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