BILL ANALYSIS �
Bill No: SB
118
SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
Senator Roderick D. Wright, Chair
2011-2012 Regular Session
Bill Analysis
SB 118 Author: Yee
AS PROPOSED TO BE AMENDED IN COMMITTEE
Hearing Date: April 26, 2011
Consultant: Paul Donahue
SUBJECT : Energy Service Contracts
SUMMARY : Requires public agencies to publish a request for
information, qualification, or proposals from qualified
persons 60 days in advance of awarding the best value
contract resulting from the process.
Existing law :
1) Generally requires state and local agencies to award
contracts for goods, services, information technology and
public construction to the lowest bidder or lowest
responsible bidder using a competitive bid process. (e.g.,
Pub. Contract Code �� 10180, 20103.8, Govt. Code � 4005)
2) Provides various exceptions to competitive bidding
rules, including one under which public agencies may award
energy service contracts<1> and related facility ground
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<1> In this context, an energy service contract means a
contract entered into by a public agency with any person
for electrical or thermal energy or conservation services
to a public agency from an energy conservation facility
that provides alternate energy equipment, cogeneration
equipment, or conservation measures located in public
buildings or on land owned by public agencies.
SB 118 (Yee)
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leases<2> without a competitive bid if the agency first
determines at a public hearing<3> that:
a) The anticipated cost to the agency for thermal or
electrical energy or conservation services provided
under the contract will be less than the anticipated
marginal energy costs to the public agency in the
absence of those purchases.
b) Any difference between the fair rental value for
the real property subject to the facility ground lease
and the agreed rent, is anticipated to be offset by
below-market energy purchases or other benefits
provided under the energy service contract.
3) Prior to awarding or entering into an agreement or
lease, the public agency may request proposals from
qualified persons
4) Specifies that, after evaluating the proposals, the
public agency may award the contract on the basis of the
experience of the contractor, the type of technology
employed by the contractor, the cost to the public agency,
and any other relevant considerations.
This bill :
1) Requires a public agency to publish a request for
information, qualification, or proposals from qualified
persons pursuant to a public process determined by the
public agency.
2) Specifies that a public agency, after evaluating the
proposals, may award the contract that is of best value,
based on the considerations set forth in existing law.
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<2> A facility ground lease may include, in addition to the
land on which energy conservation facilities will be
located, easements, rights-of-way, licenses, and rights of
access, for the construction, use, or ownership by the
person of the facility and all related utility lines not
owned or controlled by the interconnecting utility.
<3> State agency heads may make these findings without
holding a public hearing. (Govt. Code � 4217.12)
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COMMENTS :
1) Purpose of the bill : The author has voiced concerns
about the process employed by some public entities in the
state to contract for energy services, in that some
entities have negotiated contracts with a sole source
without first having requested proposals from several
qualified firms. The author states that entities using
this methodology are unable to determine whether the
proposed contract will deliver the best value to the entity
because there is no opportunity to compare multiple
proposals.
In addition, the author states that, in some instances,
existing relationships between energy service contractors
and public officials may have unduly influenced decisions
to award contracts to energy service contractors.
The purpose of this bill, as it will be amended, is to
expand the public energy service contracting process to a
range of qualified proposers, ensure that the contracting
process is a public one, thereby ensuring that the
taxpayers will receive the best value from the contract.
2) Energy Service Performance Contracting : An energy
service performance contract is a negotiated
performance-based agreement made between a public entity
and an energy services company (ESCO), in which the company
guarantees energy savings that are expected to result from
the implementation of an energy efficiency project as
outlined in the agreement. California and many other
states have allowed the use of energy performance contracts
to reduce energy consumption in state-owned buildings.
The process typically includes a Request for Qualification
(RFQ) in which the interested ESCO's provide resumes,
business profiles, prior experience, and the initial energy
efficiency or savings plan. Once received, the agency or
customer establishes a list of 3-5 companies whose
credentials and experience closely matches of the companies
whose profile for the project best matches with the owners'
ideas in the RFQ. The client then asks for a Request for
Proposal (RFP) that will provide a more detailed
explanation of the project, containing all cost savings
measures, products, and the performance contract itself.
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Energy performance contracts are routinely utilized by
public entities in California and throughout the nation as
a proven method to help pay for new energy-efficient
equipment and services using future energy cost savings.
For example, the California Department of General Services
(DGS) awards contracts using this process to carry out its
Green Building Initiative. DGS has developed a listing of
pre-qualified energy service contractors by announcing a
request for qualifications. In the order of ranking, these
firms are then asked submit responses to a project Request
for Proposal, resulting in selection of a preferred
contractor to implement the state project.
3) Opposition : The previous version of this bill required
public entities to competitively bid energy services
contracts. The organizations listed in opposition to the
bill objected to the competitive bid provisions, which will
now be stricken from the bill. It is unclear to what
extent the concerns of the opponents have been addressed in
this proposed version of the bill. Similarly, the
supporters of the bill favored the bill because it would
require a competitive bidding process for energy services
contracting. The position of supporters on the proposed
amended version is unknown.
4) Related legislation :
AB 635 (De La Torre, 2010) . Requires active financial
disclosure of any financial relationships between any
manufacturer, contractor, architects, engineers or
consultants involved in each roofing project (replacement
or repair) for state buildings or public schools. (Stats.
2010, ch. 438)
SUPPORT:
Associated Builders and Contractors of California
Californians Aware
Community College League of California
International Brotherhood of Electrical Workers
OPPOSE:
Association of California School Administrators
California Manufacturers and Technology Association
California School Boards Association
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Coalition for Adequate School Housing (CASH)
League of California Cities
Los Angeles Unified School District (unless amended)
National Association of Energy Service Companies
School Energy Coalition
Small School Districts' Association
FISCAL COMMITTEE: Yes
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MOCKUP OF AMENDMENTS TO SB 118 (Yee)
As Introduced on January 20, 2011
AS PROPOSED TO BE AMENDED IN COMMITTEE
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. It is the intent of the Legislature to
require public agencies entering into energy service
contracts that are subject to Section 4217.12 of the
Government Code to follow competitive bidding procedures.
SEC. 2. Section 4217.12 of the Government Code is
amended to read:
4217.12. (a) Notwithstanding any other provision of law
and except as provided in subdivision (c) , a public
agency may enter into an energy service contract and any
necessarily related facility ground lease on terms that its
governing body determines are in the best interests of the
public agency if the determination is made at a regularly
scheduled public hearing, public notice of which is given
at least two weeks in advance, and if the governing body
finds:
(1) That the anticipated cost to the public agency for
thermal or electrical energy or conservation services
provided by the energy conservation facility under the
contract will be less than the anticipated marginal cost to
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the public agency of thermal, electrical, or other energy
that would have been consumed by the public agency in the
absence of those purchases.
(2) That the difference, if any, between the fair rental
value for the real property subject to the facility ground
lease and the agreed rent, is anticipated to be offset by
below-market energy purchases or other benefits provided
under the energy service contract.
(b) State agency heads may make findings pursuant to
subdivision (a) without holding a public hearing.
(c) On and after January 1, 2012, notwithstanding any
other provision of law, a public agency may enter into an
energy service contract and any necessarily related
facility ground lease only if its contracting process is in
accordance with the competitive bidding requirements and
procedures set forth in the Public Contract Code.
Section 4217.16 of the Public Contract Code is amended to
read:
4217.16. Prior to awarding or entering into an agreement or
lease, the public agency may request shall publish a
request for information, qualification, or proposals from
qualified persons pursuant to a public process determined
by the public agency . After evaluating the proposals, the
public agency may award the contract that is of best value
on the basis of the experience of the contractor, the type
of technology employed by the contractor, the cost to the
local agency, and any other relevant considerations. The
public agency may utilize the pool of qualified energy
service companies established pursuant to Section 388 of
the Public Utilities Code and the procedures contained in
that section in awarding the contract.