BILL ANALYSIS � 1
SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
ALEX PADILLA, CHAIR
AB 2409 - Allen Hearing Date:
June 19, 2012 A
As Amended: May 2, 2012 FISCAL B
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DESCRIPTION
Current law establishes the California Energy Commission (CEC),
which is charged with, among other duties, developing energy
policies that conserve resources, protect the environment, ensure
energy reliability, enhance the state's economy, and protect
public health and safety. Those policies are reported biennially
in the Integrated Energy Policy Report (IEPR).
Current law requires California's electric utilities to first
meet their energy needs through all available, feasible, and
cost-effective energy efficiency measures before renewable and
conventional generation.
Current decisions of the California Public Utilities Commission
(CPUC) require investor-owned utilities (IOUs) to administer
energy efficiency programs in multi-year portfolios designed to
meet pre-established energy savings goals and funded by ratepayer
charges, currently at about $1 billion per year, and including
about $100 million per year for energy efficiency financing
options.
Current law requires the CEC to develop a comprehensive program
to achieve greater energy efficiency in existing stock of
residential and commercial buildings and requires the CPUC to
investigate how IOUs can provide energy efficiency financing
options to their customers to implement the comprehensive
strategy that CEC is developing.
Current law authorizes the CEC to administer about $280 million
in funds from the American Recovery and Reinvestment Act of 2009
(ARRA) for energy efficiency programs, including loan and
financing programs.
Current law establishes the Energy Conservation Assistance
Account (ECAA) program administered by the CEC to provide
low-interest loans to local governments, public schools,
hospitals, government buildings and non-profit organizations to
finance energy efficiency projects with $25 million in ARRA funds
and $25 million from a surcharge on electric utility ratepayers.
Current law establishes a revolving loan program administered by
the Department of General Services (DGS) to finance energy
efficiency retrofit of state buildings.
Current law establishes the California Alternative Energy and
Advanced Transportation Financing Authority (CAEATFA) within the
State Treasurer's Office and requires it to administer a 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 requires the CEC to review and make recommendations on
emerging technology financing models used in other states to
finance energy efficiency technology deployments and services
with the goal of maximizing private sector investment in
California.
This bill requires the CEC to conduct this review in
collaboration with the CPUC, Air Resources board, and the
California Infrastructure and Economic Development Bank, and in
consultation with other stakeholders, including IOUs, and
authorizes the CEC to establish and consult with an investment
advisory group consisting of private and public investors.
This bill requires the CEC review to include, at a minimum,
examination of models to finance energy efficiency for
residential and business improvements and for state
infrastructure and equipment.
This bill requires the CEC to avoid duplication of efforts at the
CPUC.
BACKGROUND
Existing Energy Efficiency Programs Include Financing - Energy
efficiency is California's top strategy for reducing energy use
and meeting the state's energy needs. Energy efficiency is at
the top of the "loading order," and California's utilities are
required to first meet their energy needs through cost-effective
energy efficiency measures before renewable and conventional
generation. The state's IOUs and, to a lesser extent, the
publicly owned utilities, administer hundreds of energy
efficiency programs that provide financial incentives and rebates
for installing energy efficient appliances, lighting, windows,
HVAC systems and other technologies or measures. The IOU
programs include a variety of rebates and financial incentives,
including an On Bill Finance loan program for non-residential
customers.
In addition to the CPUC program, the CEC administers a variety of
energy efficiency programs, many under the umbrella of Energy
Upgrade California with ARRA and ratepayer funding, and including
financing options for residential and commercial upgrades. DGS
administers a revolving loan program for energy efficiency
retrofits of state buildings.
Another New Loan Program - On April 17, 2012, another new energy
efficiency retrofit loan program was launched with $25 million in
ratepayer funds. The California Alternative Energy and Advanced
Transportation Financing Authority (CAEATFA) within the State
Treasurer's Office adopted emergency regulations to implement a
"Clean Energy Upgrade Financing" program, as required by ABx1 14
(Skinner, 2011).
CPUC Action on Financing Options - AB 758 (Skinner, 2009)
required the CEC to develop a comprehensive energy efficiency
strategy for the state's old building stock that predates
adoption of the Title 24 energy efficiency building regulations.
So far, the CEC has used ARRA funds for some pilot programs to
develop and advance the tools, protocols and workforce to conduct
best practice building energy assessments and retrofits, which
the CEC says will generate information for developing the
long-term strategy.
AB 758 also required the CPUC to investigate how utilities can
provide energy efficiency financing options to their customers to
implement the comprehensive strategy that CEC is developing. The
CPUC hired a consultant, which released a report in July 2011
called "Energy Efficiency Financing in California - Needs and
Gaps - Preliminary Assessment and Recommendations." The report
concluded that a $4 billion annual investment in energy
efficiency is needed to meet California's aggressive energy
goals.
Based on this report, a series of workshops that included
financial institutions, and several rounds of public comment from
stakeholders including lenders, the CPUC adopted a decision in
May directing IOUS to include financing options in their next
round of energy efficiency programs. The decision requires that
an energy efficiency consultant be hired to pursue the design and
development of financing program options to be piloted in 2013
and scaled up in 2014. The decision also requires the IOUS to
propose a continuation of existing energy efficiency financing
programs supported by ARRA funds, noting that ARRA funds were
used for at least eight energy efficiency financing programs
using different target markets, loan repayment terms, loan
originators, and loan program administrators.
Integrated Energy Policy Report - The CEC is required to prepare
a biennial integrated energy policy report that contains an
assessment of major energy trends and issues facing the state's
electricity, natural gas, and transportation fuel sectors and
provides policy recommendations to conserve resources; protect
the environment; ensure reliable, secure, and diverse energy
supplies; enhance the state's economy; and protect public health
and safety. The CEC prepares these assessments and associated
policy recommendations every two years as part of the IEPR.
Preparation of the IEPR involves close collaboration with
federal, state, and local agencies and a wide variety of
stakeholders in an extensive public process to identify critical
energy issues and develop strategies to address those issues. The
most recent IEPR included a summary of priority energy issues
currently facing California with strategies and recommendations
to further the state's energy goals, including energy efficiency.
COMMENTS
1. Author's Purpose . According to the author, "California
has one of the most aggressive energy efficiency goals in
the nation yet has not identified, developed, or procured
the necessary capital to meet these goals." The author
cites the CPUC consultant's conclusion that California needs
$4 billion a year in capital investment to meet its energy
goals, and identifies financing models from other states
that California should explore. The author states:
"Aggressively and collaboratively exploring these existing
financing models and, if needed, redesigning them to fit
California's needs using the expertise and experience
already present in the multitude of state agencies
implementing energy efficiency financing and programs is the
only practical mechanism for acquiring the financial capital
needed to achieve California's efficiency reductions goals,
emissions reductions as mandated by AB 32, and to put
thousands of Californian's back to work."
2. Have We Already Done This ? The author's goal is to
ensure that California explores the energy efficiency
financing models developed in other states. It is unclear,
however, if the various California state agencies that
currently administer energy efficiency loan programs
reviewed ideas from other states when developing California
programs. Given the hundreds of millions of dollars already
being spent on California energy efficiency financing,
simple due diligence would dictate that such review already
has commenced. Moreover, a question to consider is whether
California is sufficiently reviewing the lessons learned
from the financing programs it already is administering here
before developing more new ones designed for other states
that may have different policy goals, climates, and customer
characteristics.
3. Avoiding Duplication of CPUC Efforts . This bill puts CEC
in charge of conducting the review required by this bill,
with the caveat that it not duplicate CPUC efforts already
underway. As described above, the CPUC has examined energy
efficiency financing in great detail and already paid a
consultant for a review of energy efficiency financing
options. The financing models listed in the bill that the
CEC should review are among those described in the CPUC
consultant report on energy efficiency financing.
4. An Issue for the IEPR . The review and recommendations
required by this bill fall within the range of issues that
the CEC considers as part of the IEPR. This bill does not
specify a timeline, structure or funding source for the
review it requires, and the IEPR process would address all
those issues. Thus, the author and committee may wish to
consider amending that move the directive of this bill under
the rubric and funding of the IEPR.
5. Ratepayer Impact . This bill does not identify a source
of funding for the review CEC is required to conduct. CEC
is generally funded by the Energy Ratepayer Program Account,
derived from ratepayer funds.
ASSEMBLY VOTES
Assembly Floor (76-0)
Assembly Appropriations Committee (17-0)
Assembly Natural Resources Committee (7-0)
Jobs, Economic Development & the Economy Committee
(4-2)
POSITIONS
Sponsor:
Tensleep Advisory
Support:
None on file
Oppose:
None on file
Jacqueline Kinney
AB 2409 Analysis
Hearing Date: June 19, 2012