BILL ANALYSIS Ó SB 1207 Page 1 SENATE THIRD READING SB 1207 (Hueso) As Amended June 15, 2016 2/3 vote SENATE VOTE: 38-0 ------------------------------------------------------------------ |Committee |Votes|Ayes |Noes | | | | | | | | | | | | | | | | |----------------+-----+----------------------+--------------------| |Utilities |15-0 |Gatto, Patterson, | | | | |Burke, Chávez, Dahle, | | | | |Eggman, Cristina | | | | |Garcia, | | | | | | | | | | | | | | |Eduardo Garcia, | | | | |Hadley, | | | | | | | | | | | | | | |Roger Hernández, | | | | |Obernolte, Quirk, | | | | |Santiago, Ting, | | | | |Williams | | | | | | | |----------------+-----+----------------------+--------------------| |Natural |7-0 |Williams, Jones, | | SB 1207 Page 2 |Resources | | | | | | | | | | | |Cristina Garcia, | | | | |Hadley, Harper, Mark | | | | |Stone, Wood | | | | | | | |----------------+-----+----------------------+--------------------| |Appropriations |15-0 |Gonzalez, Bigelow, | | | | |Bloom, Bonilla, | | | | |Bonta, Chang, Eggman, | | | | |Eduardo Garcia, | | | | |Jones, Obernolte, | | | | |Quirk, Santiago, | | | | |Weber, Wood, McCarty | | | | | | | | | | | | ------------------------------------------------------------------ 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 SB 1207 Page 3 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. FISCAL EFFECT: According to the Assembly Appropriations Committee, with the extension of the ECAA sunset, approximately $2.1 million will flow back to the ECAA rather than the General Fund. In addition, extending the Sunset will continue the CEC's administrative costs which are about $2.5 million annually. Furthermore, the ECAA revolving fund loan program is self-sustaining. As loans are repaid, those repayments provide resources to fund additional eligible projects. If the program is not extended, new loans would not be issued and interest income would decrease over time. COMMENTS: 1)Author's Statement: According to the author, "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)IBank: The IBank was established in 1994 to finance public infrastructure and economic development projects in California SB 1207 Page 4 communities. 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. 3)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. The ECAA program is set to sunset on January 1, 2018. This bill extends the sunset to January 1, 2028. 4)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. 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 SB 1207 Page 5 more borrowers to obtain financing for energy efficiency projects through the IBank. This bill clarifies the CECs authority to pledge collateral to secure the repayment of moneys borrowed, or of bonds or other borrowings, by IBank. Analysis Prepared by: Edmond Cheung / U. & C. / (916) 319-2083 FN: 0004091