BILL ANALYSIS                                                                                                                                                                                                    Ó




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          |SENATE RULES COMMITTEE            |                       SB 1414|
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                                UNFINISHED BUSINESS 


          Bill No:  SB 1414
          Author:   Wolk (D), et al.
          Amended:  8/19/16  
          Vote:     21 

           SENATE ENERGY, U. & C. COMMITTEE:  9-1, 4/19/16
           AYES:  Hueso, Cannella, Hertzberg, Hill, Lara, Leyva, McGuire,  
            Pavley, Wolk
           NOES:  Gaines
           NO VOTE RECORDED:  Morrell

           SENATE APPROPRIATIONS COMMITTEE:  5-1, 5/27/16
           AYES:  Lara, Beall, Hill, McGuire, Mendoza
           NOES:  Nielsen
           NO VOTE RECORDED:  Bates

           SENATE FLOOR:  30-9, 5/31/16
           AYES:  Allen, Anderson, Beall, Block, Cannella, De León,  
            Galgiani, Glazer, Hall, Hancock, Hernandez, Hertzberg, Hill,  
            Hueso, Jackson, Lara, Leno, Leyva, Liu, McGuire, Mendoza,  
            Mitchell, Monning, Moorlach, Nguyen, Pan, Pavley, Roth,  
            Wieckowski, Wolk
           NOES:  Bates, Berryhill, Fuller, Gaines, Huff, Morrell,  
            Nielsen, Stone, Vidak
           NO VOTE RECORDED:  Runner

           ASSEMBLY FLOOR:  79-1, 8/23/16 - See last page for vote

           SUBJECT:   Energy


          SOURCE:    Author


          DIGEST:  This bill directs the California Energy Commission  








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          (CEC) to 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, and  
          authorizes the CEC to adopt regulations consistent with the  
          approved plan.  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.


          Assembly Amendments delete the requirement that CEC develop a  
          system to track central heating and air cooling equipment sales  
          and installations to verify compliance with permitting and other  
          requirements and instead require CEC to approve a plan and  
          authorize CEC to adopt regulations, as described above.


          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,  
            investigate complaints against licensed and unlicensed  








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            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 and 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)Directs CEC, in consultation with CSLB, local building  
            officials, and other stakeholders, to 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, and authorizes the CEC to adopt  
            regulations consistent with the approved plan.


          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








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          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  
          the most costly, most polluting times to supply electric power.   
          Yet, according to a document jointly issued by the CEC and the  
          California Public Utilities Commission, as of 2008, fewer than  
          10 percent of HVAC [heating, ventilation, and air conditioning]  
          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.  [California Energy Efficiency Strategic Plan January  
          2011 Update (http://www.energy.ca.gov/ab758/documents  
          /CAEnergyEfficiency StrategicPlan_Jan2011.pdf).]  The state  
          energy agencies conclude the installation of cooling systems  
          without proper permitting "represents a huge lost opportunity  
          for energy savings."  

          This bill attempts to provide a method to capitalize on this  
          opportunity for energy savings.  This bill directs CEC, in  
          consultation with CSLB, local building officials, and other  
          stakeholders, to approve a plan 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.  The bill  
          also authorizes CEC to adopt regulations in keeping with the  
          approved plan.

          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  








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          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  
          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.

          Requiring proof of permit closure 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  








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          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. [Level the Playing Field: Put  
          California's Underground Economy Out of Business, LHC, March  
          2015.]  The rationale behind the LHC recommendation applies just  
          as well to ratepayer-funded rebate programs. 

          Related/Prior 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 the California Public Utilities Commission (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 died in the Senate Committee  
          on Appropriations.

          FISCAL EFFECT:   Appropriation:    No          Fiscal  
          Com.:YesLocal:   No


          According to the Assembly Committee on Appropriations:


           Increases CEC costs of approximately $650,000 for the first  
            two years, then annual costs of approximately $400,000 per  
            year to prepare and implement the plan (special fund).


           Increases CPUC costs of approximately $150,000 per year  
            (special fund).




          SUPPORT:   (Verified8/23/16)


          Air-conditioning and Refrigeration Contractors Association








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          Air-conditioning Sheet Metal Association
          Building Owners & Managers Association of California
          California Apartment Association
          California Building Industry Association
          California Building Officials
          California Business Properties Association
          California Chapters of the National Electrical Contractors  
          Association
          California Legislative Council of the Plumbing, Heating & Piping  
          Industry
          California Retailers Association
          California State Pipe Trades Council
          Center for Sustainable Energy
          Environmental Defense Fund
          International Council of Shopping Centers
          NAIOP of California, the Commercial Real Estate Association
          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:   (Verified8/23/16)


          None received

          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."


           ASSEMBLY FLOOR:  79-1, 8/23/16
           AYES:  Achadjian, Alejo, Travis Allen, Arambula, Atkins, Baker,  








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            Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Burke,  
            Calderon, Campos, Chang, Chau, Chávez, Chiu, Chu, Cooley,  
            Cooper, Dababneh, Dahle, Daly, Dodd, Eggman, Frazier, Beth  
            Gaines, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez,  
            Gonzalez, Gordon, Gray, Grove, Hadley, Harper, Roger  
            Hernández, Holden, Irwin, Jones, Jones-Sawyer, Kim, Lackey,  
            Levine, Linder, Lopez, Low, Maienschein, Mathis, Mayes,  
            McCarty, Medina, Melendez, Mullin, Nazarian, Obernolte,  
            O'Donnell, Olsen, Patterson, Quirk, Ridley-Thomas, Rodriguez,  
            Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting,  
            Wagner, Waldron, Weber, Wilk, Williams, Wood, Rendon
           NOES:  Gallagher


          Prepared by:Jay Dickenson / E., U., & C. / (916) 651-4107
          8/23/16 20:03:03


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