BILL ANALYSIS
AB 46
Page 1
Date of Hearing: March 23, 2009
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Felipe Fuentes, Chair
AB 46 (Blakeslee) - As Amended: February 19, 2009
SUBJECT : Energy: energy conservation assistance.
SUMMARY : Authorizes the California Energy Commission (CEC) to
deposit funds received pursuant to the federal American Recovery
and Reinvestment Act of 2009 (ARRA) into two energy program
assistance accounts, and extends the sunset date for the two
state accounts to 2020.
EXISTING LAW :
1)Establishes the Energy Conservation Assistance Account (ECAA)
to provide loans to schools, hospitals, public care
institutions, and local government entities for financing
energy conservation related projects.
2)Establishes the Local Jurisdiction Energy Assistance Account
(LJEA) as a separate account within the General Fund as a
depository for all money received from local jurisdictions
from loan repayments, for energy project assistance. Permits
the CEC to contract for project services including feasibility
analyses, project design, field evaluation, and operation and
training assistance.
THIS BILL :
1)Permits the CEC to receive and deposit funds from the federal
government pursuant to the ARRA into the ECAA and LJEA.
2)Extends the sunset date for the ECAA and the LJEA from 2011 to
2020.
3)Includes an urgency clause declaring the bill to take effect
immediately.
FISCAL EFFECT : Unknown.
COMMENTS : According to the author, the purpose of this bill is
to "?allow a working program to continue." Both accounts fund
energy efficiency projects and energy efficiency is widely
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recognized as the cleanest and most cost-effective resource for
meeting California's energy needs. The state has a rich history
dating back to the 1970's of implementing energy efficiency and
conservation programs. As a result, for the past 30 years, while
per capita electricity consumption in the U.S. has increased by
nearly 50 percent, California electricity use per capita has
been approximately flat.
1) The ECAA : The ECAA was created in 1979 to provide grants
and loans to fund energy efficiency measures in schools,
hospitals, public care institutions, or units of local
government and their ancillary services. The repayment of the
loan is based on the amount of money saved as a result of the
installation of efficiency measures. In the short run the
borrower's energy payment doesn't decrease because the amount
saved due to the energy efficiency project is used to pay back
the loan. After the loan is fully repaid, the borrower entirely
benefits by the savings.
The CEC notes that this program has had no defaults. The CEC
calculates the amount of the loan based upon a 15-year payback
solely from energy savings. The payback is pretty quick for
less-expensive measures that reduce energy consumption, like
replacing interior and exterior incandescent light bulbs with
more efficient lamps or replacing mechanical thermostats with
programmable thermostats. Some of the larger more expensive
items require a longer payback period, such as upgrading heating
ventilation and air conditioning (HVAC) systems.
2) The LJEA : In the 1980s the federal government had several
lawsuits against the Organization of Petroleum Exporting
Countries (OPEC). There were five total overcharge cases against
domestic oil producers in California that settled for a total of
$426 million. The penalties levied against oil producers were
intended to provide restitution to victims of the oil
overcharges. Expenditure of the funds was required to benefit
energy consumers and could not supplant state funds already
allocated for energy-related programs. To fund projects of
statewide benefit, the state created the Petroleum Violation
Escrow Account (PVEA). The LJEA was created from a $40.5
million appropriation from the PVEA for energy training and
management assistance, and to provide loans to local
jurisdictions for energy project assistance.
To date, the JLAC has funded over 600 projects including public
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transportation, computerized school bus routing, highway
projects, airport maintenance and reduction in airport user
fees.
3) The American Recovery and Reinvestment Act of 2009 : On
February 17, 2009, the President signed H.R. 1, the ARRA, a $787
billion stimulus package hailed as the most sweeping financial
legislation enacted in our nation's history. According to the
authors of H.R. 1, the goal of the ARRA was to create and
protect jobs. With California's 10.1% unemployment rate, the
need for such a stimulus is timely. They targeted job creation
in specific industries, such as health, education, and science.
Significant investments were also made in critical
transportation, water, energy, and broadband infrastructure.
The ARRA reflects an energy policy that mirrors long-standing
California policy. There is an emphasis on encouraging
renewable energy and energy efficiency, with additional
consideration for low-income households.
The ARRA includes a State Energy Program. The CEC expects
California to receive about $239 million for energy efficiency
and renewable energy programs. The federal guidelines encourage
long-term funding mechanisms such as revolving loans and energy
savings performance contracting. In 2006, the CEC allocated
previous State Energy Program funds toward numerous new and
existing programs, including: the Appliance Efficiency Program,
the Bright Schools Program, the Energy Partnership Program, the
California Community Colleges Program, the Building Efficiency
Program, the "PLACE3S" Educational Materials Project, the Energy
in Agriculture Program, the Energy Conservation Assistance
Program, the CEES Safe-Bidco Energy Efficiency Improvement Loan
Program, the Removing Barriers to Improved Light-Duty Vehicle
Fuel Economy Project, the Energy Efficient School Bus
Demonstration Program, and the Clean Fueling Infrastructure and
Vehicle Efficiency Incentive Program.
The ARRA also includes an appropriation for the Energy
Efficiency and Conservation Block Grant Program, which was
created in the Energy Independence and Security Act of 2007
(2007 Energy Act) to provide grants to eligible entities to
reduce fossil fuel emissions, reduce energy use, and improve
energy efficiency in the transportation, building, and other
appropriate sectors.
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The 2007 Energy Act requires the Department of Energy (DOE) to
provide $10 billion over a 5-year period ($2 billion per year)
for grants. Modeled after the existing Community Development
Block Grant program, these energy block grants fund local
initiatives including building and home energy conservation
programs, energy audits, fuel conservation programs, building
retrofits to increase energy efficiency, "smart growth" planning
and zoning, and alternative energy programs.
The 2007 Energy Act requires the DOE to directly allocate 68% of
the funds directly to local governments with relatively high
populations. Twenty-eight percent of the $2 billion per year
($560 million) goes directly to states. Of the amount allocated
to states, the 2007 Energy Act requires that the state use not
less than 60% of the amount received to provide subgrants to
units of local government that are not eligible to apply
directly to DOE. AB 2176 (Caballero), Chapter 229, Statutes of
2008, requires the CEC to administer funds allocated to the
state, upon federal appropriation. The ARRA appropriated the
funds.
The ARRA includes additional programs for which the state is
eligible to apply. Two significant programs include competitive
grants to implement an Energy Efficient Appliance Rebate
program, and an Energy Efficiency and Renewable Energy Worker
Training Program. The provisions of this bill would capture
these funds as well, if the state applies and is granted funds.
AB 46 permits the CEC to deposit funds from the ARRA into the
ECAA and the LJEA. The ECAA is continuously appropriated
without regard to fiscal year, and the LJEA funds are disbursed
by the Controller as authorized by the CEC. As such, as long as
the expenditures are consistent with federal guidelines, the
department has wide latitude to determine which programs and
projects it chooses to fund. However, the CEC may compete for
some funds that may not comport with the authorities granted for
the ECAA and the LJEA.
In order to ensure that ARRA funds are allocated toward the
appropriate state programs that qualify the state to compete for
the federal funds, and in order to resolve the disparate bills
that will attempt to allocate ARRA funding, this committee may
wish to delete the section that addresses the ARRA in order to
deal with all ARRA funds appropriately and comprehensively.
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RELATED LEGISLATION :
AB 262 (Bass) requires any moneys received pursuant to the ARRA
that are directed toward energy related activities, programs, or
projects, to be administered by the appropriate state energy and
water agencies and adhere to existing state environmental and
conservation policies.
AB 234 (Huffman) states legislative intent to develop an
implementation plan for federal stimulus dollars to promote
energy efficiency programs including weatherization of buildings
and other energy efficiency upgrades.
AB 2176 (Caballero), Chapter 229, Statutes of 2008, requires the
CEC to administer funds allocated to the state from the 2007
Energy Act for cost-effective energy efficiency measures.
REGISTERED SUPPORT / OPPOSITION :
Support
None on file.
Opposition
None on file.
Analysis Prepared by : Gina Adams / U. & C. / (916) 319-2083