BILL ANALYSIS � 1
SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
ALEX PADILLA, CHAIR
ABX1 14 - Skinner Hearing Date:
May 3, 2011 A
As Amended: March 21, 2011 FISCAL B
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DESCRIPTION
Current law establishes the California Alternative Energy and
Advanced Transportation Financing Authority (CAEATFA) within the
State Treasurer's Office and authorizes it to issue revenue or
prepayment bonds to industry for the purpose of promoting the
development and utilization of alternative energy sources and
the development and commercialization of advanced transportation
technologies.
Current law establishes the Renewable Resources Trust Fund
(RRTF) with up to $65.5 million per year collected from a
customer surcharge to support renewable energy programs
administered by the State Energy Resources Conservation and
Development Commission (CEC).
Current law appropriated $50 million from the RRTF to the
CAEATFA to implement the Property Assessed Clean Energy (PACE)
Reserve program to help lower the cost to local governments for
issuing bonds secured by voluntary contractual assessments on
property to finance the installation of distributed generation
renewable energy sources, electric vehicle charging
infrastructure, or energy or water efficiency improvements.
This bill would expand the authority of the CAEATFA to spend the
$50 million appropriated from the RRTF for PACE to administer a
new Clean Energy Upgrade Program that would be developed by the
CEC and the CAEATFA to provide a reserve or other financial
assistance to lenders for loan programs to help finance energy
efficiency and water efficiency improvements and the
installation of renewable energy generation technologies and
electric vehicle charging equipment on residential and
commercial properties.
This bill would authorize financing for loan programs that
finance a residential project of three units or fewer or a
commercial project that costs less than $25,000 and require
CAEATFA to adopt guidelines to administer the program.
This bill would authorize financing for loan programs that offer
financing for electrical vehicle charging infrastructure if the
electric vehicle charging infrastructure is part of a project to
install energy efficiency improvements and distributed
generation renewable energy resources and is designed so that
the project does not increase peak energy demand.
Current law authorized CAEATFA to expend up to $300,000 of the
$50 million for initial administrative costs in implementing the
PACE reserve program.
This bill would authorize CAEATFA to expend up to $550,000 for
initial administrative costs in implementing the Clean Energy
Upgrade Program.
This bill would require the CAEATFA to report annually to the
Legislature a summary of loans that received assistance under
the program.
This bill declares that its provisions address the fiscal
emergency proclaimed by the Governor.
BACKGROUND
PACE Programs Halted - PACE programs provide up-front financing
for renewable and energy efficiency-related upgrades to
properties. Property owners can borrow funds from participating
local governments, which are then repaid over 20 years through
an annual assessment on the owner's property tax bill. The
assessment remains on the property when sold or transferred.
This repayment feature makes PACE loans acquire a priority lien
over existing mortgages, which may pose unusual and difficult
risk management challenges for lenders and mortgage security
investors. As a result, in July 2010, the Federal Housing
Financing Agency (FHFA) issued a directive to the federal
residential lending agencies that has effectively halted the
operation of residential PACE programs across the country.
SB 77 (Pavley, 2010) appropriated $50 million from the RRTF to
the CAEATFA for local PACE programs. That bill was chaptered
prior to the FHFA directive that froze PACE programs. Although
that directive is being challenged in court, the legal
uncertainty about the program has brought the residential PACE
program to a virtual halt. The demand for commercial PACE
financing is minimal because of project cap of $25,000.
Energy Upgrade California - This year, using about $33 million
in ARRA funds that were intended for PACE, the CEC launched
"Energy Upgrade California," a web portal resulting from a
collaborative effort among CEC, CPUC, utilities, local
governments, non-governmental organizations and the private
sector to establish a "one-stop clearinghouse" for energy
efficiency information, incentives and rebates and training for
contractors and building professionals. Each county has its own
page that highlights the services and energy efficiency
opportunities available for local residents. Property owners
can enter their zip code or county name to learn about local
incentives, financing options and participating contractors. A
substantial portion of the $33 million is dedicated to outreach
and promotion to entice property owners to adopt energy
efficiency measures. Another $4.3 million is intended for
CAEATFA to develop financing products for lenders that would
make loans available through Energy Upgrade California.
Federal Programs for Energy Efficiency Financing - According to
CAEATFA staff, federal programs offer residential financing
options for residential energy efficiency measures that may meet
some of the same need addressed by this bill. On April 21, the
U.S. Department of Energy and Housing and Urban Development
announced a new program of "PowerSaver" loans to offer
homeowners up to $25,000 to make energy efficiency improvements
of their choice, including installation of insulation, duct
sealing, replacement doors and windows, HHVAC systems, water
heaters, solar panels, and geothermal systems.
COMMENTS
1. Author's Purpose . The author states that the Clean
Energy Upgrade program established by this bill is designed
to achieve the same goals as the PACE program: increase
demand for energy efficiency and distributed small-scale
renewable energy technologies, create green jobs, reduce
interest rates on loans to property owners, increase
capital availability by reducing risk to lenders, and
leverage available funds. According to the author, "Clean
Energy Upgrade program will provide a backstop for lenders
against the risk of occasional loan loss, allowing the
lender to lower its rates and thereby lowering the
borrowing cost to property owners."
2. Energy Efficiency Priority Policy . Energy efficiency is
the top priority among California's policies to achieve
energy savings and reduce greenhouse gas emissions.
Numerous programs administered by the CEC, CPUC, utilities,
and local government agencies offer consumers incentives or
rebates to purchase energy efficient appliances and
construct or install energy efficient devices or
technologies in residential and commercial buildings.
However, these incentive and rebate programs typically
cover only part of a project cost, and access to financing
for the remaining costs are a major obstacle to adopting
energy efficiency measures. This bill targets that
problem.
3. Transparency . This bill requires CAEATFA to adopt
"guidelines" that will govern the award of up to $50
million in ratepayer funds, but exempts CAEATFA from
complying with the public notice and comment provisions of
the Administrative Procedure Act (APA). The APA is
applicable to any agency regulation, even if called a
"guideline," that establishes a standard of general
application to an open class, such as eligibility criteria
for a grant or loan. If time is of the essence, the APA
allows an agency to adopt emergency regulations in as few
as 15 to 20 days. Thus, in order to ensure an open and
transparent process for establishing regulations for Clean
Energy Upgrade, the author and committee may wish to
consider amending the bill to delete the regulations as
exempt from the APA and instead authorize CAEATFA to adopt
emergency regulations.
4. Related Legislation . SB 679 (Pavley) would appropriate
the unencumbered balance of the $50 million that was
appropriated to the CAEATFA for the PACE Reserve program to
the Energy Conservation Assistance Account program
administered by CEC for providing low-interest energy
efficiency revolving loans to local governments, public
schools, and hospitals.
SB X1 1 (Steinberg) would appropriate $40 million
over 5 years from the RRTF for Clean Technology
Partnership Academies.
SB 343 (de Leon) would authorize an unspecified
amount from the Emerging Renewable Resources Account of
the RRTF for a program for energy efficiency retrofits
for commercial buildings.
ASSEMBLY VOTES
Assembly Floor (58-12)
Assembly Appropriations Committee (11-5)
Assembly Natural Resources (6-3)
POSITIONS
Sponsor:
Author
Support:
California State Treasurer
California Association of Realtors
California Municipal Utilities Association
Ecology Action
Matadors Community Credit Union
Rabobank International
Renewable Funding
Stop Waste.Org
Sierra Club California
The Solar Alliance
The Vote Solar Initiative
Union of Concerned Scientists
Oppose:
None on file
Jacqueline Kinney
ABX1 14 Analysis
Hearing Date: May 3, 2011