BILL ANALYSIS Ó Senate Appropriations Committee Fiscal Summary Senator Kevin de León, Chair SB 1275 (De León) - Charge Ahead California Initiative. Amended: May 6, 2014 Policy Vote: T&H 11-0; EQ 6-1 Urgency: No Mandate: No Hearing Date: May 23, 2014 Consultant: Mark McKenzie SUSPENSE FILE. Bill Summary: SB 1275 would establish the Charge Ahead California Initiative, to be administered by the Air Resources Board (ARB) with the goals of placing at least 1 million zero-emission and near-zero-emission vehicles in service by 2023, to create a self-sustaining industry for these vehicles, and increase access to those vehicles in disadvantaged communities. The bill would require ARB to consult with specified entities and stakeholders to adopt a funding plan for specified programs to meet the goals of the Initiative, require ARB to make specified changes to certain vehicle rebate and voucher incentive programs, and establish specified new programs. The bill would also require ARB to expand the Enhanced Fleet Modernization Program to allow for public transportation and car-sharing vouchers as an alternative to vehicle replacement vouchers. Fiscal Impact: ARB indicates it will incur costs of approximately $619,000 and 4 PY in 2014-15, and ongoing costs of $454,000 and 3 PY ongoing to adopt the specified funding plan and administer the components of that plan. (Greenhouse Gas Reduction Fund -GGRF) ARB indicates it will incur ongoing costs of approximately $165,000 and 1 PY beginning in 2014-15 to develop and administer each of the following new programs specified in the bill: a loan-loss credit enhancement program, a car sharing program in disadvantaged communities, and deployment of a charging infrastructure program. (GGRF) Actual costs and staffing needs would depend upon the amount of funding dedicated to the specified programs. ARB indicates it will incur annual costs of $344,000 and 2 SB 1275 (De León) Page 1 PY, beginning in 2016-17, to develop and implement a certification program for truck and bus hybrid and zero-emission vehicle retrofits and remanufactures. (GGRF) Unknown ongoing costs to fund additional program expenditures, likely in the millions to tens of millions annually. (GGRF) Background: Existing law, AB 118 (Nunez), Chap. 750/2007, established additional surcharges and fees on vehicle and vessel registrations and certain identification plates, and increased the smog abatement fee as funding sources for several new air quality and emission reduction programs. The fees and surcharges established by AB 118 provide approximately $180 million annually for the following programs. The Enhanced Fleet Modernization Program (EFMP) is administered by ARB in consultation with the Bureau of Automotive Repair for vehicle retirement, and in consultation with local air districts for vehicle replacement. This program provides for the voluntary retirement of passenger vehicles and light- and medium-duty trucks that are high polluters. Under the state retirement component of EFMP, the owner of a high-polluting vehicle may apply to ARB for a voucher of up to $1,500 towards a replacement vehicle under specified conditions. Under the local replacement component of EFMP, the owner of a high-polluting vehicle may apply to participating local air quality management districts for a voucher of up to $2,500 towards a replacement vehicle or a public transit voucher, as specified. Approximately 25,000 high-polluting vehicles were retired through the state component of EFMP in 2012-13. Less than two dozen replacement vouchers have been issued under the local component of EFMP since its inception in 2010. The Alternative and Renewable Fuel and Vehicle Technology Program (ARFVTP) is administered by the State Energy Resources Conservation and Development Commission (CEC) to provide funding for development and deployment of alternative and renewable fuels and advanced transportation technologies to help attain the state's climate change goals. Eligible projects include, among other things, improvement of light-, medium-, and heavy-duty vehicle technologies, and retrofitting medium- and heavy-duty on-road and off-road vehicle fleets. SB 1275 (De León) Page 2 The Air Quality Improvement Program (AQIP) is comprised of three programs administered by ARB in conjunction with local air districts that provide, among other things, vouchers for the purchase of hybrid and zero-emission trucks and buses, and grants that fund advanced technology vehicle, equipment, or emission-control projects that are not yet commercialized. Specifically AQIP includes the following component programs: The Clean Vehicle Rebate Program (CVRP), administered by ARB's contractor, the California Center for Sustainable Energy, provides rebates of up to $2,500 for purchasing or leasing a new zero-emission vehicle (ZEV) or plug-in hybrid electric vehicle. The Hybrid and Zero-Emission Truck and Bus Voucher Incentive Project (HVIP), administered by ARB and its contractor CALSTART, provides vouchers to California fleet owners to help purchase hybrid and zero-emission trucks and buses. AB 118 Advanced Technology Demonstration Projects, administered by ARB, provides grants to local air districts and other public agencies to fund advanced-technology vehicle, equipment, or emission-control projects that are not yet commercialized. The On-Road Heavy-Duty Vehicle Air Quality Loan Program (Truck Loan Assistance Program), administered by ARB and the California Pollution Control Financing Authority, provides loans to fleets to help implement ARB emissions reduction regulations related to trucks, buses, and heavy-duty (tractor-trailer) vehicles. Existing law, AB 32 (Nunez), Chap. 488/2006, requires ARB to adopt greenhouse gas (GHG) emission reduction measures to ensure that statewide emissions are reduced to 1990 levels by 2020. As part of the implementation of AB 32 market-based compliance measures, ARB adopted a cap-and-trade program that caps the allowable statewide emissions and provides for the auctioning of emission credits, the proceeds of which are quarterly deposited into the GGRF. Existing law, SB 535 (deLeón), Chap. 830/2012, requires that a minimum of 10 percent of cap-and-trade revenues fund projects located within disadvantaged communities, and that 25 percent of available revenues fund projects that benefit those communities. To date, ARB has conducted six auctions of GHG emission allowances, generating approximately $663 million. SB 1275 (De León) Page 3 Proposed Law: SB 1275 would require ARB to update the EFMP guidelines to ensure that public transit or car sharing vouchers are available as an alternative to vehicle replacement vouchers, and that those vouchers be equal in value to a vehicle replacement voucher. Car sharing is defined as a model of vehicle rental where users who are preapproved members can rent vehicles for short periods of time. SB 1275 would also require ARB to administer a new Charge Ahead California Initiative with the goals of placing at least 1 million zero-emission and near-zero-emission vehicles in service by 2023, to create a self-sustaining industry for these vehicles, and increase access to, and placement of those vehicles in disadvantaged communities. The bill would require ARB, in consultation with CEC, air districts, and public stakeholders to do the following: Adopt a plan by June 30, 2015 that establishes an estimate of the total funding necessary for specified programs and projects to meet the Initiative's goals. The programs funded would include the CVRP, HVIP, various components of the ARFVT, precommercial demonstration projects of advanced freight and transit technology for goods and passenger movement, and specified new programs. Update the funding plan at least every three years through January 1, 2023. Adopt revisions to CVRP criteria and guidelines by June 30, 2015 to ensure rebate levels are phased down in multiyear increments and to expand access and eligibility to low- and moderate-income persons, as specified. Adopt revisions to HVIP by June 30, 2015 to ensure program eligibility for a truck and bus retrofitted or remanufactured to be a zero- or near-zero-emission vehicle. Establish programs that increase access and benefits for disadvantaged and low- and moderate-income communities from electric transportation, including: loan and loss reserve financing, car sharing programs, and charging infrastructure in multi-unit dwellings in disadvantaged communities. Require these new programs to provide adequate outreach to disadvantaged and low- and moderate-income communities. Related Legislation: SB 1204, currently pending in this Committee, would require ARB, in conjunction with the CEC, to SB 1275 (De León) Page 4 administer a California Clean Truck, Bus, and Off-Road Vehicle and Equipment Technology Program to fund specified projects to develop and demonstrate technologies for zero- and near-zero emission medium and heavy duty trucks, buses, and off-road vehicles and equipment. Funding for the program would be from the GGRF and priority would be given to projects located in disadvantaged communities. Staff Comments: SB 1275 requires ARB, in consultation with specified entities to adopt a financing plan to fund specified projects and programs at a level that is necessary to achieve the specified goals. As noted above, the various vehicle-related fees and surcharges imposed under AB 118 provide approximately $180 million annually to fund most of the programs identified in this bill, but it is unlikely that this amount is sufficient to also meet the goals of the Charge Ahead California Initiative. Although the bill does not explicitly authorize the use of GGRF funds, the findings and declarations in the bill state that low carbon transportation, low-carbon freight, and zero-emission passenger transportation are eligible and recommended expenditures from the GGRF. It is unclear how much additional revenues would be needed to both maintain existing expenditures on AB 118 programs and make the additional investments specified in this bill, but staff estimates the bill could require additional allocations in the millions to tens of millions, which could be from the GGRF. The Governor's 2014-15 proposed budget includes appropriations of $850 million in cap-and-trade revenues to fund various projects and programs designed to reduce GHG emissions. As part of the Administration's overall strategy, ARB submitted a Budget Change Proposal (BCP) requesting $200 million from the GGRF and 15 PY of staff to support the expansion of existing clean transportation programs that provide incentives for sustainable freight technology, zero and low-emission vehicles, and clean trucks and buses. According to the BCP, these funds would benefit disadvantaged communities through the retirement and replacement of older, high-emitting vehicles with low-emission passenger vehicles in these communities, and supporting the demonstration of advanced freight technology to move cargo, which will benefit communities near freight hubs. This proposal is consistent with the May 2013 Cap-and-Trade Auction Proceeds Investment Plan, which emphasizes investments in existing programs in sectors which have the greatest GHG emissions, SB 1275 (De León) Page 5 namely transportation, energy, waste, and natural resources, with proposed investments commensurate with relative emissions. Investment in existing programs, rather than creating new programs, expedites investments in GHG-reducing projects. The Legislature has yet to act on the Administration's proposal, but it could be modified through the budget process to incorporate the goals and expenditures envisioned by this bill.