BILL ANALYSIS
SB 363
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Date of Hearing: July 6, 2009
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Felipe Fuentes, Chair
SB 363 (Hancock) - As Amended: June 1, 2009
SENATE VOTE : 25-13
SUBJECT : Energy Conservation: schools.
SUMMARY : Creates the Solar School Subaccount in the State
Energy Conservation Assistance Account (ECAA) to provide low
interest loans to schools to be used for the installation of
solar energy systems.
EXISTING LAW
1)Creates the continuously appropriated ECAA in the General
Fund.
2)Authorizes the California Energy Commission (CEC) to contract
and provide loans to local government and public institutions,
including schools, to maximize energy use savings.
3)Requires that the interest rates on the loans be based on
surveys of existing financial markets and at rates not less
than 3 percent.
4)Creates the California Solar Initiative (CSI), a $3.3 billion
declining rebate program to offset the cost of installing
solar panels on homes, businesses, and public buildings.
THIS BILL :
1)Establishes the Solar School Subaccount in the State Energy
Conservation Assistance Account to be used for loans to
schools for the installation of solar energy systems.
2)Requires that the interest rates on the loans from the
subaccount be no higher than 1.5 percent.
3)Requires that the Solar School Subaccount (subaccount) be
available for the deposit of funds, including, but not limited
to, the American Reinvestment and Recovery Act of 2009 (ARRA).
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FISCAL EFFECT : Unknown.
COMMENTS : The purpose of this bill is to increase the ability
of school districts to purchase and install solar energy systems
in order to reduce operating costs.
1) Background : The Energy Conservation Assistance Act of 1979
(Act) is one of a number of energy efficiency measures passed by
the California Legislature in the wake of the oil shocks of the
1970's. At that time, the Legislature recognized that energy
costs often times made up a significant portion of local
governments' expenses and that those public institutions could
reduce their energy costs by 20 to 30 percent through efficiency
measures. The purpose of the Act was to provide local
governments and public institutions with financial and technical
assistance to achieve some of these potential savings.
ECAA is a revolving loan fund that provides loans of up to $3
million to public schools and colleges, cities, counties,
special districts, public hospitals and public care institutions
for energy efficiency and renewable energy retrofits. The loans
cover 100 percent of project costs and are designed to be repaid
with dollars saved on energy bills at a reasonable interest rate
given the financial market, which is currently set at 3.95
percent. According to the CEC, ECAA has provided over $200
million in loans to over 700 organizations to date, saving
borrowers an average of $40 million in lower energy costs per
year. There is over $20 million in ECAA in the current fiscal
year.
The ARRA, signed into law on February 17, 2009, was intended to
stimulate the U.S. economy in the wake of the economic downturn.
The various provisions of the act are worth approximately $787
billion, and include over $61 billion in funding for a number of
energy-related programs. The energy-related funding available in
the ARRA may be organized into five basic categories: a)
formula-based funds that are provided directly to the state b)
competitive funds for which the state is eligible but must apply
for funding c) funding available to local governments d) funding
available to private entities e) tax credit bonds. One of the
direct allocations to the CEC pursuant to ARRA is for the State
Energy Program, which will be receiving over $220 million. In
its June 2009 application to the Department of Energy for these
funds the CEC stated that it plans use a portion of these funds
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to augment ECAA.
This bill creates a Solar Schools Subaccount within ECAA that
would be used specifically for loans to schools for solar energy
systems. The fund is available to accept ARRA funding, and any
other funding, allocated by the legislature. Loans from the
subaccount are to be granted at an interest rate of 1.5 percent.
2) Empty subaccount that might stay that way : This bill would
create a subaccount within the ECAA that lacks a source of
funding at this time. According to the sponsors of the bill,
this subaccount would make it possible for future funding
sources to be available to schools for low-interest loans for
solar installations. While the CEC does plan on augmenting ECAA
using ARRA funds, it is unclear whether or not the commission
would use any of the funding to fund this account. The CEC had
a similar program called Solar Schools which expired in 2008 and
was not renewed. This might suggest that the CEC would not fund
such an account using the ARRA funding. Should the account not
be funded, this bill creates a cost for establishing a fund that
might stay empty. The committee may wish to consider amending
the bill to make its implementation contingent upon confirmation
that the CEC plans on directing ARRA moneys to the fund .
3) Solar preference : This bill creates a subaccount that would
specifically fund solar installations at schools. According to
the CEC, solar installations are one of the most expensive forms
of meeting increasing energy demand. The most cost-effective
means of meeting increasing energy demand is energy efficiency.
Should the state wish to maximize the funding available pursuant
to ARRA that is available to schools, it would seem that
creating a preference for a more expensive form of energy would
not only lower the total number of schools that can take
advantage of the funding, but would also create a higher payback
burden on the schools that do receive loans. The committee may
wish to consider amending the bill to include energy efficiency
measures .
4) Lowering the interest rate : This bill specifies a lower
interest rate for the subaccount than the one that is otherwise
available to schools under ECAA. The subaccount interest rate is
set at 1.5 percent, while the interest rate under ECAA is
currently set at 3.95 percent and is updated periodically based
upon a survey of existing financial markets by the CEC. By
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creating a set interest rate in statute, the ability of the CEC
to adjust the interest rate to reflect changing market
conditions will be eliminates. The committee may wish to
consider amending the bill set the interest rate as some
percentage of the ECAA interest rate . The lower interest rate is
also a significant departure from the current interest rate for
ECAA, and may not be deemed appropriate for all sources of
funding into this account. However, the lower interest rate is
appropriate for ARRA funding because the intent of the Federal
government is for these funds to be expended expeditiously.
Therefore the committee may wish to consider amending the bill
to limit the lower interest rate to be applied only to the ARRA
funds .
REGISTERED SUPPORT / OPPOSITION :
Support
Alameda County Waste Management Authority (ACWMA)
Albany (CA) Sustainability Committee
Albany Coalition for Environmental Health
Albany Unified School District
Albany Unified School District's Pool Sustainability Committee
Anirvan Chatterjee, CEO, Bookfinder.com
Bay Localize
California Interfaith Power and Light
Carbon Neutral Albany
Christine K. White, Planner/Designer, Interactive Resources,
Inc.
City of Richmond
Coalition for Adequate School Housing (C.A.S.H.) (co-sponsor)
Community Environmental Council
County School Facilities Consortium (CSFC)
Creekcats Environmental Partners
Dharma Merchant Services
Dreyfuss & Blackford Architects
Ecology Center
Global Green USA
Green Chamber of Commerce
Green Sangha
Greenback Associates
Helio Micro Utility
Kent Lewandowski, Chair, Sierra Club Northern Alameda Group
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Kyoto USA (co-sponsor)
Physicians for Social Responsibility
Renewable Funding
Robert S. Lieber, Albany City Council Member
Sequoia Foundation
Solar Panels for Albany High
Solar Richmond
South Bay Cities Council of Governments (SBCCOG)
SunPower
Union of Concerned Scientists (UCS)
Vote Solar
Warner Bros. Entertainment
West Sonoma County Union High School District
Opposition
None on file.
Analysis Prepared by : Nina Kapoor / U. & C. / (916) 319-2083