BILL ANALYSIS �
Bill No: SB
124
SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
Senator Roderick D. Wright, Chair
2013-2014 Regular Session
Staff Analysis
SB 124 Author: Corbett
As Amended: April 10, 2013
Hearing Date: April 23, 2013
Consultant: Paul Donahue
SUBJECT
Public contracts: Bid preferences - clean energy
DESCRIPTION
This bill provides a 5% preference to bidders installing
"clean energy" systems that have been manufactured or
assembled in California. Specifically, this bill :
1)Requires the California State University (CSU) and state
agencies that accept bids or proposals for a contract for
the purchase or installation of a clean energy device,
technology, or system through a power purchase
agreement<1> or a direct purchase to provide a preference
of 5% to a bidder that certifies that all of the parts of
the clean energy device, technology, or system to be
installed have been manufactured or assembled in this
state.
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<1> A power purchase agreement is a financial arrangement
in which a third-party developer owns, operates, and
maintains a clean energy device, technology, or system, and
a state agency agrees to site the device, technology, or
system on its roof or elsewhere on its property and
purchases the device, technology, or system's electric
output, not the device, technology, or system itself, from
the third-party developer for a predetermined period of
time.
SB 124 (Corbett) continued
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2)Specifies that the preference shall be 5% of the bid
price of the lowest responsible bidder meeting
specifications, or 5% of total score of the highest
scored bidder when factors in addition to price are
considered by the awarding authority.<2>
3)To be eligible for the preference, bidders must submit
information on the manufacturer or assembler of the clean
energy system, and the location where the system parts
will be manufactured or assembled.<3>
4)States that if more than one bid is lowest responsible or
highest scored, the agency shall award the contract to
the bidder having the highest number of full-time
employees assembling or manufacturing the clean energy
system in the state when the contract is let.
5)Defines "Clean energy device, technology, or system" as:
(a) energy efficiency devices or technologies that reduce
the need for new electric generation and reduce emissions
of toxic and criteria pollutants and greenhouse gases;
(b) devices or technologies used for a renewable
electrical generation facility;<4> (c) a combined heat
and power system;<5> (d) distributed generation and
energy storage technologies eligible under the
self-generation incentive program;<6> or (e) a facility
designed for the production of renewable fuels, the
efficient use of which reduces the use of fossil or
nuclear fuels.
6)Contains several legislative findings and declarations,
which state among other things that state purchases
should be used to stimulate our state economy and put
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<2> The bill specifies that the 5% preference shall not be
awarded to a noncompliant bidder, and cannot be used to
satisfy any applicable minimum requirements.
<3> The bill directs the Department of General Services
(DGS) to establish a process to verify that a bidder meets
the criteria for the 5-percent preference.
<4> Pub. Res. Code � 25741
<5> Pub. Util. Code � 2840.2
<6> See Pub. Util. Code � 379.6
SB 124 (Corbett) continued
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people back to work; that California is the nation's
largest clean economy; that more than 12,000 clean
technology companies call California home and are
creating jobs at nearly 10 times the rate of the state's
other industries; and that this bill create both
construction and permanent manufacturing jobs in
California.
EXISTING LAW
1)Establishes rules governing the awarding of contracts by
state agencies, including general requirements for
competitive bidding on contracts for construction
projects, goods, services, and information technology.
2)Authorizes public agencies to enter into contracts with
private entities to provide electrical or thermal energy
or conservation services from alternate energy equipment
or cogeneration equipment, if the cost of the services
provided will be less than the anticipated cost to the
agency. The contracts are also exempt from competitive
bidding and may be awarded by the agency based on the
experience of the contractor and cost of the contract.
(Govt. Code � 4217.10 et seq.)
3)Entitles California disabled veteran businesses and small
businesses certified by the Department of General
Services (DGS) to a 5 percent preference in bidding on
state contracts for goods, services, information
technology and for state public construction contracts.
4)Requires the state to award a 5 percent preference in
contracts for goods and services to California based
firms that demonstrate and certify that at least 50
percent of the total labor hours for manufactured goods
or 90 percent of the total labor hours for services will
be performed in qualifying areas.<7>
5)Establishes a Self-Generation Incentive Program (SGIP) to
provide subsidies for customer-owned electric generation
facilities, with an additional 20 percent incentive for
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<7> See, e.g., Target Area Contract Preference Act, Govt.
Code � 4530 et seq.; Enterprise Zone Act, Govt. Code � 7070
et seq.; Local Agency Military Base Recovery Area Act,
Govt. Code � 7105 et seq.
SB 124 (Corbett) continued
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installation of eligible distributed generation
resources<8> from "California suppliers."
BACKGROUND
1)Purpose of the bill : According to the author, California
has made a strong commitment to clean energy technology.
Currently, California maintains over a dozen major
programs to support the development of energy efficiency
and alternative energy in the state. Over the past 10 to
15 years, the state has spent approximately $15 billion
on such efforts. In addition, Proposition 39 of 2012,
which passed with a 60 percent vote, increases state
corporate tax revenues and requires that half of these
revenues for the next five years be used for energy
efficiency and alternative energy projects. California
residents are great supporters of green technology.
According to the author, "California-made clean energy
technology creates important manufacturing jobs in our
state, leads to significant investment in our
communities, is made with cleaner energy than
foreign-made products and will demonstrate California's
innovative technology. The continued success of green
technology in California depends upon state policy and
federal and state incentives.
"Unfortunately, the current system fails to fully
consider California's investments when spending tax
dollars to implement energy efficiency projects. For
example, California has installed photovoltaic solar
systems on state property, including land controlled by
the Department of Corrections and Rehabilitation, the
Department of Mental Health and several California State
Universities. However, Department of General Services
does not know if any of the solar panels on state
property were made in California.
"Several states, including Alaska, Idaho, Montana, and
West Virginia, have preferences for state-manufactured
goods. SB 124 is no different. This policy supports the
continued development of energy efficiency and
alternative energy jobs in our state and protects our
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<8> The Public Utilities Commission administers incentives
for solar technologies under a separate California Solar
Initiative program.
SB 124 (Corbett) continued
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financial investment in green technology."
2)All parts must be manufactured or assembled in
California : In order to be eligible for the 5 percent
preference, a bidder must certify that all of the parts
of the clean energy device, technology, or system to be
installed have been manufactured or assembled in
California. Many so-called clean tech companies in
California manufacture or fabricate alternative or
distributed generation systems, and related devices or
systems.
Ostensibly, these firms would be eligible for the
preferences outlined in this bill, but it would seem that
few companies could certify that they manufacture or
assemble every single part of an alternative energy
system in California. To illustrate, a small compressor
might have been manufactured in Ohio, and shipped as a
discrete unit to a California company that incorporates
that part into an extensive alternative energy system
designed to heat and cool an entire university campus.
Technically speaking, this firm would not qualify for the
preference because a component part of a system was
manufactured and assembled elsewhere.
The California Public Utilities Commission's
Self-Generation Incentive Program (SGIP) provides
incentives for the installation of alternative energy
resources from a California supplier.
The SGIP program defines a "California supplier" as
either a business whose owners or officers are domiciled
in California and the permanent principal office or place
of business is in the state, or is a business that has,
during the preceding 5 years (1) owned and operated a
manufacturing facility in the state that manufactures
[the specified] resources; (2) is licensed to do business
in the state; and (3) employs California residents.
In order to avoid inadvertently excluding companies from
the bill's preference program, despite their having
substantial business operations in California, the author
or the Committee may wish to consider clarifying the
preference eligibility requirements consistent with the
SGIP definitions described above.
SB 124 (Corbett) continued
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3)Arguments in support : Supporters state that California
should put its money where its mouth is, in that we
support green energy and we should reward contractors
that invest in producing goods and services that meet the
highest environmental standards.
4)Arguments in opposition : Opponents state that this bill
would undermine growth in California green technology
manufacturers because growth in that sector depends on
their ability to export to other markets where energy
efficiency and renewable energy development lag behind
California.
PRIOR/RELATED LEGISLATION
SB 175 (Corbett), 2011-2012 Session. Would have established
a 15 percent bidding preference on state contracts for the
purchase or installation of a solar photovoltaic system to
a business certifying that all of the solar cells and solar
panels installed as part of the solar photovoltaic system
have been manufactured in California. (Held in Assembly
policy committee)
SUPPORT:
Bloom Energy
California Conference Board of the Amalgamated Transit
Union
California Conference of Machinists
California Labor Federation, AFL-CIO
California Teamsters Public Affairs Council
Capstone Turbine Corporation
Engineers & Scientists of California, IFPTE Local 20
International Longshore and Warehouse Union
Professional & Technical Engineers, IFPTE Local 21
Solaria Corporation
Soraa
UNITE-HERE, AFL-CIO
United Food & Commercial Workers Western State Council
Utility Workers Union of America
OPPOSE:
California Chamber of Commerce
California Manufacturers & Technology Association
SB 124 (Corbett) continued
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FISCAL COMMITTEE: Senate Appropriations Committee
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