BILL ANALYSIS Ó
SENATE COMMITTEE ON APPROPRIATIONS
Senator Ricardo Lara, Chair
2015 - 2016 Regular Session
AB 693 (Eggman) - Multifamily Affordable Housing Renewables
Program.
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|Version: August 18, 2015 |Policy Vote: E., U., & C. 8 - 3 |
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|Urgency: No |Mandate: Yes |
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|Hearing Date: August 24, 2015 |Consultant: Marie Liu |
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This bill meets the criteria for referral to the Suspense File.
Bill
Summary: This bill would create a program to provide monetary
assistance of qualifying renewable energy systems that are
installed on qualified multifamily affordable housing
properties.
Fiscal
Impact:
Ongoing costs of $558,000 from the Public Utilities
Reimbursement Account (special fund) for California Public
Utilities commission (CPUC) to oversee the contract to
administer the program and to annually assess the success of
the program.
Cost pressures of up to $100 million annually (General Fund)
to fund the program after 2020 if no additional Cap-and-trade
allocations are given to the electric utilities.
AB 693 (Eggman) Page 1 of
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Unknown lost revenues to the state, as an electric ratepayer
(General Fund and various special funds), for reduced credits
from the sale of Cap-and-trade auction revenues allocated to
electrical corporations.
Background: The California Global Warming Solutions Act of 2006 (referred
to as AB 32, HSC §38500 et seq.) requires the California Air
Resources Board (ARB) to determine the 1990 statewide greenhouse
gas (GHG) emissions level, to approve a statewide GHG emissions
limit equivalent to that level that will be achieved by 2020,
and to adopt GHG emissions reductions measures by regulation.
ARB is authorized to include the use of market-based mechanisms
to comply with the regulations. Under this authority, the ARB
initiated the cap-and-trade program. All monies, except for
fines and penalties, collected pursuant to the cap-and-trade
program deposited in the Greenhouse Gas Reduction Fund (GGRF)
(Government Code §16428.8).
Existing law requires that the GGRF only be used to facilitate
the achievement of reductions of GHG emissions consistent with
AB 32 (HSC §39710 et seq.). To this end, the Department of
Finance, in consultation with the ARB and any other relevant
state agencies, is required to develop, as specified, a
three-year investment plan for the moneys deposited in the GGRF.
The investment plan must allocate a minimum of 25% of the funds
to projects that benefit disadvantaged communities and to
allocate 10% of the funds to projects located within
disadvantaged communities. Additionally, the ARB, in
consultation with CalEPA, is required to develop funding
guidelines for administering agencies receiving allocations of
GGRF funds that include a component for how agencies should
maximize benefits to disadvantaged communities.
Under the Cap-and-trade regulations, ARB allocates GHG emission
allowances to capped sectors, including electric IOUs. These
allowances are given to IOUs to reduce the impact of the
cap-and-trade regulations on ratepayers. ARB requires that the
IOUs sell these allowances at the quarterly auctions and that
the proceeds be used for the ratepayer benefit, subject to
AB 693 (Eggman) Page 2 of
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oversight by the California Public Utilities Commission (CPUC).
Specifically, existing law (§748.5(c)) allows the CPUC to
allocate up to 15 percent of the proceeds to fund clean energy
and energy efficiency projects that are administered by the IOU.
Any remaining proceeds must be credited directly to residential,
small business, and emission-intensive trade-exposed retail IOU
customers.
Proposed Law:
This bill would require the CEC to annually allocate $100
million or 10% of available funds from the sale of GHG
allowances on behalf of ratepayers, which is less, for the
Multifamily Affordable Housing Renewable Programs for 10 years
from FY 2016-17 through FY 2025-2026. The program would provide
monetary incentives for qualifying renewable energy systems that
are installed on qualified multifamily affordable housing
properties through December 31, 2030.
The CEC guidelines would be required to:
Establish conditions for photovoltaic (PV) systems that
would receive funding under the program to ensure
appropriate siting and installation that promotes the
greatest energy production for the funds expended,
including through performance-based incentives if
appropriate.
Ensure that the renewable energy system be primarily
used to offset the electricity usage by low-income tenants.
Prohibit any additional costs for the renewable energy
system from being passed on to low-income tenants for
systems that are owned by third-parties.
Take into account federal investment tax credits and
contributions when determine incentive levels
Prohibit incentives that exceed total system
installation costs
Establish local hiring requirements to provide economic
development benefits to disadvantaged communities
Ensure that participating customers receive off-sets on
their electricity bills through virtual net metering
tariffs (VNM)
This bill would require the program to be administered by the a
third-party, selected by the CEC through a competitive bidding
process.
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If funds that are allocated over the first three years remain
uncommitted after three years, those funds would be required to
be credited to ratepayers.
The CEC would be required to evaluate program performance every
three years and make adjustment to the programs as needed. The
CEC would be required to report to the Legislature on the
progress of the program every two years.
This bill would also allow the CEC to approve a third-party
administrator to administer revenues from the sale of GHG
allowances received by an utility that are allocated for clean
energy and energy efficiency projects.
Staff
Comments: To oversee the administration of this grant program,
the CPUC estimates needing two and a half positions at an annual
cost of $308,000. Additionally, to produce the annual report to
the Legislature assessing the success of the program, the CPUC
anticipates needing a contract with an annual cost of $250,000.
This bill would require the CPUC to contract with a third-party
administrator to implement this program because the author and
sponsors believe that a third-party administrator can be more
cost-efficient and effective. The bill would limit the
administrative costs of the third-party administrator to 10% of
the program funds. The CPUC notes that the Single-Family
Affordable Solar Housing Program is run by a third-party
administrator that it considers to be effective and efficient
but has an administrative budget of 15%. These costs would come
from the funds allocated to the program.
Staff notes that this grant program is to be funded by revenues
from Cap-and-Trade revenue sales. However, the CPUC notes that
the ARB's Cap-and-Trade regulation only specifies that electric
utilities will receive allowances through 2020. It is unclear
how this program should be funded past this date unless it
receives monies from the General Fund.
Additionally, this bill restricts the grant program from
receiving 10% of available funds from revenues described in
§748.5(c), which is 15% of allocation revenues. It is unclear
AB 693 (Eggman) Page 4 of
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whether this program is limited to 10% of all allocation
revenues or 10% of the 15% of the revenues allocated for clean
energy and energy efficiency projects. Staff recommends that
this allocation be clarified. Staff further notes that this
program will result in reduced credits to electricity consumers
as a result of the sale of Cap-and-trade allocations, including
the state.
The grant program under this bill would offer incentives to
qualifying renewable energy systems that would include a
facility that generates electricity using biomass, solar
thermal, photovoltaic (PV), wind, geothermal, fuel cells using
renewable fuels, small hydroelectric generation, digester gas,
municipal solid waste conversion, landfill gas, ocean wave,
ocean thermal, or tidal currents. However, incentives are most
likely to go to PV solar systems. Should the other types of
renewable energy systems apply to the program, there could be a
significant increase in administrative costs and the incentive
levels could vary between the technologies.
Assuming that this grant program will essentially be a PV
assistance program, staff notes that there are other existing
programs, in particular the Multifamily Affordable Solar Housing
Program (MASH) (PUC §2852) which establishes monetary incentives
for the installation of solar energy systems on low-income
residential housing and is administered by the California Public
Utilities Commission. In fact, this program references the
definitions of the MASH program in order to define "qualified
multifamily affordable housing property" under this new program.
On July 31, 2015, the CPUC approved the handbook for the
reauthorized MASH program. MASH requires that the tenant must
receive at least 50% of the economic benefit of the allocated of
the solar energy system on a monthly system through VNM for the
life of the system up to 20 years. This bill similarly requires
that the tenants receive offsets on their utility bills through
VNM tariffs. The MASH program is currently oversubscribed and is
currently reviewing applications on the program waitlist.
Aside from the eligibility of other renewable energy systems
other than PV, the principal difference between this program and
MASH is the administering agency (third party hired by the CPUC
and the investor-owned utilities, respectively), funding source
(Cap-and-trade allocation sales and ratepayer funds,
respectively) and whether master-metered properties are eligible
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(no and yes, respectively). Staff notes that administering
multiple programs for substantially similar project types
typically results in higher administrative costs than a single
program.
The bill makes references to eligible customers who are
participating in the program. However, it would be the housing
property owner(s) who would be the participants to the programs,
with the tenant customers being beneficiaries of the program.
Staff recommends that the use of these terms be clarified.
This bill currently specifies that if funds remain uncommitted
after three years, the funds are to be credited to ratepayers.
However, the bill currently only applies this restriction to
funds allocated over the first three years. Presumably this
restriction should also apply to funds that are allocated in
year four (or beyond) that remain uncommitted after three years.
The language is also unclear whether which funds are to be
credited to the ratepayers - all uncommitted funds or just the
funds that have been uncommitted for more than three years.
Staff recommends that this restriction be clarified.
This bill constitutes a state mandate as it creates a new crime
because all violations of the PUC code are crimes. However,
under the California Constitution, costs associated with this
mandate are not reimbursable.
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