BILL ANALYSIS �
AB 1186
SENATE COMMITTEE ON ENVIRONMENTAL QUALITY
Senator S. Joseph Simitian, Chairman
2011-2012 Regular Session
BILL NO: AB 1186
AUTHOR: Skinner
AMENDED: June 6, 2012
FISCAL: Yes HEARING DATE: July 2, 2012
URGENCY: No CONSULTANT: Peter Cowan
SUBJECT : CALIFORNIA GLOBAL WARMING SOLUTIONS ACT: SCHOOL
ENERGY EFFICIENCY
SUMMARY :
Existing law , under the California Global Warming Solutions
Act of 2006 (CGWSA):
1) Requires the California Air Resources Board (ARB) to
determine the 1990 statewide greenhouse gas (GHG) emissions
level and approve a statewide GHG emissions limit that is
equivalent to that level, to be achieved by 2020, and to
adopt GHG emission reduction measures by regulation, and
sets certain requirements in adopting the regulations. ARB
may include the use of market-based mechanisms to comply
with these regulations. (Health and Safety Code �38500 et
seq.).
2) Requires ARB to prepare and approve a scoping plan by
January 1, 2009, for achieving the maximum technologically
feasible and cost-effective reductions in GHG emissions
from sources or categories of sources of GHGs by 2020. ARB
must evaluate the total potential costs and total potential
economic and noneconomic benefits of the plan for reducing
GHGs to the state's economy and public health, using the
best economic models, emission estimation techniques, and
other scientific methods. The plan must be updated at least
once every five years. (�38561).
3) Authorizes ARB to adopt a schedule of fees to be paid by
GHG emission sources regulated under CGWSA, to be deposited
into the Air Pollution Control Fund and available upon
appropriation by the Legislature for carrying out the
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CGWSA. (�38597).
This bill : Requires any investor-owned utility (IOU) that
receives proceeds from the auction of GHG emission allowances
directly allocated to the IOU by the ARB to submit to the PUC
an expenditure plan for those proceeds and prohibits the PUC
from approving such a plan unless:
1) 10 percent of those GHG emission allowance auction proceeds
are available to fund a grant program for cost-effective
energy efficiency improvements for public K-12 schools,
including, but not limited to, advanced lighting controls,
upgrades to heating, ventilation, and air-conditioning
systems, hot water, and kitchen appliances, for schools in
the IOU's service area.
2) The plan includes measures to leverage funding from other
sources that do not adversely affect that grant program.
COMMENTS :
1) Purpose of Bill . According to the author "Over 70% of
California's public school classrooms are over 25 years
old. In addition, schools account for approximately 12% of
all commercial energy consumption, representing not only a
significant cost to California's public schools, but also
demonstrating that schools have a sizable greenhouse gas
footprint." The author contends that by directing 10
percent of the IOU auction proceeds to school energy
efficiency will reduce General Fund expenditures for
utility bills at California's K-12 public schools.
2) Brief background on cap-and-trade . The adopted
cap-and-trade regulation imposes a cap on the aggregate GHG
emissions allowed from "capped sectors." The entities
covered within these sectors constitute approximately 85%
of all statewide GHG emissions. Each year the cap declines,
thus resulting in a reduction in GHG emissions over time.
To comply with the cap, covered entities must surrender to
the state a number of "compliance instruments" equal to the
amount of their GHG emissions, as expressed in the
equivalent metric tons of CO2. The regulations describe two
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types of compliance instruments: a) an "allowance" to emit
GHGs, all of which are generated by the state in an amount
equal to the cap and; b) an "offset" resulting from an
emissions reduction achieved in an uncapped sector and
generated by third party pursuant to a protocol adopted by
ARB.
Under the cap-and-trade regulation many of the allowances
are freely allocated to the covered entities, some are held
in a price containment reserve, and the remainder
auctioned. Allowances received or purchased can be traded,
thus creating an emissions market which according to ARB
minimizes compliance costs and encourages businesses to
invest in GHG emissions reductions. ARB plans to hold
auctions quarterly starting in November 2012, and monies
collected for allowances sold at auction are deposited into
the Air Pollution Control fund, with the exception of
allowances sold on behalf of Investor Owned Utilities
(IOUs).
IOUs are given enough allowances to cover all of their
emissions, but are required to auction them all. The
revenues from these auctions are then returned to the IOUs
to be used for ratepayer benefit in accordance with an
ongoing rulemaking at the Public Utilities Commission
(PUC).
3) Avoiding duplication . The state currently administers
several multiple energy efficiency programs, including
those specifically targeted to K-12 schools. These programs
are administered by PUC, CEC, and the Office of Public
School Construction.
The PUC issued a decision on May 10, 2012, establishing the
parameters by which IOUs will design their efficiency
programs 2013-2014, and includes specific reference toward
encouraging investment in municipalities, universities,
colleges, schools, and hospitals, but does not make
specific guidance on what level of funding should be
directed to schools. Those investment plans and budgets are
due to the PUC in July.
The CEC administers the Energy Conservation Assistance Act
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(ECAA) which makes low interest loans for energy efficiency
and renewable energy to public schools, public hospitals
and local jurisdictions. Loans do not become due until
energy cost savings have occurred and are repaid from those
cost savings. According to the CEC, the ECAA program has
issued 320 loans to schools totaling $45,117,285.
The School Facilities Program Modernization Program
provides state funds on a 60/40 state and local sharing
basis for eligible improvements to educationally enhance
existing school facilities. Projects eligible under this
program include modifications such as air conditioning,
plumbing, lighting, and electrical systems. Since 1998,
$8.85 billion in general obligation bonds have been
approved by the voters. As of fall 2011, $7.49 billion has
been allocated to schools and $750 million remained.
As the state considers additional energy efficiency
programs it should endeavor to avoid duplicating efforts in
multiple programs and to provide a clear means of
evaluating the success for these various efforts.
4) Cap-and-trade revenues in the budget . The Governor's budget
proposal estimated that fee revenues from the first set of
auctions will be $1 billion in the 2012-13 Budget, with
auctions planned for November 2012, February 2013, and May
2013. Actual revenues cannot be known until the auctions
have been completed.
The natural resources budget trailer bill establishes the
Greenhouse Gas Reduction Fund as a special fund in the
State Treasury to receive all funds resulting from
cap-and-trade auctions. It also specifies that the fund be
appropriated in the annual Budget Act and requires the
Department of Finance to submit to the Legislature a
proposal for expenditure of the fund, unless the
Legislature passes a bill before August 31, 2012,
specifying a process for establishing a long-term spending
plan that includes: a) criteria and requirements for the
use of the auction proceeds, b) establishment of program
categories eligible for funding, and c) the specification
of the process that ARB use to develop the strategy. The
trailer bill further requires agencies expending moneys
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from the fund to prepare a record describing the uses of
the funds, how they further the goals of the CGWSA,
including attainment of the 2020 limit, how non-GHG
emissions objectives of the CGSWA were considered, and a
description of how the agency will document the results of
the expenditure.
The trailer bill also allows the PUC to allocate up to 15%
of proceeds from the auction of allowance distributed to
IOUs for clean energy and energy efficiency projects
established by statute and administered by the IOUs if they
are not otherwise funded. The remainder of the IOU
allowance allocation proceeds must be credited directly to
residential, small business, and emissions-intensive
trade-exposed retail ratepayers.
5) Finding the funds . In considering whether the funding
source identified in AB 1186 IOU allowance auction revenue
is the most appropriate the committee should take into
account:
a) On June 7, 2012, the Senate Budget Committee voted to
adopt trailer bill language directing ARB and PUC to
rebate any IOU cap-and-trade proceed collected to be
refunded to ratepayers in the form of a "climate
dividend" rebate, inconsistent with the direction in AB
1186.
b) The proposed funding source only applies to IOUs and
thus only the schools that fall into those service
areas. While Publicly Owned Utilities (POUs) are also
allocated allowances under cap-and-trade regulation they
are not subject to the same auction requirement and
would not be affected by AB 1186.
In response to similar concerns raised by the Senate
Energy, Utilities and Communications Committee, the author
agreed to identify other revenue sources.
6) Related legislation . SB 1268 (Pavley), set for hearing in
Assembly Natural Resources Committee July 2, 2012, extends
sunsets on the Energy Conservation Assistance Account and
the Local Jurisdiction Energy.
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SB 1572 (Pavley) establishes the Greenhouse Gas Reduction
Fund within the Air Pollution Control Fund and requires
that all moneys collected pursuant to the market-based
compliance mechanism be deposited in the Fund and specifies
the lesser of half of the money in the Fund for 2013-14 or
$250 million would be available for appropriation by the
Legislature, to administering agencies to fund prescribed
projects that meet certain goals relating to GHG emissions
reductions. The bill would require administering agencies
to prepare and submit to the Legislature quarterly reports
on funded projects and activities. SB 1572 is set for
hearing in Assembly Natural Resources Committee July 2,
2012.
AB 1532 (J. Perez) establishes procedures for deposit and
expenditure of regulatory fee revenues derived from the
auction GHG allowances pursuant to the cap-and-trade
program, and specifically requires PUC to develop and
transmit to ARB an investment plan which includes
requirements on how IOUs may use any allowance auction
moneys the IOUs might collect pursuant to a market-based
compliance mechanism. AB 1532 is set for hearing in the
Senate Environmental Quality Committee July 2, 2012.
SOURCE : Assemblymember Skinner
SUPPORT : Alameda County Office of Education
Bonita Unified School District
Breathe California
California School Employees Association
California State Association of Electrical
Workers
California State Pipe Trades Council
California Teachers Association
Coalition for Adequate School Housing
Ella Baker Center for Human Rights
Environmental Defense Fund
Fagen, Friedman and Fulfrost
Los Angeles Unified School District
Marysville Joint Unified School District
McKinstry
Oakland Unified School District
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Partnership for Children and Youth
PMSM Architects
School Energy Coalition
State Building & Construction Trades Council of
California
State Superintendent of Public Instruction
U.S. Green Building Chapter, California
West Contra Costa Unified School District
Western States Council of Sheet Metal Workers
OPPOSITION : American Council of Engineering Companies - Ca
California Asian Pacific Chamber of Commerce
California Business Properties Association
California Chamber of Commerce
California Chapter of the American Fence
Association
California Construction Trucking Association
California Council for Environmental and
Economic Balance
California Farm Bureau Federation
California Fence Contractors' Association
California Framing Contractor's Association
California Grocers Association
California Independent Oil Marketers
Association
California Large Energy Consumers Association
California League of Food Processors
California Manufacturers & Technology
Association
California Metals Coalition
California Retailers Association
California Taxpayers Association
Can Manufacturers Institute
Chemical Industry Council of California
Engineering Contractors' Association
Flasher/Barricade Association
Golden State Builders Exchanges
Marin Builders' Association
National Federation of Independent Business
Pacific Gas and Electric Company
PacifiCorp
San Diego Gas & Electric
Southern California Edison
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United Contractors
Western Wood Preservers' Institute