BILL ANALYSIS �
AB 14 X1
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Date of Hearing: March 2, 2011
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
AB 14 X1 (Skinner) - As Amended: March 1, 2011
Policy Committee: Natural �
ResourcesVote:6-3
Urgency: No State Mandated Local Program: �
No Reimbursable: No
SUMMARY
This bill creates the Clean Energy Upgrade Program, providing �
financial assistance to reduce the cost to borrowers who make �
certain property improvements. Specifically, this bill:
1)Creates the Clean Energy Upgrade Program (CEUP), administered �
by the California Alternative Energy and Advanced �
Transportation Financing Authority.
2)Directs the authority to provide CEUP financial assistance, �
such as a loan repayment reserve, to reduce overall costs to �
property owners who borrow from financial institutions to �
finance the installation of distributed generation renewable �
energy sources or energy or water efficiency improvements.
3)Directs the authority to establish guidelines for CEUP and to �
work with the California Energy Commission (CEC) to determine �
the level of financial assistance to be provided to CEUP �
participants.
4)Specifies other criteria the authority is to consider when �
providing financial assistance.
5)Makes available to CEUP a prior $50 million appropriation from �
the Renewable Resources Trust Fund (RRTF) previously �
authorized for use by the authority as a reserve for the �
Property Assessed Clean Energy (PACE) program.
6)Increases the amount of the RRTF appropriation available to �
the authority for administration.
AB 14 X1
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FISCAL EFFECT
1)Expands authorized use by the authority of a $50 million �
appropriation from the RRTF to include use as financial �
assurance for the CEUP program.
2)Increases, from $350,000 to $500,000, the amount available �
from the $50 million RRTF appropriation that the authority may �
use for program administration.
3)Negligible costs to CEC to assist the authority in �
administering the CEUP program.
COMMENTS
1)Rationale . The authors intend this bill to serve as an �
alternative to the state's PACE Reserve program, which has �
been hampered by actions taken by the federal government. �
Like the PACE program, the CEUP program created by this bill �
is designed to lower the cost to property owners who seek to �
install distributed generation renewable energy sources or �
make energy or water efficiency improvements.
2)California Alternative Energy and Advanced Transportation �
Financing Authority. This authority was created in 1980 to �
finance projects utilizing alternative sources of energy, such �
as cogeneration, wind and geothermal power. In 1994, its �
charge was expanded to include the financing of advanced �
transportation technologies. CAEATFA consists of five members �
- the Director of the Department of Finance, the Chairman of �
the CEC, the President of the Public Utilities Commission, the �
State Controller, and the State Treasurer.
3)PACE Program Lowers Cost of Financing Property Improvements. �
The PACE program permits local public agencies and utility �
districts to provide up-front financing to property owners to �
install solar or other renewable energy-generating devices, or �
to make specified water or energy efficiency improvements to �
their properties. This financing mechanism was first used by �
Berkeley through its Charter Cities authority and then �
authorized statewide by AB 811 (Levine), Chapter 159, Statutes �
of 2008, and AB 474 (Blumenfield), Chapter 444, Statutes of �
AB 14 X1
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2009.
Under the PACE program, a city, county, or other public agency �
issues bonds and uses the proceeds to make loans to property �
owners to finance energy retrofits. These loans are repaid by �
the property owner over 20 years via an annual assessment on �
the owner's property tax bill. The assessment remains on the �
property even if it is sold or transferred. From the property �
owner's perspective, the added property tax assessments are �
partly or fully offset by energy savings resulting from the �
retrofit. The loan repayments from the property owners are �
dedicated by the municipalities to the repayment of the �
revenue bonds.
4)Legislature Makes RRTF Funds Available to Assist PACE. SB 77 �
(Pavley), Chapter 15, Statutes of 2010, sought to lower the �
costs to local governments and property owners in the �
financing of PACE bonds by authorizing the authority to tap up �
to $50 million from the RRTF to fund the PACE Reserve Program. �
Prior to SB 77, the primary purpose of the RRTF had been to �
fund a new solar home rebate program pursuant to the �
California Solar Initiative. However, given the steep decline �
in new home construction in California, the RRTF accumulated a �
large fund balances in excess of near-term demand for solar �
rebates.
5)Federal Action Creates Space to Replace PACE. The recent �
negative developments in the economy, specifically in the �
housing and bond markets, have made it difficult for local �
governments to sell PACE bonds. Potential investors have �
become wary about property tax defaults. Though the loan �
assessments are secured by high priority liens (which are paid �
before the mortgage loan), investors have concerns about PACE �
bond repayments being delayed.
More damaging to the PACE program, the Federal Housing Finance �
Agency (FHFA), which oversees the nation's largest mortgage �
finance companies Fannie Mae and Freddie Mac, issued a �
statement objecting to local governments holding the first �
lien on PACE homes, calling it a significant risk to the �
mortgage financier. This caused the mortgage lenders to stop �
underwriting loans on properties with PACE assessments and �
tighten lending standards in communities with PACE programs, �
thereby frustrating implementation of PACE programs, including �
the authority's PACE Reserve Program.
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Following the FHFA action, the CEC adopted Energy Upgrade �
California using federal stimulus funds to support residential �
and commercial energy improvements without relying on the PACE �
mechanism.
6)Bill Fails to Require Authority to Consider Water Efficiency. �
The bill defines the CEUP program as a "statewide energy and �
water efficiency and renewable energy generation building �
retrofit financing program." The remainder of the bill is �
generally consistent with this description. However, the bill �
fails to include water efficiency among the factors the �
authority is to consider when evaluating an application to �
receive CEUP financial assistance.
7)Related Legislation.
a) AB 811 (Levine), Chapter 159, Statutes of 2008 �
authorized general law cities to provide up-front financing �
to property owners to install solar or other renewable �
energy-generating devices or make specified energy �
efficiency improvements to their properties through a �
system of contractual assessments.
b) AB 474 (Blumenfield), Chapter 444, Statutes of 2009 �
added water efficiency improvements to the list of �
improvements that can be paid for through a contractual �
assessment.
c) SB 77 (Pavley), Chapter 15, Statutes of 2010 , sought to �
lower the costs to local governments and property owners in �
the financing of PACE bonds by authorizing the authority to �
tap up to $50 million from the RRTF to fund the PACE �
Reserve Program. SB 77 passed the Assembly 60-10.
d) AB 13 X1 (V.M. Perez), also before this committee, �
expands existing siting and permitting provisions for �
renewable energy projects and makes changes to the planning �
and permitting of renewable energy projects. AB 13 X1 �
would make $7 million available, upon appropriation, from �
the RRTF to fund environmental planning in the San Joaquin �
Valley and the state's desert areas to facilitate renewable �
energy development.
e) SB 26 X8 (Pavley, 2010) was very similar to SB 77 �
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(Pavley), Chapter 15, Statutes of 2010. The bill passed �
this committee 11 to 3 but died on the Assembly floor.
8)Support. Registered supporters of this bill include the �
Treasurer and small a number environmental advocates. Neither �
this committee nor the referring policy committee has received �
expressions of support from representatives of the financial �
institutions that potentially would make loans that benefit �
from the financial assurances provided by CEUP.
9)Opposition. There is no registered opposition to this bill.
Analysis Prepared by : Jay Dickenson / APPR. / (916) 319-2081