. This assumes
$1.0 billion in total Proposition 39 revenues, with half
provided for energy efficiency per the proposition during this
timeframe. The Governor's proposal is limited to these four
years, since Proposition 39 does not require energy efficiency
funding beyond 2017-18.
Recommendations of the Office of the Legislative Analyst (LAO) -
The LAO has concerns with the Governor's budget proposal and
opines that the proposed allocation method limits the potential
benefits of Proposition 39 funds in the following ways:
Excludes many eligible projects;
Fails to account for energy consumption differences;
Fails to sufficiently leverage existing programs and
experience;
Does not account for significant past investments in
K-14 facilities;
May not guarantee return on investment; and
Allocates funding inefficiently.
As an alternative the LAO recommends designating the CEC as the
lead agency, in consultation with the CPUC and other experienced
entities, for Proposition 39 energy funds. The CEC would be
directed to develop and implement a competitive grant process in
which all public agencies could apply for Proposition 39 funding
on a project-by-project basis to ensure that the state maximizes
energy benefits. The competitive process would consider and
weigh all factors that affect energy consumption. The LAO notes
that the CEC could create a tiered system that categorizes
facilities based on a high-, medium-, and low energy intensity
or need. Based on that categorization, funding could be provided
to facilities with the greatest relative need in coordination
with other existing energy efficiency programs.
To qualify for grant funding and assist CEC in evaluating
potential projects, the LAO alternative would require applicants
to first have an energy audit to identify the cost-effective
energy efficiency upgrades that could be made, similar to the
types of audits currently provided through the CEC and the
investor owned utilities (IOUs). As part of the application,
facilities should also provide information regarding the climate
zone, size, design, and age of a building.
Loading Order - The "loading order" guides the state's energy
policies and decisions according to the following order of
priority: (1) decreasing electricity demand by increasing energy
efficiency; (2) responding to energy demand by reducing energy
usage during peak hours; (3) meeting new energy generation needs
with renewable resources; and (4) meeting new energy generation
needs with clean fossil-fueled generation. This policy has been
adopted by the energy agencies - the CEC and CPUC - and its
principles guide all energy programs.
Existing CEC Programs - The CEC has administered several grant
programs to fund energy efficiency retrofits. The "ECCA"
(Energy Conservation Assistance Act of 1979) program was
established more than 30 years ago and is one of the oldest of
California's many programs designed to reduce statewide energy
consumption through energy efficiency measures. The program
makes low-interest loans to cover up to 100 percent of a project
with a maximum loan amount of $3 million and maximum repayment
term of 15 years. A loan repayment amount cannot exceed the
estimated energy savings from a funded project.
In 2009 the CEC received $314.5 million for energy efficiency
and renewable energy programs as a result of the American
Recovery and Reinvestment Act of 2009 (ARRA) and administered
four programs: the State Energy Program ($226 million), the
Energy Efficiency Conservation Block Grant Program ($49.6
million), Appliance Rebate Program ($35.2 million), and Energy
Assurance Planning ($3.6 million) with several subsets.
Building Audits - For energy efficiency retrofits a building
audit may be undertaken to provide a comprehensive analysis of a
facility's energy usage and efficiency. The audit identifies
various energy losses due to, e.g., lighting, HVAC,
refrigeration, window quality, dropped ceilings, and wall
insulation.
Benchmarking - This is a method for determining the total amount
of energy a building uses (often called energy or building
performance). The electricity, natural gas, chilled water,
steam, or any other utilities that the building receives are
taken into account. Benchmarking allows direct comparisons of
building energy use to the average for similar buildings by
normalizing for variables such as local climate, square footage,
occupancy levels, number of computers, and operating hours. The
U.S. EPA's ENERGY STAR Portfolio Manager, a free and secure
online tool, is the standard for benchmarking.
COMMENTS
1. Author's Purpose . According to the author, SB 39
represents a historical opportunity for California to
create meaningful employment; be smarter about energy
management; and improve the lives of hundreds of thousands
of students in California - many of whom go to school each
day in substandard conditions to the detriment of their
learning and their health. This bill that will award
energy efficiency upgrade grants to the most economically
disadvantaged school communities in need of modernization.
These grants will maximize job creation; create long-term
energy cost savings for schools and put money back in
classrooms; shrink our carbon footprint and reduce
pollution creating cleaner air for our children; create
accountability and transparency to ensure we invest in line
with the voters' will; and minimize bureaucracy so the
public experiences maximum value in real projects.
According to experts, the continuing high cost of energy
and utilities due to inefficient lighting, insulation,
heating, ventilation, and air conditioning systems,
plumbing, windows, and irrigation systems take local money
away from educational programs. According to the U.S.
Environmental Protection Agency, modification of
pre-existing buildings for energy efficiency can save a
typical 100,000-square-foot school building between $10,000
and $16,000 annually, and simple behavioral and operational
measures alone can reduce energy costs by up to 25 percent
(U.S. EPA, 2008). For example, the Corona-Norco Unified
School District annual power bill is $6.4 Million and their
potential energy efficiency savings is $1.6 Million that
could support teachers and efficient district operations
that have been especially hard hit by cuts in recent years.
2. Top Down, Competitive Grants . The goal of funding
energy efficiency improvements in schools is worthwhile.
However, this bill proposes an allocation structure for
Proposition 39 funds much like that suggested by the LAO
where funds would be distributed from a top down approach -
providing grants for applicants that can demonstrate the
highest energy efficiency savings in schools of need. The
program structure proposed would be cumbersome and lengthy,
requiring the participation of as many as six state
agencies - the CEC, OPSC, PUC, SDE, SAB, and Office of the
State Architect and likely discourage the participation of
far too many schools. Program elements that add complexity
and delay in putting the Proposition 39 funds to work
include:
Competitive Grant - At the March informational hearing
of this committee on schools and energy efficiency
programs prior to Proposition 39, a common theme heard
from witnesses was the challenges that schools have
had in securing funds for energy efficiency. They are
available but the work necessary by a school or
district to apply for those funds has discouraged
participation. Many schools lack the resources to
dedicate staff to an application process which may not
result in an award which is a disincentive to
participate. Consequently the competitive award
proposed by this bill will not result in the award of
funds to schools which can provide the greatest energy
efficiency savings statewide but only to those schools
that are resourced to apply for the grants.
Audits - Each grant application would require an audit
for each building to which improvements would be made.
The LAO recommends that applicants for Proposition 39
funds "first have an energy audit to identify the
cost-effective energy efficiency upgrades that could
be made." An audit would allow an applicant to
determine which energy efficiency improvements would
be the most cost-effective for each facility. However
energy audits can be expensive and cumbersome. Audits
are beneficial when a building owner is contemplating
a deep retrofit to accomplish all of the most
cost-effective improvements to undertake but
cost-effective energy efficiency can be accomplished
without an audit if managed properly.
Ranking - Higher priority would be given to schools
located in economically disadvantaged areas, with
above average unemployment rates, above average energy
consumption, located in economically disadvantaged
communities, that provide training and information to
students and classified school employees to better
understand and support energy efficiency, enhance
workforce development, and is a joint partnership
between two or more agencies. The goals of the
criteria are not questioned but energy efficiency
projects are generally evaluated on the
cost-effectiveness of the project and the energy
savings that will accrue. Adding this overlay to the
evaluation of grant applications will significantly
extend the time needed at the state level to review
them.
Agency Approval - Regulations would need to be
established by the CEC in consultation with all
agencies for project guidelines, regulations would be
needed by the OPSC to govern its review and approval
of the applications, and the funding of each project
would have to be approved by the SAB. Many projects
regardless of the grant administration may also
trigger review by the Office of the State Architect.
3. Bottom-Up Grant Administration . As an alternative to
the allocation framework proposed by this bill, the author
and committee may wish to consider a program design that
ensures all districts will have a guaranteed award of funds
through a streamlined application process for energy
upgrades that are tried and true cost-effective energy
efficiency investments. The structure would provide
districts with a guaranteed level of funding, mitigate the
delays associated with involvement of as many as six state
agencies, and put the funds to work for the schools and the
workforce as soon as possible while maintaining eligibility
priorities.
ADA Allocation - any formula could be used as
determined by the Legislature for every school
district. A minimum guarantee of funds should be
allocated for small districts. Funding could be
prioritized to any sub-set of students - Title I
eligibility, free and reduced price lunch, or any
other population - or any subset of building
characteristics such as the age of a the facility,
which are determined to be a priority.
Tried & True Improvements - Utilizing the funds in
this manner would spread the benefits of readily
available, low risk, high-return efficiency
technologies for eligible facilities to more schools.
The energy efficiency investments, by performing
retrofits on a wide scale, can show building faculty,
staff and students that energy efficiency can provide
not only cost savings but other valuable non-energy
benefits. Improved building comfort and reduced
maintenance costs will help convince the schools to
accept and demand new energy efficient innovations.
The efficiency measures must be best practice
technologies that have previously demonstrated
costeffective energy savings and be broadly applicable
to school buildings. The results of an investment
such as lighting, HVAC, or kitchen refrigeration are
easily quantified and the upgrades are tried and true
measures which generally don't require an investment
grade audit of a facility or a lengthy application.
The improvements can be dispatched more quickly than
the work required to implement a deep energy retrofit
of a building.
CEC Guidelines - The agency would adopt a "how-to"
guide to facilitate planning with a list of best
practice energy efficiency improvements, by climate
zone, that have successfully demonstrated substantial
energy savings in schools and require no building
audit. Benchmarking of the building should be
required. The CEC has extensive experience with these
guidelines through its work with distribution of
hundreds of millions of dollars in ARRA funding since
2009. Those technologies include the improvements
referenced at page 5, lines 15-20. Note that lines
21-22 include electrical systems and insulation.
These improvements should be excluded as statutorily
eligible since they are not always cost-effective.
Additionally the CEC should be exempt in its
development of these guidelines from complying with
the public notice and comment requirements of the
Administrative Procedures Act. Guidelines were
effectively used to facilitate development of
ARRA-related energy efficiency programs.
Local Review - The Governor's proposed allocation
lacks any oversight at the front-end of the energy
efficiency projects to ensure that sound planning
occurs and that the improvements are cost-effective.
Conversely, requiring that approximately 1,100
districts including 10,000 schools to send project
applications to Sacramento for review as required by
this bill would cause considerable delay in putting
the money to work and discourage school participation.
However, it is critical that the plans be reviewed
independently and the only infrastructure outside of
Sacramento with expertise in energy efficiency and
that reaches across the entire state is the state's
electric and gas utility energy efficiency programs.
It is not suggested that the utilities receive funding
but that the districts have the utilities review the
plans for conformity with the CEC guidelines, to
ensure cost-effective projects, and to take advantage
of any other rebates and assistance that is available
from the utility programs. Many publicly owned
electric utilities have no energy efficiency programs.
In this instance, the gas corporations will provide
consultation.
There is a growing industry of energy service
companies, third party implementers and other private
consultants in the energy efficiency world upon which
the schools may rely. However, unfortunately, schools
and other utility customers have been misled by bad
actors in the consulting world which resulted in
school investments without the promised savings. The
committee has heard of companies already in the market
making promises to schools of special access to
Proposition 39 funds which is obviously a
misrepresentation. The schools need an independent,
double-check.
4. Clean Energy Improvements . Proposition 39 does
authorize funds to be used for clean energy technologies
which include self-generation such as solar, combined heat
and power, and fuel cells but this bill is limited to
energy efficiency upgrades only. The state's loading order
for energy requires that all cost-effective energy
efficiency be accomplished as the top priority before
renewable generation technologies are considered and
funded. Pursuing energy efficiency before the installation
of generation technologies can significantly reduce the
size and cost of the generation technology resulting in
greater savings for the facility.
5. Commissioning or Retro-commissioning . Generally energy
efficiency programs focus on technologies that can be
installed to reduce consumption. In newer construction,
and for some facility renovations, energy management
systems are typically installed which allow for automated
control of lighting and HVAC, for example. The utilities
and energy efficiency consultants report however that far
too many facility managers lack the understanding necessary
to implement the technical features present in these
advanced systems. The Los Angeles Department of Water and
Power discovered this challenge in schools throughout its
territory and found that far too many school HVAC and
lighting systems are running 24/7, year-round. By training
facility staff to program the systems energy bills could be
cut by as much as half in many schools. This type of
training of staff is not a one-time expense and is an
on-going need for most facilities. Consequently training
programs have not generally been funded by state or
utility-administered programs. Districts should be
encouraged to use the savings achieved with energy upgrades
to provide ongoing training for staff in operating the
equipment efficiently.
6. CEC Loan Program . This bill requires the CEC to develop
guidelines for a financing program for energy efficiency
and clean energy projects for the community colleges,
California State University, and University of California.
However, the CEC has in place a very effective revolving
loan program called "ECCA" (Energy Conservation Assistance
Act of 1979). Public schools and colleges are eligible for
the loans therefore the development of an additional
program does not seem warranted. The program is however
always in need of additional funding since demand outpaces
available loan funds. The author and committee may wish to
consider striking this requirement.
7. Related Legislation . The following bills have also been
introduced in the current legislative session establish
parameters for the funding of programs authorized by
Proposition 39.
SB 35 (Pavley) - Requires the CSU and CCC, and
requests the UC, to establish a special subcommittee
to develop and administer a "Systemwide Energy
Solutions Action Plan" that provides a near-and
long-term strategy for energy savings projects which
are defined as a measure program, activity, or
expenditures that results in energy savings,
greenhouse gas emissions reduction, and budgetary
savings through investments in clean energy. Status:
Set for hearing in the Senate Education Committee May
1, 2013.
SB 64 (Corbett) - Requires the CEC to develop and
administer programs consistent with Proposition 39 to
provide financial assistance to school districts,
cities, and counties for low risk, high-return energy
efficiency or clean energy technology projects.
Status: Set for hearing in the Senate Appropriations
Committee May 6, 2013.
SB 729 (Fuller) - States the intent of the Legislature
to enact legislation to implement the California Clean
Energy Jobs Act. Status: Senate Rules Committee.
AB 29 (Williams) - Allocates $152 million in five
consecutive fiscal years to the CEC to administer
grants, loans, or other financial assistance for the
University of California, California State University,
and California Community Colleges to reduce energy
demand and consumption. Status: Referred to the
Assembly Utilities & Commerce Committee.
AB 39 (Skinner) - Directs the CEC to develop and
provide grants, loans, or other financial assistance
to K-12 schools and community colleges to improve
energy efficiency, installing clean energy technology,
or make energy system improvements; provide
low-interest or no-interest loans from a revolving
loan fund to schools, colleges and public buildings;
and provide funds for job training and workforce
development. Status: Set for hearing in Assembly
Utilities & Commerce Committee April 29, 2013.
AB 114 (Salas) - Directs the Labor and Workforce
Development Agency to award grants to eligible
entities for projects to provide job training on
energy efficiency and clean energy projects that are
located in economically disadvantaged communities.
Status: Set for hearing in Assembly Utilities &
Commerce Committee April 29, 2013.
AB 239 (Hagman) - Requires the Office of Public School
Construction to fund a zero-interest revolving loan
program and a grant program for school districts to
perform energy efficiency retrofit or clean energy
installation projects at public schools. Status: Set
for hearing in Assembly Utilities & Commerce Committee
April 29, 2013.
8. Double Referral . This bill was approved by the Senate
Committee on Education on April 17, 2013, by a vote of 8-0.
POSITIONS
Sponsor:
Author
Support:
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| | |
|African American Student Social |Environmental Health Coalition |
|Work Association |FirstFuel Software, Inc. |
|AltaMed Health Services |Global Green USA |
|American Lung Association |Los Angeles Unified School |
|Asian Pacific Environmental |District |
|Network |Metropolitan Education |
|Bay Area Parent Leadership |District, if amended |
|Action Network |Natural Resources Defense |
|Building Industry Association |Council |
|of Southern California |People Organizing to Demand |
|California Energy Efficiency |Environmental |
|Industry Council | & Economic Rights |
|California Environmental |PolicyLink |
|Justice Alliance |Public Employees Union, Local |
|California Federation of |One |
|Teachers, if amended |School Energy Coalition |
|California School Board |Small School Districts' |
|Association, if amended |Association |
|California School Employees |Solar Energy Industries |
|Association, AFL-CIO |Association, with amendments |
|Center for Community Action & |South Coast Air Quality |
|Environmental Justice |Management District |
|Center on Race, Poverty & the |Southern California Pipe Trades |
|Environment |District Council 16 |
|Coalition for Adequate School |State Building and Construction |
|Housing |Trades Council |
|Communities for a Better |The Greenlining Institute |
|Environment |TRANE |
|County School Facilities |Urban Advisors, Inc. |
|Consortium | |
|Environment California | |
|Environmental Defense Fund | |
| | |
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Oppose:
None on file.
Kellie Smith
SB 39 Analysis
Hearing Date: April 30, 2013