BILL ANALYSIS Ó
SB 1414
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Date of Hearing: June 29, 2016
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Mike Gatto, Chair
SB
1414 (Wolk) - As Amended June 14, 2016
SENATE VOTE: 30-9
SUBJECT: Energy
SUMMARY: Directs the California Energy Commission (CEC) to
develop a plan by 2019, in consultation with the Contractors
State License Board (CSLB), local building officials, and other
stakeholders, to promote the installation of central air
conditioning and heat pumps in compliance with Part 6 of Title
24 of the California Code of Regulations. 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.
EXISTING LAW:
1)Authorizes the State Building Standards Commission to review
and approve building construction standards proposed by state
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agencies, resolve conflict, duplication, and overlap in
construction standards, and ensure highly consistent
construction standards among state and local jurisdictions.
(Health and Safety Code Section 18930)
2)Requires the CEC to adopt energy efficiency regulations
applicable to new construction and remodeling of residential
and commercial buildings. (Public Resources Code Section
25402(b)(1))
3)Establishes within the Department of Consumer Affairs, the
CSLB and requires the CSLB to license and regulate
California's construction contractors, 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 Section 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 Section 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 Section 399.4(b)(1))
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FISCAL EFFECT: Unknown.
COMMENTS:
1)Author's Statement: "SB 1414 supports statewide energy
efficiency goals to increase compliance to 90 percent by 2020
(as established in the California Energy Efficiency Strategic
Plan) and ensures that ratepayer dollars are spent on projects
that meet required local government permitting requirements."
2)Rate of Unpermitted Heating, Ventilation and Air Conditioning
(HVAC) Installations: Air conditioning use is common in
California. Today, 95% of new homes built in California
include central air conditioning. Much of the need to power
air conditioners coincide with times of peak electric system
demand, traditionally the most costly, most polluting times to
supply electric power. Yet, according to a document jointly
issued by the CEC and California Public Utilities Commission
(CPUC), as of 2008, fewer than 10% of HVAC systems obtained
legally required pre-installation local building permits; 30%
to 50% of new central air conditioning systems were not being
properly installed, leading to a 20% to 30% increase in peak
energy needed to 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
--------------------------
<1>
California Energy Efficiency Strategic Plan January 2011 Update
(http://www.energy.ca.gov/ab758/documents/CAEnergyEfficiencyStrat
egicPlan_Jan2011.pdf).
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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.
3)Impact on Statewide Energy Savings: 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% 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 2011 consultant memo to
the CEC and CPUC - that many HVAC projects are unpermitted.<2>
Second, energy agencies assume 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. However, it is very
difficult 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.
--------------------------
<2>http://www.energydataweb.com/cpucFiles/pdaDocs/1514/HVAC6%20Re
sidential%20Partial%20Compliance%20Results%20Phase%20One_11APR201
6.pdf
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Currently, the CPUC is conducting a HVAC Market Assessment to
determine compliance with Title 24 requirements. This study is
ongoing. However, preliminary findings provided in a staff
white paper released in April 2016 shed additional light on
this issue. According to the paper, preliminary findings show
only 35% of HVAC replacements were permitted. In addition, the
results found that code requirements were met 79% of the time
for permitted installations and 60% of the time for
unpermitted installations.<3> Although these findings suggest
that more HVAC systems are permitted than was thought in 2011,
they also suggest that permitting rates remain unacceptably
low. Further, they bring evidence to the claim that
unpermitted HVAC systems are installed incorrectly at a higher
rate than those with proper permitting.
4)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.
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 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
--------------------------
<3> Staff White Paper on Energy Efficiency Baselines, California
Public Utilities Commission, corrected version April 27, 2016.
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upgrade should comply with the CEC's building energy
efficiency standards. Energy efficiency is the rationale for
the incentive. 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
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counter California's energy efficiency goals.
However, this bill would only discourage unpermitted and
unsafe program participation. Further, IOUs are already
required to certify the improvement or installation has
complied with any applicable permitting requirements. This
bill modifies existing law to ensure Title 24 regulations are
complied with throughout the installation process as
prevailing evidence strongly suggests many projects are
completed without proper permitting despite current
regulations.
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.<4> The
rationale behind the LHC recommendation applies just as well
to ratepayer-funded rebate programs.
5)Arguments in Support: According to The Utility Reform Network
(TURN), "Last year the Legislature enacted AB 802 (Williams),
which will allow the Energy Efficiency Program Administrators,
as specified by the CPUC, to provide incentives and receive
credit for projects to bring existing buildings up to the
CEC's energy efficiency standards for existing buildings,
including credit for energy savings associated with code
compliance. With this policy change, it is even more
important than ever before to ensure that projects receiving
ratepayer incentives comply with the requirements of
California's building code, including the requirement to close
a permit, where a permit is required. The process of closing
---------------------------
<4> Level the Playing Field: Put California's Underground
Economy Out of Business, Little Hoover Commission, March 2015.
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a permit includes an inspection by the local building
department, which serves a critical verification role in
assuring that projects meet the health, safety, and energy
efficiency-related specifications of code. By requiring
Program Administrators to require proof of permit closure for
customers receiving ratepayer-funded rebates or incentives, SB
1414 would promote code compliance and help to ensure that
customers - including those whose contractors would otherwise
pull permits but not close them - receive the full benefits of
the energy efficiency upgrade they have purchased."
6)Arguments in Opposition: According to Sempra Energy
Utilities, "The [IOUs] currently engage with local governments
through our existing coordination/partnership programs for
energy efficiency, including HVAC efforts. We work closely
with the State to help ensure the appropriate permits are
obtained prior to installation of energy efficiency measures
that use ratepayer funds. To the end, customers and/or the
recipient of an HVAC rebate or incentive must certify that
they have used a licensed contractor, and have followed
permitting requirements for the installation. This
certification applies to all work or installation that
requires a building permit. The IOU's rebate and incentive
applications contain language and required fields for name,
company name, signature, permit number, and a check box
indicating compliance with the requirement(s). The contractor
must fill in these required fields for the rebate or incentive
to be valid and processed. If the State wants to increase
compliance with the local and state building permit process,
the compliance monitoring process implemented by local
governments should be enhanced. It should not be the
responsibility of the electrical and gas corporations to
police building permit compliance."
7)Suggested Amendments:
The author may wish to consider technical amendments to (1)
change references to the "Contractors' State License Board" to
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read: Contractors State License Board; and (2) adjust wording
in 25402.12(a) to more clearly reflect the intention of the
author to increase code compliance in HVAC installation.
SECTION 1. Section 25402.12 is added to the Public Resources
Code, to read:
25402.12. (a) On or before January 1, 2019, the commission, in
consultation with the Contractors' Contractors State License
Board, local building officials, and other stakeholders, shall
approve a plan that will promote the installation of central
air conditioning and heat pumps in compliance with Part 6 of
Title 24 of the California Code of Regulations in the
installation of central air conditioning and heat pumps .
(b) Prior to approving the plan described in subdivision (a),
the commission shall do all of the following:
(1) Evaluate the best available technological and economic
information to ensure that data collection and its use is
feasible and achievable at a reasonable cost to government,
industry, and homeowners.
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(2) Consider the impact of the plan on all of the following:
(A) Property owners.
(B) The HVAC industry, including manufacturers, distributors,
and contractors.
(C) Local governments.
(D) Building officials.
(E) The Contractors' State License Board.
(3) Provide the public with the opportunity to review and
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comment on the proposed plan.
(c) The commission may adopt regulations to increase
compliance with permitting and inspection requirements for
central air conditioning and heat pumps and associated sales
and installations, consistent with the plan approved pursuant
to subdivision (a).
8)Prior Legislation:
AB 802 (Williams), Chapter 590, Statutes of 2015: Allows the
Energy Efficiency Program Administrators, as specified by the
CPUC, to provide incentives and receive credit for projects to
bring existing buildings up to the CEC's energy efficiency
standards, including credit for energy savings associated with
code compliance.
AB 1918 (Williams) of 2014: 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. Held in
the Senate Appropriations Committee.
REGISTERED SUPPORT / OPPOSITION:
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Support
Air-Conditioning Sheet Metal Association
Air-Conditioning and Refrigeration Contractors
Building Owners & Managers Association of California
California Apartment Association
California Building Officials
California Building Industry Association
California Business Properties Association
California Legislative Council of the Plumbing, Heating, and
Piping Industry
California State Pipe Trades Council
Center for Sustainable Energy
International Council of Shopping Centers
NAIOP - Commercial Real Estate Development Association of
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California
National Electrical Contractors Association, California Chapters
Retail Industry Leaders Association
Sierra Club California
The Utility Reform Network
U.S. Green Building Council, California
Western States Council of Sheet Metal Workers
Opposition
Pacific Gas and Electric Company
Sempra Energy Utilities (San Diego Gas and Electric; Southern
California Gas Company)
Analysis Prepared by:Darion Johnston / U. & C. / (916)
319-2083
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