BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | SB 1414| |Office of Senate Floor Analyses | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- 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 SB 1414 Page 2 (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 SB 1414 Page 3 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 SB 1414 Page 4 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 SB 1414 Page 5 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 SB 1414 Page 6 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 SB 1414 Page 7 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, SB 1414 Page 8 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 **** END ****