BILL ANALYSIS �
SB 124
Page 1
Date of Hearing: July 1, 2013
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Steven Bradford, Chair
SB 124 (Corbett) - As Amended: April 29, 2013
SENATE VOTE : 28-8
SUBJECT : Public Contracts: clean energy bid preferences
SUMMARY : Requires state agencies and the Trustees of the
California State University that accept bids or proposals for a
contract for the purchase or installation of a clean energy
device, technology, or system to provide a 5% preference to a
bidder. Specifically, this bill :
a)Defines a "clean energy device, technology, or system" as
follows:
1) A Renewable electrical generation facility that uses
biomass, solar thermal, photovoltaic, wind, geothermal,
fuel cells using renewable fuels, small hydroelectric
generation of 30 megawatts or less, digester gas, municipal
solid waste conversion, landfill gas, ocean wave, ocean
thermal, or tidal current, and any additions or
enhancements to the facility using that technology.
2) Combined heat and power system sized to meet on site
customer demand with a generating capacity no larger than
20 megawatts (MW).
3) Distributed generation and energy storage systems to
facilitate the integration of those resources into the
electrical grid, improve efficiency and reliability of the
distribution and transmission system, and reduce emissions
of greenhouse gases, peak demand, and ratepayer costs,
including fossil fuel projects that meet specified emission
requirements. The California Public Utilities Commission
(PUC) defines these as: wind turbines, waste heat to power
technologies, pressure reduction turbines, internal
combustion engines, microturbines, gas turbines, fuel
cells, and advanced energy storage systems.
4) Energy efficiency devices or technologies that reduce
the need for new electric generation and reduce emissions
of toxic and criteria pollutants and greenhouse gases.
a)Requires a state agency to provide a 5% bid preference to a
bidder that certifies that a clean energy device, technology,
or system was manufactured in the state.
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b)Requires bidders to provide substantiating documentation.
c)Requires the Department of General Services (DGS) to establish
a process to verify that bidders meet the 5% bid preference.
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. (Government Code 14650
et seq. and Public Contract Code 1100 et seq.)
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)Requires all contracts awarded by any state agency,
department, officer, or other state governmental entity
pursuant to this chapter for construction, professional
services, materials, supplies, equipment, alteration, repair,
or improvement shall have statewide participation goals of not
less than 15% for minority business enterprises and not less
than 5% for women business enterprises. These goals apply to
the overall dollar amount expended each year by the awarding
department. (Government Code 8790.70)
4)Entitles California disabled veteran businesses and small
businesses certified by the Department of General Services
(DGS) to a 3% preference in bidding on state contracts for
goods, services, information technology and for state public
construction contracts. (Military and Veterans Code 999)
5)Requires the state to award a 5% preference in contracts for
goods and services to California based firms that demonstrate
and certify that at least 50% of the total labor hours for
manufactured goods or 90% of the total labor hours for
services will be performed in qualifying areas. (Govt. Code �
4530 et seq.; Enterprise Zone Act, Govt. Code � 7070 et seq.)
6)Qualified small business and microbusiness bidders have
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precedence over nonsmall business bidders in the application
of bidder preference for which nonsmall business bidders may
be eligible. Provides that in the event of a precise tie
between the low responsible bid of a qualified small business
or microbusiness, and the low responsible bid qualified
disabled veteran-owned small business or microbusiness, the
contract shall be awarded to the disabled veteran-owned small
business or microbusiness. This applies if the small business
or microbusiness bidder is the lowest responsible bidder, as
well as if the small business or microbusiness bidder is
eligible for award as the result of application of the small
business and microbusiness bidder preference (Government Code
14838)
7)Target Area Contract Preference Act (TACPA) provides a 5% bid
preference to California based companies who demonstrate that
at least 50% of total labor hours required to manufacturer
goods and perform a contract are accomplished at worksites
located in a distressed area (defined). Government Code 4533.
8)Local Agency Military Base Recovery Area (LAMBRA) provides a
5% bid preference to California based companies who
demonstrate that at least 50% of total labor hours required to
manufacturer goods and perform a contract are accomplished at
worksites located in a military base recovery area (defined).
(Government Code 7118)
9)Establishes a Self-Generation Incentive Program (SGIP), until
January 1, 2016, to provide subsidies for specified types of
on-site electric generation facilities and energy storage,
with an additional 20 percent incentive for installation of
eligible distributed generation resources from "California
suppliers." (Public Utilities Code 379.6)
10)Establishes a 3% goal for disabled veteran businesses
participation in State contracting annually. (Executive Order
D-43-01).
FISCAL EFFECT : Unknown.
COMMENTS :
1)Author's Comment. "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
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green technology in California depends upon state policy, as
well as federal and state incentives.
"SB 124 supports the continued development of energy
efficiency and alternative energy in our state and protects
our financial investment in green technology, by giving a
small bid-preference of 5 percent on state or CSU contracts to
a bidder that certifies all of the parts of the device,
technology or system for installation were manufactured in
California. This preference-which is similar to several other
states, including Alaska, Idaho, Montana, and West Virginia,
that have preferences for various kinds of state-manufactured
goods-is intended to strengthen this important job sector and
demonstrate California's commitment to keeping clean
technology manufacturing in the state."
2)Definition of technology. AB 124 provides definitions of clean
energy devices, technologies, and systems but limits the
definition to those things that produce or store electricity.
In addition to these technologies, solar water heating systems
displace energy consumption, either electricity or natural
gas.
The author may wish to consider an amendment to include solar
water heating within the definition of clean energy devices,
technologies, and systems.
3)Women, Minority, and Disable Veteran workforce recruitment and
retention. SB 124 points out that California has suffered a
severe economic downturn and one of the nation's highest
unemployment rates. The clean energy sector promises to create
many jobs in both the manufacturing and construction sectors.
Current law establishes goals and bid preferences for women,
minority, and disabled veteran enterprises.
In 2011, the State enacted Senate Bill 2 1X (Simitian), the
33% Renewable Portfolio Standard (RPS), part of which included
a provision that the PUC adopt rules regarding " workforce
recruitment, training, and retention efforts, including the
employment growth associated with the construction and
operation of eligible renewable energy resources and goals for
recruitment and training of women, minorities, and disabled
veterans." The PUC's first annual RPS report after enactment
of the 33% RPS did not have sufficient data to report on
progress in this regard, however, the PUC has committed to
providing this in future reports.
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In February of 2013, one California based clean technology
manufacturer admitted to failing to meet federal wage
requirements for 14 Mexican workers. The company was required
to pay $70,000 in back wages, damages and fines in the case,
under a court order. The order also bars the company from
violating federal wage and overtime rules in the future.
The author may wish to consider an amendment to require the
Department of General Services to report on the employment
growth associated with the clean energy bid preference for
women, minority, and disabled veterans.
4)Transparency. The author states that "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."
In order to ensure that the bid preference program is working
as intended, the author may wish to consider an amendment to
require the Department of General Services to publish
information on its website on the location of all sites that
receive bid preferences; the name of the manufacturer and the
type of clean energy device, technology, or system utilized.
5)Clarification of bid preference implementation. Both TACPA and
LAMBRA limit the total of all bid preferences authorized to no
greater than 15%.
In addition, some clean technology companies are "vertically
integrated," meaning that they are both manufacturers and
construction contractors. The author may wish to clarify that
only one 5% bid preference is applicable in this circumstance.
The author may wish to consider specifying that this statute
provides a single 5% bid preference per bidder and include a
similar provision limiting the total of all bid preferences
authorized by this and other statutes to 15%.
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6)Related Legislation.
SB 175 (Corbett, 2011) proposed a 15 percent bidding
preference 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.
Status: Failed passage, Assembly Business, Professions and
Consumer Protection Committee.
SB 297 (Roth, 2013) would increase the California disabled
veteran businesses and small businesses preference in bidding
on state contracts for goods, services, information technology
and for state public construction contracts from 3% to 5%.
Status: Referred to Assembly Committees on Jobs, Economic
Development & the Economy and Accountability and
Administrative Review.
7)Arguments in Support . Supporters of SB 124 state that the bid
preferences will reward manufacturers and contractors located
here in California, support in-state employment for skilled
workers and attract capital investment to the state.
8)Arguments Against. Opponents of SB 124 express concern that
the bid preference will drive up energy costs. They also
express concern that protectionist statutes will promote trade
wars with or retaliatory actions by other states or nations.
Some of these concerns appear to be well founded. The State of
Oregon's procurement policy "requires public contracting
agencies, in determining the lowest responsible bidder, to add
a percent increase to each out-of-state bidder's bid price
which is equal to the percent of preference given to local
bidders in the bidder's home state. That is, if the low bidder
is from a state that grants a 10 percent preference to its own
in-state bidders, the Oregon agency must add 10 percent to
that bidder's price when evaluating the bid."
A number of other states have similar rules.
9)Technical Amendments and Sunset Date.
The Legislative Intent Section of SB 124 includes several
statements that may not be correct or verifiable, such as:
"California faces the most severe economic downturn since the
Great Depression" and "California is the nation's largest
clean economy." Most experts agree that California's economy
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is improving. While California is a leader in the clean
economy we do not have a relevant analysis to ensure that this
statement is factually correct. Therefore the author may wish
make revisions to the Legislative Intent.
The author may wish to consider a sunset date to provide the
Legislature and opportunity to revisit this bid preference to
verify that it is achieving intended results.
10)Suggested Amendments .
SECTION 1. The Legislature finds and declares all of the
following:
(a) California faces the most severe economic downturn since
the Great Depression. Over two million Californians are out of
work, and California's unemployment rate is one of the highest
in the nation.
(b) At a time of scarce state resources, state purchases
should can be used to stimulate our state economy and put
people back to work.
(c) The Green Building Executive Order (B-18-12) mandated that
state agencies evaluate the merits of using clean and
renewable onsite energy generation technologies in all new
building or large renovation projects.
(d) California has several companies that manufacture clean
energy devices, technology, and systems in the state,
employing Californians and helping our economy.
(e) California is the nation's largest a national leader in
creating a clean economy. More than 12,000 Many clean
technology companies call California home and are creating
jobs at nearly 10 times the rate of the state's other
industries . A number of these companies have developed novel
technologies, and it is in the interest of the state to
incentivize these companies to establish and grow
manufacturing operations within the state . This will to create
both construction and permanent manufacturing jobs in
California.
(f) It is the intent of the Legislature that a preference
should be allowed for clean energy devices, technology, and
systems manufactured in California.
10390. (a) "Clean energy device, technology, or system" means
devices or technologies used for a renewable electrical
generation facility, as defined in paragraph (1) of
subdivision (a) of Section 25741 of the Public Resources Code;
a combined heat and power system, as defined in Section 2840.2
of the Public Utilities Code; distributed generation and
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energy storage technologies eligible under the self-generation
incentive program pursuant to Section 379.6 of the Public
Utilities Code, as determined by the Public Utilities
Commission; a solar water heating system as defined by Section
2861(g) of the Public Utilities Code; or a facility designed
for the production of renewable fuels the efficient use of
which reduces the use of fossil or nuclear fuels; and energy
efficiency devices or technologies that reduce the need for
new electric generation and reduce emissions of toxic and
criteria pollutants and greenhouse gases.
10391. (a) A state agency that accepts bids or proposals for
a contract for the purchase or installation of a clean energy
device, technology, or system through a power purchase
agreement or a direct purchase shall provide a preference of 5
percent to a bidder that certifies that all of the parts of
the clean energy device, technology, or system to be installed
have been manufactured in this state. The maximum preference a
bidder may be awarded pursuant to this chapter is 5 percent
for that portion of a project that for the purchase and
installation of a clean energy device, technology, or system.
The sum of bid preferences as a result of this chapter and any
other provision of law shall be 15 percent. The preference
shall be provided as follows:
10391. (b) (1) The Department of General Services shall
establish a process to verify that a bidder meets the criteria
for the 5-percent preference and publish a regularly updated
list of all sites that receive bid preferences including the
name of the manufacturer and the type of clean energy device,
technology, or system utilized on its Internet Web Site .
(2) The Department of General Services shall annually publish
data on its Internet Web Site on the employment growth
associated with the clean energy bid preference for women,
minority, and disabled veterans.
10392. (c) This chapter shall sunset on January 1, 2020.
10780.6. (a) For purposes of this section, "clean energy
device, technology, or system" means devices or technologies
used for a renewable electrical generation facility, as
defined in paragraph (1) of subdivision (a) of Section 25741
of the Public Resources Code; a combined heat and power
system, as defined in Section 2840.2 of the Public Utilities
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Code; distributed generation and energy storage technologies
eligible under the self-generation incentive program pursuant
to Section 379.6 of the Public Utilities Code, as determined
by the Public Utilities Commission; a solar water heating
system as defined by Section 2861(g) of the Public Utilities
Code; or a facility designed for the production of renewable
fuels, the efficient use of which reduces the use of fossil or
nuclear fuels; and energy efficiency devices or technologies
that reduce the need for new electric generation and reduce
emissions of toxic and criteria pollutants and greenhouse
gases.
10780.6 (b) The trustees 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 or a direct purchase shall provide a preference of 5
percent to a bidder that certifies that all of the parts of
the clean energy device, technology, or system to be installed
have been manufactured in this state. The maximum preference a
bidder may be awarded pursuant to this chapter is 5 percent
for that portion of a project that is for the purchase and
installation of a clean energy device, technology, or system.
The sum of bid preferences as a result of this chapter and any
other provision of law shall be 15 percent. The preference
shall be provided as follows:
10780.6 (c) (1) The Department of General Services shall
establish a process to verify that a bidder meets the criteria
for the 5-percent preference and publish a regularly updated
list of all sites that receive bid preferences including the
name of the manufacturer and the type of clean energy device,
technology, or system utilized on its Internet Web Site .
(2) The Department of General Services shall annually publish
data on its Internet Web Site on the employment growth
associated with the clean energy bid preference for women,
minority, and disabled veterans.
10780.6 (d) This chapter shall sunset on January 1, 2020.
REGISTERED SUPPORT / OPPOSITION :
Support
Bloom Energy
California Conference Board of the Amalgamated Transit Union
California Conference of Machinists
California Labor Federation, AFL-CIO
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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
Opposition
California Chamber of Commerce
California Manufacturers & Technology Association (CMTA)
Analysis Prepared by : Susan Kateley / U. & C. / (916)
319-2083