BILL ANALYSIS �
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|SENATE RULES COMMITTEE | SB 136|
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UNFINISHED BUSINESS
Bill No: SB 136
Author: Yee (D)
Amended: 8/22/11
Vote: 21
PRIOR VOTES NOT RELEVANT
SENATE FLOOR : 37-0, 5/31/11
AYES: Alquist, Anderson, Blakeslee, Calderon, Cannella,
Corbett, Correa, De Le�n, DeSaulnier, Dutton, Emmerson,
Evans, Gaines, Harman, Hernandez, Huff, Kehoe, La Malfa,
Leno, Lieu, Liu, Lowenthal, Negrete McLeod, Padilla,
Pavley, Price, Rubio, Runner, Simitian, Steinberg,
Strickland, Vargas, Walters, Wolk, Wright, Wyland, Yee
NO VOTE RECORDED: Berryhill, Fuller, Hancock
ASSEMBLY FLOOR : Not available
SUBJECT : Energy services contracts: prevailing wages
SOURCE : Author
DIGEST : This bill provides that specified energy
services contracts entered into pursuant to existing law
are public works projects and subject to applicable
prevailing wage laws.
Assembly Amendments delete the prior language relating to
Medi-Cal and insert energy services contracts language.
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ANALYSIS :
Existing law:
1. Authorizes a public agency to 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, as
specified.
2. Defines an "energy service contract" as a contract
entered into by a public agency with any person whereby
the person will provide electrical or thermal energy or
conservation services to a public agency from an energy
conservation facility.
3. Requires the prevailing wage rate to be paid to all
workers on "public works" projects over $1,000.
4. Defines "public work" to include, among other things,
construction, alteration, demolition, installation or
repair work done under contract and paid for in whole or
in part out of public funds.
5. Defines "paid for in whole or in part out of public
funds" as used in public works as the following:
A. Payment of money or the equivalent of money by a
state or political subdivision directly to or on
behalf of the public works contractor, subcontractor,
or developer.
B. Construction work performed by a state or
political subdivision in execution of a project.
C. Transfer of an asset of value for less than fair
market value.
D. Fees, costs, rents, insurance or bond premiums,
loans, interest rates, or other obligations normally
required in the execution of a contract that are
paid, reduced, charged at less than fair market
value, waived or forgiven.
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E. Money loaned that is to be repaid on a contingent
basis.
F. Credits applied against repayment obligations.
6. Exempts from the definition of "paid for in whole or in
part out of public funds" specified types of affordable
housing, private residential housing, private
development projects, qualified residential projects,
low income housing projects, state manufacturing tax
credits, and single family residential projects.
This bill provides that specified energy-related projects
are public works projects and subject to applicable
prevailing wage laws. Specifically, this bill provides
that a "public work" means specified work when all of the
following conditions exist:
1. The work is performed in connection with the
construction or maintenance of renewable energy
generating capacity or energy efficiency improvements.
2. The work is performed on the property of the state or a
political subdivision of the state.
3. Either of the following conditions exist:
A. More than 50 percent of the energy generated is
purchased or will be purchased by the state or a
political subdivision of the state.
B. The energy efficiency improvements are primarily
intended to reduce energy costs that would otherwise
be incurred by the state or a political subdivision
of the state.
Comments
This bill deals with "energy service contracts," sometimes
also referred to as "energy performance contracting."
Energy performance contracting is an alternative
procurement and funding mechanism that allows public
entities to enter into agreements for new energy-efficient
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equipment and services. Under this process, an "energy
service contract" is an agreement made between the public
entity and an energy service company (ESCO). The ESCO will
generally perform an inspection and identify energy-saving
opportunities and recommend a package of improvements to be
performed. The ESCO will usually guarantee that the energy
savings meet or exceed annual payments to cover all project
costs - usually over a contract terms of seven to ten
years.
For example, a city or other public agency may enter into
an energy service contract with an ESCO to perform many
types of building improvements, such as new lighting
technologies or more efficient heating/air conditioning
systems. The city will subsequently realize energy savings
from these improvements. These savings (or a portion
thereof) will be paid from the city to the ESCO over a
period of years to pay for the costs of the improvements.
In recent years, California and many other states have
allowed the use of energy service contracts to reduce
energy consumption in state-owned buildings. For example,
the Department of General Services (DGS) uses these
contracts as part of its "Green Building Initiative."
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
SUPPORT : (Per Assembly Labor and Employment Committee
analysis of 7/5/11)
California State Pipe Trades Council
International Brotherhood of Electrical Workers
State Building and Construction Trades Council
Western States Council of Sheet Metal Workers
ARGUMENTS IN SUPPORT : Supporters argue that this bill
will "put to rest a convoluted interpretation of the
application of prevailing wages regarding energy service
contracts." They contend that some local agencies have
found a creative loophole to avoid paying prevailing wages
for energy service contracts. Despite the fact that the
work is being completed on public infrastructure and will
be paid back from energy savings that otherwise would have
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been utilized by the public agency, some have argued that
such work is exempt from the prevailing wage requirement.
Supporters argue that these types of contracts could
potentially be a huge bonus to a number of unemployed
workers suffering through difficult times. Unfortunately,
given this convoluted reading of current law, the
definition of public works needs updating to provide these
workers with a fair wage. Supporters contend that without
these provisions, contractors bidding for state money could
undercut prevailing wages in any given area by 20 to 30
percent and ultimately hurt vulnerable workers and their
families.
PQ:mw 8/29/11 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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