BILL ANALYSIS Ó
SENATE COMMITTEE ON ENERGY, UTILITIES AND COMMUNICATIONS
Senator Ben Hueso, Chair
2015 - 2016 Regular
Bill No: SB 1414 Hearing Date: 4/19/2016
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|Author: |Wolk |
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|Version: |4/12/2016 As Amended |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant:|Jay Dickenson |
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SUBJECT: Energy
DIGEST: This bill directs the California Energy Commission
(CEC) to develop a system to track central heating and air
cooling equipment sales and installations to verify compliance
with permitting and other requirements. This bill also
prohibits an investor-owned utility (IOU) from paying out a
rebate or incentive for energy efficiency upgrades unless the
recipient proves closure of regulatory permitting and compliance
with any requirements of the state's building standards for
energy efficiency.
ANALYSIS:
Existing law:
1)Authorizes the State Building Standards Commission to review
and approve building construction standards proposed by state
agencies, resolve conflict, duplication, and overlap in
construction standards, and ensure highly consistent
construction standards among state and local jurisdictions.
(Health and Safety Code §18930)
2)Requires the CEC to adopt energy efficiency regulations
applicable to new construction and remodeling of residential
and commercial buildings. (Public Resources Code
§25402(b)(1))
3)Establishes within the Department of Consumer Affairs the
Contractors State License Board (CSLB) and requires the CSLB
to license and regulate California's construction contractors,
SB 1414 (Wolk) PageB of?
investigate complaints against licensed and unlicensed
contractors, issue citations, suspend or revoke licenses, and
seek administrative, criminal, and civil sanctions against
violators. (Business and Professions Code §7000)
4)Specifies construction work for which a contractor or building
owner is required to obtain a permit from local building
officials requires inspections to ensure that the work
complies with regulations, including energy efficiency
regulations. (Business and Professions Code §7030)
5)Requires any rebates or incentives offered by an IOU for an
energy efficiency improvement or installation of energy
efficient components, equipment, or appliances in buildings be
provided only if the recipient of the rebate or incentive
certifies that the improvement or installation has complied
with any applicable permitting requirements and, if a
contractor performed the installation or improvement, that the
contractor holds the appropriate license for the work
performed. (Public Resources Code §399.4(b)(1))
This bill:
1)Requires CEC, in consultation with CSLB, local building
officials, and other stakeholders, to develop a system to
track central heating and air cooling equipment sales and
installations, statewide, to verify compliance with
permitting, inspection, and equipment testing requirements.
2)Conditions the provision of any rebate or incentive offered by
an IOU for energy efficiency upgrades upon the recipient
providing proof of permit closure and certification of
compliance with California's energy efficiency building
standards.
Background
California's air conditioners use a lot of energy; unpermitted
installations might be rampant. Air conditioning use is common
in California. Today, 95 percent of new homes built in
California include central air conditioning. Our homes are
bigger than they once were, too. As a result, it took seven
times as much energy to power California's air conditioners in
2008 as it did in 1970. Much of the need to power our air
conditioners came at times of peak system demand, traditionally
SB 1414 (Wolk) PageC of?
the most costly, most polluting times to supply electric power.
Yet, according to a document jointly issued by the CEC and CPUC,
as of 2008, fewer than 10 percent of HVAC systems obtained
legally required pre-installation local building permits; 30-50
percent of new central air conditioning systems were not being
properly installed, leading to a 20-30 percent increase in peak
energy needed cool the state's buildings.<1>
The situation described above is problematic, for a number of
reasons. First, local permitting exists to protect health and
safety. To the extent that air cooling systems are installed
without the proper permits, local agencies cannot ensure such
systems are installed in ways that best protect the public.
Second, it robs local agencies of permit revenues that allow
them to inspect installations for, as stated, health and safety.
Finally, it undercuts installers who do receive permits for air
cooling system installations, who must compete against the
likely lower cost of unpermitted air system installations. None
of this is right. Yet, none of this directly affects
achievement of the state's energy or environmental goals,
either.
The state energy agencies conclude the installation of cooling
systems without proper permitting "represents a huge lost
opportunity for energy savings." To get to this conclusion, the
energy agencies make a couple of key assumptions. The first
assumption is that a large number of air cooling systems are
installed in California without proper permitting. As noted
above, the agencies own documents indicate that fewer than 10
percent of HVAC systems obtained legally required building
permits. However, in making this claim, the agencies rely on
industry estimates. The author has provided evidence - a
consultant memo to the CEC and CPUC - that many HVAC projects
are unpermitted.<2> Despite the memo, the energy agencies have
not provided this committee reference to any thorough accounting
of the number of unpermitted air cooling installations that
occur in California.
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<1> California Energy Efficiency Strategic Plan January 2011
Update
(http://www.energy.ca.gov/ab758/documents/CAEnergyEfficiencyStrat
egicPlan_Jan2011.pdf).
<2>http://www.energydataweb.com/cpucFiles/pdaDocs/1514/HVAC6%20Re
sidential%20Partial%20Compliance%20Results%20Phase%20One_11APR201
6.pdf
SB 1414 (Wolk) PageD of?
The second assumption the energy agencies make is the air
cooling systems installed without the necessary permits are
oftentimes improperly installed, and the improper installations
cause energy inefficient operation. This is not an unreasonable
assumption. However, it is not necessarily true: in some
instances, or even in every instance, an air cooling system
installed without proper permits may nonetheless be operating at
maximum practical energy efficiency. Of course, it is very
difficult for the state energy agencies, or anyone else, for
that matter, to determine the number of air cooling systems
installed without a permit or the operating efficiency of any
such system because their existence is largely unknown.
This bill attempts to provide a method for filling this
information gap. This bill requires CEC, in consultation with
CSLB, local building officials, and other stakeholders, to
develop a system to track central heating and air cooling
equipment sales and installations, statewide. This bill
explicitly state's the purpose of the system to be developed by
CEC: to verify compliance with permitting, inspection, and
equipment testing requirements.
The details of the system that would be developed by CEC to
track HVAC sales are as yet unknown. HVAC sales are disperse;
so are installations. Sales and installations do not always
geographically coincide. A contractor may purchase an HVAC
system in a store, then drive it across city, county, state or
even national boundaries. The sale may occur at a
brick-and-mortar store, or it may occur online. It is hard to
image a system that will effectively track HVAC sales and
installations in a way that enables verification of compliance
with permitting, inspection, and equipment testing requirements,
many of which vary by local jurisdiction. It is even harder to
image such a system that is not cumbersome and costly.
Rebates for bad actors? Current law makes certain requirements
of any rebate or incentive offered by an IOU for energy
efficiency upgrades. One common type of project for which IOUs
offer rebates or incentives is HVAC installation. Relevant to
this bill, current law requires that, before an IOU may provide
a recipient with the rebate or incentive, the recipient must
certify (a) the improvement or installation complies with any
applicable permitting requirements and (b) if a contractor
performed the installation or improvement, that the contractor
holds the appropriate license for the work performed. This bill
SB 1414 (Wolk) PageE of?
modifies this process in that it newly requires an applicant for
an IOU rebate or incentive, in addition to the certification
described above, (a) to provide proof of closure of the permit
for the project and (b) to certify that the project or
installation complies with any specifications or requirements in
Title 24 of the California building code (the code section that
includes the CEC's building energy efficiency standards).
A project or upgrade that receives incentives from an IOU
because of energy efficient characteristics of the project or
upgrade should comply with the CEC's building energy efficiency
standards: energy efficiency is the rationale for the
incentive. And it is not burdensome for an applicant to
self-certify that the project or upgrade complies with CEC's
standards: this mirrors the exiting process for self-certifying
that a qualified contractor performed the work. This bill,
however, introduces a new aspect to the rebate or incentive
procedure - proof that the permit for a project has been closed.
HVAC installation requires a permit by a local building permit
agency. Upon approval, an HVAC installation receives a permit
from the local agency. That permit remains "open" until the
completed project is inspected by a certified technician, who
confirms the HVAC system is installed properly, at which point
the permit is said to be closed.
As noted above, the author's office has provided evidence that
many HVAC systems are installed without a permit. According to
the author's evidence, many permits for HVAC installations
remain "open," meaning the local building permit agency has no
confirmation the installation underwent final inspection to
ensure performance. This bill seeks to better ensure that
entities seeking IOU energy efficiency rebates or incentives for
HVAC installations undergo final inspection for performance, as
reflected in proof of a permit's closure.
Representatives of the IOUs object. They contend that requiring
an applicant for an IOU energy efficiency rebate to provide
proof of permit closure would prove burdensome, to both to the
program administrator and to the applicant. The IOUs accurately
note that local building permitting processes and requirements
vary among California's many local jurisdictions. The IOUs
contend this bill will add administrative cost and confusion,
delay payments, and potentially discourage program
participation, which would counter California's energy
SB 1414 (Wolk) PageF of?
efficiency goals. They may be right.
Nonetheless, the requirement makes sense. It is inappropriate
for the IOUs to provide energy efficiency rebates - paid for by
IOU ratepayers - for improperly permitted energy efficiency
projects. The requirement is also consistent with a recent
recommendation by the Little Hoover Commission (LHC), that
administrators of tax-payer-funded rebate programs require
applicants provide proof that legal requirements have been met
before awarding rebates.<3> The rationale behind the LHC
recommendation applies just as well to ratepayer-funded rebate
programs.
Prior/Related Legislation
AB 1918 (Williams, 2014) would have required the CEC, along with
stakeholders, to identify and implement methods to simplify
processes and procedures related to compliance with Title 24
energy efficiency building standards. It also would have
required CPUC to design an enforcement program to provide
technical and financial assistance to local governments to
improve HVAC compliance with the permitting process. The bill
was held in Senate Committee on Appropriations.
FISCAL EFFECT: Appropriation: No Fiscal
Com.: Yes Local: No
SUPPORT:
Building Owners & Managers Association of California
California Apartment Association
California Building Industry Association
California Building Officials
California Business Properties Association
California Retailers Association
Center for Sustainable Energy
International Council of Shopping Centers
NAIOP of California, the Commercial Real Estate Association
Sierra Club California
The Utility Reform Network
U.S. Green Building Council, California
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<3> Level the Playing Field: Put California's Underground
Economy Out of Business, Little Hoover Commission, March 2015.
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OPPOSITION:
Pacific Gas and Electric Company, unless amended
ARGUMENTS IN SUPPORT: According to the author:
Program Administrators (PAs) of energy efficiency programs
funded by the ratepayers of California's three IOUs do not
currently require program participants to demonstrate proof
of code compliance to be eligible for ratepayer incentives.
PAs also claim a large portion of their energy efficiency
savings from code compliance. Research shows that code
compliance is low and that the full energy efficiency
savings from code are not being captured. This requirement
would close this loop and ensure that ratepayer funds are
spent on code-compliant projects.
ARGUMENTS IN OPPOSITION: Representatives of the IOUs contend
this bill adds unknown, but potentially significant,
administrative complexity and cost to the energy efficiency
rebate programs.
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