BILL ANALYSIS Ó
SB 1207
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Date of Hearing: June 29, 2016
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Mike Gatto, Chair
SB
1207 (Hueso) - As Amended June 15, 2016
SENATE VOTE: 38-0
SUBJECT: Energy: conservation: financial assistance
SUMMARY: Extends the sunset on the Energy Conservation
Assistance Account (ECAA) program, and makes other technical and
clarifying changes to the Public Resources Code relating to the
California Energy Commission (CEC) and the California
Infrastructure and Economic Development Bank (IBank).
Specifically, this bill:
1)Extends the sunset date on the ECAA program from January 1,
2018, to January 1, 2028.
2)Clarifies the authority of the CEC to pledge collateral to
secure the repayment of moneys borrowed, or of bonds or other
borrowings, by IBank.
3)Clarifies, in connection with the pledging of loans, or of the
principal and interest payment on loans, the CEC's authority
to enter into pledge agreements setting forth the terms and
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conditions pursuant to which the CEC is pledging loans, or the
principal and interest payment on loans, including the
pledging of loans, or the principal and interest payment on
loans, as collateral to secure the repayment of bonds or other
borrowings by IBank, and may also agree to have the loans held
by bond trustees or by independent collateral or escrow agents
and to direct that payments received on those loans be paid to
those trustee, collateral, or escrow agents.
EXISTING LAW:
1)Establishes the ECAA, administered by the CEC, to provide
grants and loans to local governments and public institutions
to maximize energy use savings, including, but not limited to,
technical assistance, demonstrations, and identification and
implementation of cost-effective energy efficiency measures
and programs in existing and planned buildings or facilities.
(Public Resources Code Section 25410 et seq.)
2)Sunsets the ECAA on January 1, 2018, and thereafter revert the
remaining unexpended funds to the General Fund. (Public
Resources Code Section 25421)
3)Authorizes the CEC to borrow money, for the purpose of
obtaining funds to make specified loans, from the California
Economic Development Financing Authority, IBank, and the
California Consumer Power and Conservation Financing Authority
from the proceeds of revenue bonds issued by any of those
agencies. (Public Resources Code Section 25417.5)
4)Authorizes the CEC to pledge, to provide collateral in
connection with the borrowing of money, loans, or the
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principal and interest payments on loans, as specified.
(Public Resources Code Section 25417.5)
5)Establishes the IBank to finance public infrastructure and
economic development in California. (Government Code Section
63021 et seq.)
6)Requires IBank, following consultation with appropriate state
and local agencies, to establish criteria, priorities, and
guidelines for the selection of projects to receive assistance
from the bank. (Government Code Section 63040)
7)Authorizes IBank to issue specified taxable and tax-exempted
revenue bonds to provide financing for specified projects.
(Government Code Section 63045)
FISCAL EFFECT: Unknown.
COMMENTS:
1)Author's Statement: "SB 1207 ensures low cost financial
assistance is available for clean energy and energy efficiency
projects in the State of California. This bill accomplishes
this by: (1) extending the existing ECAA program, which is an
energy efficiency loan program administered by the CEC, and
(2) authorizing the CEC to pledge its loans to secure the
bonds issued by the IBank for its [California Lending for
Energy and Environmental Needs Center] Center, which finances
energy efficiency and clean energy projects."
2)Background: In 2003, the CPUC and CEC established the
"loading order" to help guide the state's energy policies and
decisions. The loading order consist of decreasing energy
demand by increasing energy efficiency and demand response,
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and meeting new energy generation needs with distributed
generation and renewable resources. In addition, consistent
with the loading order, statute requires both electrical and
gas Investor Owned Utilities (IOUs) to meet unmet resource
needs with all available energy efficiency and demand
reduction that is cost-effective, reliable and feasible. To
achieve these targets, the IOUs administer energy efficiency
programs with ratepayer funds approved by the CPUC.
Furthermore, under SB 350 (De León, Chapter 547, Statutes of
2015), California increased its Renewable Portfolio Standard
from 33% of electricity retail sales be served by renewable
energy to 50%, and doubled the energy efficiency savings in
electricity and natural gas end users by 2030.
3)IBank: The IBank was established in 1994 to finance public
infrastructure and private development that promote economic
growth, protect and sustain the environment, support clean
energy and efficiency, revitalize communities and enhance the
quality of life for the people in California. The IBank has
board authority to issue bonds, make loans, and provide
guarantees and other credit enhancements, provide financing to
public agencies, acquire or lease facilities, and leverage
State and Federal funds on a wide variety of projects related
to environmental mitigation measures.
In 2014, IBank established the California Lending for Energy
and Environmental Needs (CLEEN) Center to focus on energy
efficiency projects and retrofits. The CLEEN Center utilizes
IBank's access to capital markets to help drive energy related
projects through the Statewide Energy Efficiency Program
(SWEEP). SWEEP provides financing to State and local
governments, via a combination of a direct loan from IBank or
public market tax-exempt bonds, for approved clean energy
projects such as generation, distribution, transmission and
storage of electrical energy, energy conservation measures,
environmental mitigation measures, and water treatment and
distribution.
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4)CEC's Energy Conservation Assistance Account: The CEC
operates the ECAA program which provides loans to cities,
counties, public school districts, special districts, public
hospitals and care facilities, and public colleges and
universities at low rates, to reduce statewide energy
consumption through energy efficiency measures. From its
inception in 1979 to March 2016, the ECAA Program has issued
over $392 million in loans to 851 applicants, including 339
loans to local government agencies, 432 loans to schools and
colleges, 64 loans to public hospitals and public care
facilities, and 16 loans to special districts. According to
the CEC, from March 2000 to March 2016, the energy efficiency
improvements saved through ECAA loan recipients is estimated
at $37 million per year in energy cost savings and have reduce
greenhouse gas emission by approximately 122,000 tons per
year.
5)CEC and IBank: The IBank and CLEEN Center do not have a
dedicated source of funding specifically for clean energy
projects. The IBank is currently collaborating with the CEC
to securitize an unleveraged CEC loan program portfolio to
raise funds for the CLEEN Center at the lowest possible cost.
Securitizing the loan will result in $50 to $75 million in new
funding for the CLEEN Center so that it can continue to
finance energy efficiency and clean energy projects. In order
to secure the lowest possible interest rate, there must be
public confidence that the CLEEN Center will be appropriately
capitalized and funded to repay its loans. By using an
existing CEC loan portfolio as pledged collateral, the IBank
would be able to secure a higher credit rating on its bonds to
fund CLEEN Center projects. Obtaining a higher credit rating
will result in lower interest rates and cost for IBank, which
would lower the cost of loans for prospective IBank borrowers,
therefore increasing the accessibility for more borrowers to
obtain financing for energy efficiency projects through the
IBank.
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This bill clarifies the CECs authority to pledge collateral to
secure the repayment of moneys borrowed, or of bonds or other
borrowings, by IBank.
Furthermore, the ECAA program is set to sunset on January 1,
2018. This bill would extend the sunset to January 1, 2028.
This will allow the CEC to continue to provide energy
efficiency financing, including to the IBank, to reach the
state's energy efficiency and greenhouse gas reduce emission
goals.
6)Prior Legislation:
SB 1268 (Pavley), Chapter 615, Statutes of 2012: Extended the
sunset on the ECAA program from January 1, 2013, to January 1,
2018.
7)Double Referred: This bill is double referred to the Assembly
Natural Resources Committee.
REGISTERED SUPPORT / OPPOSITION:
Support
California School Board Association
East Bay Municipal Utility District
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School Energy Coalition
Opposition
None on file.
Analysis Prepared by:Edmond Cheung / U. & C. / (916)
319-2083