BILL ANALYSIS Ó AB 2379 Page A Date of Hearing: April 6, 2016 ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE Mike Gatto, Chair AB 2379 (Quirk) - As Introduced February 18, 2016 SUBJECT: Energy: home energy rating program: report SUMMARY: Requires the California Energy Commission's (CEC) biennial energy policy report to include additional information related to home energy efficiency. Specifically, this bill requires the report to include a comparison of actual energy savings and the models or projections used to validate the Home Energy Efficiency Rating program. EXISTING LAW: 1)Requires the CEC to continuously carry out studies, technical assessments, research projects, and data collection directed to reducing wasteful, inefficient, unnecessary, or uneconomic uses of energy, including improved appliance efficiency. (Public Resources Code Section 25401) 2)Requires the CEC to adopt cost-effective energy efficiency standards for appliances. (Public Resources Code Section 25402) AB 2379 Page B 3)Prohibits the sale of new appliances that do not meet the energy efficiency standards adopted by the CEC. (Public Resources Code Section 25402(c)(2)) 4)Requires the CEC to certify compliance options for new products, materials, and calculation methods in order to meet the energy efficiency standards. (Public Resources Code Section 25402.1(a)(2)) 5)Establishes ratepayer-funded programs to assist low-income households through billing discounts and weatherization and appliance replacement programs. (Public Utilities Code Sections 327 and 382) 6)Directs the California Public Utilities Commission (CPUC) to administer cost-effective energy efficiency programs funded by a nonbypassable system benefits charge assessed on ratepayers to fund energy efficiency programs. (Public Utilities Code Section 381) 7)Requires the CPUC to report annually on its effort to identify ratepayer-funded energy efficiency programs that are similar to other state programs to ensure that the ratepayer-funded programs complement and do not duplicate programs of other state agencies (Public Utilities Code Section 747.6) FISCAL EFFECT: Unknown. COMMENTS: 1)Author's Statement: "One of the problems that we are finding, [?] is that the models that are used to determine the energy savings as a result of efficiency upgrades are frequently off by significant margins. As a result, the efficiency scores AB 2379 Page C under [Home Energy Rating Systems] may also be inaccurate and giving homeowners the wrong picture about just how efficient their homes are or how much potential there is to improve a home's energy efficiency. In a California Public Utilities Commission evaluation from 2010-2012, the CPUC looked at the Whole House Retrofit program and determined that the 'program as currently implemented is not meeting its energy savings goals ? caused by a combination of factors that include [an] overestimation of savings in the retrofit planning (building modeling) phase.' Additionally, the report concluded that to improve the program, better energy estimating tools would be needed, including more complete data on energy use. This bill will improve the Home Energy Rating System by requiring a comparison of the estimated and actual savings that a home experiences when property owners make energy efficiency improvements that are recommended under [Home Energy Rating System]. As a result, we will learn through better and more complete data how the models that predict energy efficiency are working and be better informed about how to improve them. If we invest in energy efficiency to reduce energy consumption and to reduce greenhouse gas emissions, we must be sure that energy efficiency upgrades are actually yielding the results we expect." 2)Energy Efficiency and Funding: California has pursued its energy demand reduction goals through two primary avenues: utility-sponsored programs to reduce end-user consumption, and codes and standards designed to lower the energy use of buildings and appliances through energy efficiency improvements. By 2004, the CEC suggests these efforts have cumulatively saved more than 40,000 gigawatt hours (GWh) of electricity and 12,000 megawatts (MW) of peak electricity, equivalent to 24 500-MW power plants. According to the CEC, more than half of the statewide savings was from the building and appliance standards, with the balance resulting from programs implemented by the state's IOUs and local publicly-owned utilities (POUs). As a result of these efforts, the CEC states that California's energy use per capita has remained stable for more than 30 years while the national per capita average has increased by 40% and is nearly AB 2379 Page D double that of California. Energy efficiency is at the top of the "loading order," which refers to a requirement that California utilities first meet their energy needs through cost-effective energy efficiency measures before meeting energy needs through renewable and conventional generation. The state's IOUs and the publicly owned utilities administer energy efficiency programs that provide financial incentives and rebates for installing energy efficient appliances, lighting, windows, Heating, Ventilation and Air Conditioning (HVAC) systems and other technologies or measures. The Legislative Analyst Office (LAO) reports that these programs have totaled $9 billion in ratepayer funding since IOUs began administering them in 1998.<1> The CPUC reports the IOUs have requested roughly $2 billion in funding for energy efficiency programs in 2013-14, including HVAC, lighting, government partnerships, non-residential custom projects, and financing programs. These programs are expected to generate 4,670 GWh of energy savings in that cycle. A partial summary of funding of previous and ongoing programs follows: a) $1 billion per year from IOU ratepayers for programs approved by the CPUC through 2014, with $220 million for financing and expansion of the "Energy Upgrade California" program offering residential energy efficiency incentives and rebates up to $4,500 per customer. b) $25 million in ratepayer funds for a "Clean Energy Upgrade Financing" program required by AB 14 X1 (Skinner), Chapter 9, Statutes of 2011-12 First Extraordinary Session, to finance energy efficiency retrofits with loans administered by the California Alternative Energy and -------------------------- <1> Roberts, T., Simbol, A., and Taylor, M. "Energy Efficiency and Alternative Energy Programs", LAO, 2012 http://www.lao.ca.gov/laoapp/PubDetails.aspx?id=2677 AB 2379 Page E Advanced Transportation Financing Authority (CAEATFA) within the State Treasurer's Office. c) $300 million per year from IOU ratepayers for free energy efficiency and weatherization services for IOU low-income customers approved by the CPUC. d) $30 million per year in federal funding for free weatherization services for low-income residents administered by the California Department of Community Services and Development (CDCS). e) $185 million in one-time funding for free weatherization services for low-income residents from the American Recovery and Reinvestment Act of 2009 (ARRA) administered by CDCS. f) $280 million in one-time ARRA funds for energy efficiency programs administered or coordinated by the CEC), including Energy Upgrade California and several pilot programs designed to develop best practices for energy efficiency retrofits of California's buildings constructed prior to adoption of Title 24 energy efficiency building standards. These pilots are intended to help CEC develop a comprehensive energy efficiency strategy for this old building stock, as required by AB 758 (Skinner), Chapter 470, Statutes of 2009. 3)AB 758 (Skinner): Requires the CEC, in collaboration with the California Public Utilities Commission (CPUC) and stakeholders, to develop a program to achieve greater energy AB 2379 Page F efficiency in the state's existing buildings.<2> This effort is closely tied to California's Global Warming Solutions Act of 2006 (AB 32 (Núñez), Chapter 488), which seeks to reduce the state's greenhouse gas emissions to 1990 levels by 2020. One mechanism to reduce greenhouse gas emissions is to reduce energy consumption in existing homes - a goal to be met by AB 758. The first phase of AB 758 implementation, funded by the ARRA, established state and local pilot programs supporting energy efficiency upgrades.<3> 4)Energy Upgrade California:<4> Energy Upgrade California is a statewide initiative designed to help California meet the climate action and energy efficiency goals of AB 32 and AB 758, respectively. By offering financial incentives to homeowners who complete certain energy-saving home improvements, the program guides Californians to conserve energy, reduce demand on the electrical grid, and make informed energy management choices. Energy Upgrade California is an alliance of the CPUC, CEC, utilities, regional energy networks, local governments, businesses, and nonprofits. The financial incentives are designed to reward homeowners who address energy efficiency needs through a comprehensive "whole house" approach. Depending on their improvement needs and budget, homeowners can choose between various incentives - typically upgrades such as air sealing, attic insulation, and duct sealing must be combined with upgrades to wall, floor, and duct insulation and/or heating and cooling equipment. 5)Energy assessments and ratings: An energy assessment examines energy saving opportunities in a particular building, in order to define potential upgrades. Ratings are used to compare the energy efficiency of one building to others based on standard assumptions of occupant behavior. A variety of software tools --------------------------- <2> California Energy Commission. Comprehensive Energy Efficiency Program for Existing Buildings. http://www.energy.ca.gov/ab758 <3> California Energy Commission. AB 758 Pilots. http://www.energy.ca.gov/ab758/pilot-programs.html <4> Energy Upgrade California. http://energyupgradeca.org/en/ AB 2379 Page G are available to perform assessments and ratings, and some contractors have created proprietary in-house tools. These methods involve inputting information about a building into a building energy simulation program and running the program to predict energy use. Examples of modeling software that estimate energy usage include EnergyPro, Home Energy Saver (HES), and Home Energy Efficient Design (HEED). 6)Both anecdotal evidence and controlled studies have raised concerns about the accuracy of energy analysis software.<5> Generally, it has been observed that software-based energy analysis of inefficient existing homes tends to over-predict pre-retrofit energy use and retrofit energy savings. For example, a recent report found that modeling software consistently overestimated the energy use of each home.<6> Modeled pre-retrofit annual energy use was compared with actual billing data for 30 jobs, showing: a) Mean modeled total annual use was 40% greater than billed use. b) Mean modeled annual kilowatt hour use was 56-68% greater than billed use. c) Mean modeled annual gas use was 39-43% greater than billed use. The same study found that estimates prepared by the EnergyPro and eQUEST software were significantly different from each other and overestimated energy use. -------------------------- <5> National Renewable Energy Laboratory. Assessing and Improving the Accuracy of Energy Analysis for Residential Buildings http://www.nrel.gov/docs/fy11osti/50865.pdf <6> 2010-2012 PG&E and SCE Whole House Retrofit Program Process Evaluation Study. AB 2379 Page H Another study compared software-based energy use projections for 192 existing homes to actual energy bills and calculated the percent errors.<7> SIMPLE had a mean absolute percent error of 25.1%, compared to HES-Full with 33.4%, REM/Rate with 43.7%, and HES-Mid with 96.6%. In other words, SIMPLE predicted energy use on average within plus or minus 25.1% of actual use. It has been recommended that a study compare model results to pre- and post-upgrade utility bills. This could determine the accuracy of each software program relative to the particular measure, and establish the steps needed to calibrate the models to the actual use. The National Renewable Energy Laboratory has begun to identify, investigate, and correct input and software issues.<8> The CEC agrees that "simulation results should be calibrated to actual energy usage to help homeowners understand how their investment will likely affect their energy use if their occupant behavior remains the same after improvements are installed."<9> 7)Consumer Protection: Homeowners are encouraged to address energy efficiency depending on their improvement needs. --------------------------- <7> Energy Trust of Oregon. Energy Performance Score 2008 Pilot. http://www.earthadvantage.org/assets/documents/EPSPilotReport_200 8.pdf <8> National Renewable Energy Laboratory. Assessing and Improving the Accuracy of Energy Analysis for Residential Buildings http://www.nrel.gov/docs/fy11osti/50865.pdf <9> California Energy Commission. Comprehensive Energy Efficiency Program For Existing Buildings Scoping Report, August 2012. http://www.energy.ca.gov/2012publications/CEC-400-2012-015/CEC-40 0-2012-015.pdf AB 2379 Page I However, projected energy savings compared to actual energy bills studied had a margin of error of roughly 25%. Therefore, consumers are likely investing in home improvements to increase energy efficiency without accurate information regarding the actual impact on their energy bill. This discrepancy between projected and actual energy savings could have an exacerbated negative financial impact on households that are middle and lower income. The state is also a consumer when government subsidies and other financial incentives are invested in energy efficiency home improvements. To ensure consumers and the state are appropriately investing finances in energy efficiency projects, it is important to have accurate information on actual energy savings resulting from these projects. 8)Measuring Savings vs. Consumption: The bill requires the California Energy Commission's (CEC) biennial energy policy report to include a comparison of actual energy savings and the models or projections used to validate the Home Energy Efficiency Rating program. 9)Suggested Amendments: It may be difficult to measure energy savings with validity considering energy consumption fluctuates based on various factors independent of energy efficiency technologies in a home such as climate changes, changes in family life, or changes in time spent in the home. AB 2379 Page J The author may wish to consider an amendment that would require the CEC to include in their biennial report a comparison of the models or projections used to qualify the rating program to actual energy consumption as opposed to actual savings to better define what is being measured. SECTION 1. Section 25942 of the Public Resources Code is amended to read: 25942. (a) On or before July 1, 1995, the commission shall establish criteria for adopting a statewide home energy rating program for residential dwellings. The program criteria shall include, but are not limited to, all of the following elements: (1) Consistent, accurate, and uniform ratings based on a single statewide rating scale. (2) Reasonable estimates of potential utility bill savings, and reliable recommendations on cost-effective measures to improve energy efficiency. (3) Training and certification procedures for home raters and quality assurance procedures to promote accurate ratings and to protect consumers. (4) In coordination with home energy rating service organization databases, procedures to establish a centralized, publicly accessible, database that includes a uniform reporting system for information on residential dwellings, excluding proprietary information, needed to facilitate the program. There shall be no public access to information in the database concerning specific dwellings without the owner's or occupant's permission. (5) Labeling procedures that will meet the needs of home buyers, homeowners, renters, the real estate industry, and mortgage lenders with an interest in home energy ratings. (b) The commission shall adopt the program pursuant to subdivision (a) in consultation with representatives of the Department of Real Estate, the Department of Housing and Community Development, the Public Utilities Commission, investor-owned and municipal utilities, cities and counties, AB 2379 Page K real estate licensees, home builders, mortgage lenders, home appraisers and inspectors, home energy rating organizations, contractors who provide home energy services, consumer groups, and environmental groups. (c) On and after January 1, 1996, no home energy rating services may be performed in this state unless the services have been certified, if such a certification program is available, by the commission to be in compliance with the program criteria specified in subdivision (a) and, in addition, are in conformity with any other applicable element of the program. (d) On or before July 1, 1996, the commission shall consult with the agencies and organizations described in subdivision (b), to facilitate a public information program to inform homeowners, rental property owners, renters, sellers, and others of the existence of the statewide home energy rating program adopted by the commission. (e) The commission shall, as part of the integrated energy policy report prepared pursuant to Section 25302, report on the progress made to implement a statewide home energy rating program. The report shall include an evaluation of the energy savings attributable to the program, a comparison of actual energysavingsconsumption and the models or projections used to qualify the rating program, and a recommendation concerning which means and methods will be most efficient and cost-effective to induce home energy ratings for residential dwellings. REGISTERED SUPPORT / OPPOSITION: Support None on file. AB 2379 Page L Opposition None on file. Analysis Prepared by:Darion Johnston / U. & C. / (916) 319-2083