BILL ANALYSIS Ó 1
SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
ALEX PADILLA, CHAIR
SB 64 - Corbett Hearing Date:
April 16, 2013 S
As Amended: April 9, 2013 FISCAL B
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DESCRIPTION
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)
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
25410-25474)
This bill directs the CEC 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.
This bill exempts the CEC from the public notice and comment
provisions of the Administrative Procedures Act in adopting
these guidelines and instead requires the CEC to provide written
notice to the public of not less than 30 days, and 15 days for
amending the guidelines.
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.
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.
COMMENTS
1. Author's Purpose . Proposition 39 provides minimal
guidance on how to develop and administer programs
consistent with the Clean Energy and Job Creation Fund. SB
64 will provide the legislative guidance for implementing
the objectives of Proposition 39, assist in improving
energy efficiency, and expand clean energy generation in
schools and public buildings in order to help lower energy
utility bills, make clean energy improvements, and create
jobs in California. In doing so, SB 64 keeps the promise
made to voters in Proposition 39 that funds be available
toward eligible projects for K-12 school districts, cities,
and counties, for energy efficiency and clean energy
generation projects for their facilities and buildings.
2. Efficient Efficiency Program . The program design of
this bill aims to spread the benefits of readily available,
low risk, high-return efficiency technologies for eligible
facilities throughout the state as well as generation to
offset a customer's electric load. The energy efficiency
investments, by performing retrofits on a wide scale, can
show building owners, operators and occupants 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 customers to
accept and demand new energy efficient innovations, helping
to transform the market. The efficiency measures must be
best practice technologies that have previously
demonstrated costeffective energy savings and be broadly
applicable to specific building markets.
The results of an investment such as lighting are easily
quantified and the upgrades are tried and true measures
which generally dont require an investment grade audit of a
facility or a lengthy application and can be dispatched
more quickly than the work required to implement a deep
energy retrofit of a building.
The program structure of this measure will allow the CEC to
adopt guidelines quickly since the program is similar to
other programs administered by the CEC including the ECCA
and those developed under the ARRA. A virtue of this bill
is that it does focus the funding on only one program at
the CEC for ease of administration. The committee
monitored the ARRA programs developed by the CEC starting
in 2009 very closely and observed that the development of
so many programs in a very short time due to federal time
limits for expenditure of the funds overwhelmed the CEC and
redirected significant staff resources from nearly every
other program in the Agency.
3. Proposition 39 Funding . The bill allocates an
unspecified sum from Proposition 39 revenues for the
2013-14 fiscal year only. The Governor's Proposed Budget
allocates all available Proposition 39 revenues for energy
efficiency to K-12 and the community colleges and counts
those revenues toward the Proposition 98 minimum funding
guarantee. If the Legislature approves the Governor's
spending plan there would be no available funding from
Proposition 39 for non K-14 public facilities in the budget
year or for the four remaining years of dedicated funding
for clean energy since the Governor also proposes that the
funds remain within Proposition 98 for the entire five
years. Consequently, this bill proposes to allocate funds
that may not be available.
There could be additional funding available for clean
energy investments from revenue from the Air Resources
Board's cap and trade auctions from which is expected to
result in $200 million in the current year and $400 million
in revenue in the 2013-14 fiscal year. Thus far the
Governor has proposed that all but $100 million of those
funds be used to offset General Fund costs of existing
greenhouse gas mitigation activities. The ARB's experience
with cap and trade auctions is new and actual revenues are
unknown.
4. First-Come, First Served ? The financial assistance
program in this bill does not specify the means by which
the CEC should prioritize awards. As currently drafted it
appears that the author intends the funds to be awarded on
a first-come, first served basis. As the CEC experienced
with the ARRA program funds the demand for clean energy
investment assistance is much greater than the available
funding even with Proposition 39. By requiring that awards
go to tried and true measures, the funds will be easier to
apply for and be more widely disbursed but the most
equitable and effective funding system is a tough call.
The provisions of Proposition 39 are not informative on
this issue. It requires that: "[a]ll projects shall be
selected based on in-state job creation and energy benefits
for each project type" and that all projects be
cost-effective. However project selection may also include
non-energy benefits: "consideration of non-energy benefits,
such as health and safety, in addition to energy benefits."
The LAO has recommended all funding run through the CEC
utilizing a competitive grant process in which all public
agencies could apply and receive funding based on
identified facility needs which would better optimize
benefits. The LAO further recommends that:
In order to ensure that the state maximizes energy
benefits, this competitive process should consider and
weigh all factors that affect energy consumption. 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 should be provided to facilities with the
greatest relative need in coordination with other
existing energy efficiency programs.
The committee should consider what parameters it might want
to include for prioritizing funding awards and the benefits
and limitations of each direction. Awarding funds on a
first-come, first-served basis tends to benefit those
participants who have the largest staff with the greatest
energy expertise and are the best grant writers. Awards
are likely to be concentrated in small geographic areas and
do not consider where the greatest energy savings can
accrue on a statewide basis. Competitive grants may
maximize energy savings, help the state to achieve its
broader GHG reduction goals, and relieve pressure on the
electric grid, but really only within the universe of those
eligible facilities for which applications are actually
submitted. If the CEC were directed to award grants only
to facilities that can show the greatest savings, smaller
facilities would automatically be excluded. Additionally,
competitive grants can discourage applicants from
participating particularly when funds are limited due to
the time demanded of the applicant to prepare the grant
application. However because a project doesn't present the
state with the greatest energy savings, it doesn't mean
that the project doesn't provide the applicant with
significant energy savings.
Criteria could be included related to the age of facilities
but as buildings are remodeled they are required to conform
to the state's green building codes (Title 24) which ensure
energy efficiency. Consequently facility age is not
thought to equate to the greatest energy savings.
Directing funds just to buildings would also exclude tried
and true measures such as switching out red street lights
for LED fixtures. Some ARRA grants were allocated across
all cities and counties to ensure equal opportunities
across all regions of the state. Other criteria to
prioritize awards include how the facility's electric
demand relates to the state's peak electric demand and by
climate zones.
The complexities of program design to achieve the greatest
benefits to the state's energy goals may not be appropriate
for a taxpayer-funded program such as Proposition 39 but
are the basis of the energy efficiency programs
administered by the CPUC for investor-owned utilities and
by many publicly-owned utilities. The author's approach in
this bill to make funding available for tried and true
energy efficiency measures appears to provide the greatest
number of opportunities to schools, cities and counties
across the state ensuring broader participation and
benefits for a program that was approved by voters
statewide. The ease of administration will allow
applicants to put the funds to work more quickly thus
creating jobs and energy savings as intended by Proposition
39.
5. Eligible Entities . The financial assistance made
available as a result of this bill would be limited to K-12
schools and city and county facilities. Eligible entities
under the provisions of Proposition 39 are not limited to
schools and municipalities but and include all "public
facilities" which is not defined. Should the bill be
broadened to define and include all public facilities which
could extend financial assistance to facilities at
colleges, universities, state properties, and special
districts?
6. Loading Order . Proposition 39 and this bill specify
clean energy improvements to not only include energy
efficiency improvements but also installation of
self-generation such as solar but in what order? 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.
The committee should consider amendments to ensure that
Proposition 39 funds are also allocated consistent with the
loading order.
7. Energy Audits . 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 or the most cost-effective
improvements to undertake but cost-effective energy
efficiency can be accomplished without an audit if managed
properly.
The program intended by this bill would not require an
applicant to go through the energy audit process but
dedicates funds to tried and true energy efficiency
improvements. A feasibility study would be required and
has been used extensively by the CEC for other energy
efficiency programs. A feasibility study typically
includes:
A description of the proposed energy
efficiency projects and the buildings or facilities
that will be affected by these projects;
A discussion of baseline energy use for the
affected facilities, including annual energy-related
utility bills;
All calculations and assumptions to support
the technical feasibility and energy savings of the
recommended projects;
A proposed budget detailing all project cost;
and
A proposed schedule for implementation of the
projects.
1. Retrocommissioning . Generally energy efficiency
programs focus on technologies that can be installed to
reduce consumption. In new 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 owners or managers understand how 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 the HVAC and lighting systems are running 24/7, year
round. By training facilities to use the systems energy
bills could be cut in half in many schools. This type of
training of faculty 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-administered programs.
2. Guidelines or Regulations ? In an effort to expedite
program development and to get the money approved by
Proposition 39 working for the state as soon as possible,
this bill allows the CEC to adopt program guidelines rather
than regulations. In doing so, the CEC would be exempt in
its development of these guidelines from complying with the
public notice and comment requirements of the
Administrative Procedures Act (APA). The bill requires
instead that CEC provide written notice to the public of
not less than 30 days when adopting the guidelines, and 15
days for amending the guidelines. The procedures are
consistent with authority provided to the CEC to facilitate
development of ARRA-related energy efficiency programs.
The committee is unaware of any controversies associated
with the development of ARRA program guidelines through
this process. However, absent the authority for
guidelines, if an agency believes that the public notice
and comment procedures under the APA take too long, they
can adopt emergency regulations to be effective in as
little as 15 to 20 days, with the emergency standard
typically met by specifying it in the statute.
3. 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 Energy, Utilities & Communications Committee
April 16, 2013.
SB 39 (De Leon) - Requires the Office of Public School
Construction to establish a school district assistance
program to distribute grants, on a competitive basis, for
energy efficiency upgrade projects pursuant to Proposition
39. Status: Set for hearing in the Senate Education
Committee April 17, 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: Set for hearing in Assembly Natural Resources
Committee April 15, 2013.
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 Natural Resources Committee April 15,
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 Natural Resources Committee April 15, 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
Natural Resources Committee April 15, 2013.
POSITIONS
Sponsor:
Author
Support:
SunPower Corporation
Oppose:
None on file
Kellie Smith
SB 64 Analysis
Hearing Date: April 16, 2013