BILL ANALYSIS Ó SB 471 Page 1 Date of Hearing: August 26, 2015 ASSEMBLY COMMITTEE ON APPROPRIATIONS Jimmy Gomez, Chair SB 471 (Pavley) - As Amended August 17, 2015 ----------------------------------------------------------------- |Policy |Natural Resources |Vote:|9 - 0 | |Committee: | | | | | | | | | | | | | | |-------------+-------------------------------+-----+-------------| | | | | | | | | | | | | | | | |-------------+-------------------------------+-----+-------------| | | | | | | | | | | | | | | | ----------------------------------------------------------------- Urgency: No State Mandated Local Program: NoReimbursable: No SUMMARY: This bill explicitly allows reductions of greenhouse gas (GHG) emissions associated with the water sector, including water use, supply and treatment, to be eligible for funding from AB 32 cap and trade revenues. Specifically, this bill: SB 471 Page 2 1)Requires the California Energy Commission (CEC), in cooperation with the State Water Resources Control Board (SWRCB), Air Resources Board (ARB), the Public Utilities Commission (PUC), and the Department of Water Resources (DWR), to study water-related energy use in California, as specified. 2)Requires the State Water Resources Control Board (SWRCB), in cooperation with CEC, ARB, PUC, and DWR, to develop a grant and loan program, upon appropriation of Greenhouse Gas Reduction Funds (GGRF), to fund projects that result in water-related GHG emission reductions. Authorizes SWRCB to adopt guidelines and regulations necessary to implement the bill. 3)Requires that any public funds made available for the program to private water companies regulated by the PUC be used for the benefit of ratepayers or the public. FISCAL EFFECT: 1)Annual cost pressures of approximately $10 million to fund a grant and loan program at SWRCB, including $500,000 for administration (GGRF). 2)Increased one-time costs of $315,000 and ongoing costs of $175,000 for ARB to provide assistance to CEC and develop methodology to quantify GHG reductions (GGRF). 3)Unknown increased ongoing costs for DWR to provide assistance to CEC, likely in the $50,000 to $250,000 range (GGRF). SB 471 Page 3 4)Increased ongoing annual costs of $100,000 for the PUC to provide assistance to the CEC. COMMENTS: 1)Rationale. Existing law allows GGRF to be used for the reduction of GHG emissions associated with water use and supply. Although, it is possible that water treatment would also be considered an eligible use as it is an integral part of urban water use and often requires significant amounts of electricity, this bill ensures water treatment projects are eligible for GGRF. 2)Background. Under the California Global Warming Solutions Act of 2006 (AB 32, Chapter 488, Statutes of 2006) the Air Resources Board (ARB) is required 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. All monies, except for fines and penalties, collected pursuant to a market-based mechanism are deposited in the Greenhouse Gas Reduction Fund (GGRF). Existing law requires the GGRF to be used only to facilitate the achievement of reductions of GHG emissions and lists a non-exclusive list of eligible project purposes including funding to reduce GHG emissions associated with water use and supply. SB 471 Page 4 3)Funding for water and GHG emissions. Emergency drought relief legislation, SB 103 (Budget Committee, Chapter 2, Statutes of 2014) appropriated $10 million to the California Department of Food and Agriculture (CDFA) for water and energy efficiency projects in the agricultural sector, and $30 million to DWR to implement a grant program to support local water-use efficiency projects and energy efficiency projects at State Water Project facilities. If this bill is enacted, there will be three entities competing for GGRF water project funds. The 2014-15 Budget allocates $832 million in GGRF revenues to a variety of transportation, energy, and resources programs aimed at reducing GHG emissions. Various agencies are in the process of implementing this funding. The budget agreement specifies how the state will allocate most cap-and-trade auction revenues in 2015-16 and beyond. For all future revenues, the legislation appropriates 25% for the state's high-speed rail project, 20% for affordable housing and sustainable communities grants, 10% to intercity capital rail projects, and 5% for low-carbon transit operations. The remaining 40% is available for annual appropriation by the Legislature, but has not yet been appropriated for the 2015-16 Fiscal Year. Of that 40% available for annual appropriation, the Governor's proposed 2015-16 cap-and-trade expenditures would appropriate $60 million to DWR and CDFA for water and energy efficiency projects, $30 million to CEC and DWR for rebates to replace inefficient appliances, and $30 million to CEC and DWR for the Water and Energy Technology Program. SB 471 Page 5 Analysis Prepared by:Jennifer Galehouse / APPR. / (916) 319-2081