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.
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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
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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