BILL ANALYSIS Ó
SB 343
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Date of Hearing: June 27, 2011
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Steven Bradford, Chair
SB 343 (De Leon) - As Amended: June 22, 2011
SENATE VOTE : 22-16
SUBJECT : Energy efficiency: commercial building retrofits.
SUMMARY : Allocates an unspecified amount of the public goods
charge energy efficiency program funds to a newly established
revolving loan program to finance energy retrofits of commercial
properties. Specifically, this bill :
1)Establishes in the State Treasury the California Alternative
Energy and Advanced Transportation Financing Authority Energy
Efficiency Retrofit Bank Fund for the purposes of financing
commercial building retrofits through loans.
2)Authorizes the California Alternative Energy and Advance
Transportation Financing Authority (CAEATFA) to manage this
new bank fund.
3)Allocates an unspecified amount of the public goods charge
energy efficiency program funds to a newly established
revolving loan program to finance energy retrofits of
commercial properties.
4)Requires the California Public Utilities Commission (PUC) to
require each electrical corporation to remit an unspecified
amount of that money collected to the CAEATFA for deposit.
5)Allows for issuance of bonds, special purpose trust, or
sponsor to pay for this fund.
6)Specifies the criteria by which the Authority shall accept
applications from borrowers for financing of energy retrofits
of commercial properties.
7)Describes powers and authorities of the authority over the
funds.
8)Requires the Legislative Analyst's Office, by an unspecified
date, to submit a report to the Joint Legislative Budget
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Committee on the effectiveness of the loan program. It would
repeal this requirement on an unspecified date.
EXISTING LAW :
1)Requires the PUC to require the state's three largest
electrical corporations to identify a separate electrical rate
component to fund programs that enhance system reliability and
provide in-state benefits. This rate component, better known
as the public goods charge, is a nonbypassable element of
local distribution and collected on the basis of usage.
2)States that public goods charge moneys are collected to
support cost-effective energy efficiency and conservation
activities, public interest research and development not
adequately provided by competitive and regulated markets, and
renewable energy resources.
3)States those monies collected through the public goods charge
for cost-effective energy efficiency and conservation
activities are utilized by electrical corporations for
programs subject to supervision by the PUC.
4)Establishes the California Alternative Energy and Advanced
Transportation Financing Act requires the California
Alternative Energy and Advanced Transportation Financing
Authority, in consultation with the State Energy Resources
Conservation and Development Commission, to establish criteria
for selecting projects related to renewable energy and
alternative transportation technologies that would receive
financial assistance, including loans, loan loss reserves,
interest rate reductions, insurance, guarantees, and other
credit enhancement or liquidity facilities from the Authority.
FISCAL EFFECT : Unknown.
1)COMMENTS : According to the author, this bill aims at
addressing some of the financing
obstacles to energy efficiency retrofits and provide financing
mechanisms to commercial retrofits assuming reauthorization of
the Public Goods Charge (PGC). The author states that
commercial buildings consume 35% of our electricity - more than
any other end-use in California. Commercial buildings consume
more electricity than any other end-use in California and
provide a major opportunity for achieving energy savings,
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especially old buildings that do not meet the state's Title 24
energy efficiency standards first adopted in 1982.
2)Background : The California Air Resources Board Climate Change
Scoping Plan dated
December 2008 suggests that retrofitting existing residential
and commercial buildings would achieve substantial greenhouse
gas emissions reduction benefits. The Scoping Plan recommends
the establishment of an environmental performance rating system
for homes and commercial buildings and further recommends that
California adopt mechanisms to encourage and require retrofits
for buildings that do not meet minimum standards of performance.
AB 758 (Skinner, Chapter 470, Statutes of 2009) required the
California Energy Commission (CEC) to open a proceeding, by
March 1, 2010, to develop a comprehensive program to achieve
greater energy savings in the state's residential and
nonresidential building stock.
Presently, the CEC has authorized several pilot programs,
including three commercial building retrofit programs. These
American Recovery and Reinvestment Act (ARRA) funded commercial
retrofit programs will demonstrate the cost-effectiveness of
emerging technologies and will test new retrofit delivery models
with strong work force development components. The results of
these pilot programs should be released by June 2012.
Information from the CEC states that its plan for AB 758
implementation includes the commercial building energy use
disclosure requirements mandated by AB 1103 (Saldana, Chapter
533, Statutes of 2007), for which implementing regulations are
pending, as well as a new building energy performance rating
system that focuses on valuing the permanent efficiency features
of commercial property.
In September 2009, the PUC opened a proceeding to investigate
the ability of utilities to provide energy efficiency options to
implement the CEC AB 758 program, as required by that
legislation (D.09-09-047). The PUC expects a comprehensive
energy efficiency financing report to be released by the end of
June.
3)A piece of the pie : This bill would direct an unspecified
portion of the PGC energy
efficiency funds to establish a revolving loan program to
finance energy retrofits of commercial properties. The public
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goods charge for energy efficiency programs provides $228
million annually for energy efficiency upgrades, retrofits, and
consumer education programs. The funds are administered by the
investor-owned utilities (IOUs) with oversight from the PUC.
Current statute allows the funding to be adjusted annually at a
rate equal to the lesser of the annual growth in electricity
commodity sales or inflation. According to the PUC
approximately 28% of the total IOU energy efficiency budgets for
the 2010-2012 program cycle are for commercial buildings with a
variety of offerings for whole-building retrofits. The authority
to continue to collect the funds for the public goods charge
programs ends January 1, 2012.
4)Performance audits are needed : According to a Heating
Ventilating and Ventilating (HVAC)
Energy Efficiency Maintenance Study conducted by the Davis
Energy Group, Inc., research has shown that performance of
existing residential and small-commercial HVAC systems is far
from optimal. In many cases, the systems were never installed
properly and have never performed optimally, resulting in lower
efficiency than implied by the nameplate rating. In other
cases, the performance has degraded over time, either because of
faults or improper service, causing the equipment to malfunction
or to perform poorly. The study notes that measures such as
duct sealing and repair, condenser and evaporator coil cleaning,
refrigerant charge and air flow adjustments, economizer
retro-commissioning, and HVAC controls can potentially produce
significant savings.
5)On-bill financing : Presently the IOUs administer on-bill
financing programs for energy
efficient retrofits. On-bill financing helps qualified utility
customers pay for energy efficient improvements through their
utility bill. A utility provides customers with unsecured loans
that cover 100% of the energy efficient equipment and
installation costs (net of rebates and incentives) at zero
percent interest. On-bill financing facilitates the purchase and
installation of comprehensive, qualified energy efficiency
measures by customers who might not otherwise be able to act.
Customer eligibility is limited to non-residential customers of
the IOUs. Multi-family properties where owners do not reside on
the premises may be eligible. Also, customers must have good
credit.
A total of $41.5 million of funding is available for the
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2010-2012 program cycle and delineated as follows: Pacific Gas
and Electric (PG&E) - $18.5 million; Southern California Edison
(SCE) - $16 million; San Diego Gas and Electric (SDG&E) - $5
million, and Southern California Gas (SoCalGas) - $3 million.
Commercial loans must have a minimum of $5,000 financed and a
maximum of $100,000 over five years. Institutional loans must
have a minimum of $5,000 financed and a maximum of $1,000,000
over ten years.
Effective April 15, 2011, SCE's on-bill financing program no
longer accepts new applications. The program's suspension of
new applications will remain in place until sufficient funding
becomes available. The $16 million in on-bill financing program
funds are fully subscribed, and over $6.3 million in additional
applications are wait-listed.
6)Policy concerns : Directing an unspecified portion of public
goods charge energy efficiency
program funds for commercial buildings may have unintended
consequences as it may disadvantage other sectors (i.e.
residential and public buildings) from accessing energy
efficiency funds. The author's office is working with the
Governor's Administration and key stakeholders to determine the
appropriate amount that should be allocated to commercial sector
retrofits.
This bill establishes the California Alternative Energy and
Advanced Transportation Financing Authority Energy Efficiency
Retrofit Bank Fund. This bank fund would be managed by the
CAEATFA. It is unclear to this committee if CAEATFA is the
appropriate entity to establish the standards for energy
efficiency measures that qualify for the energy efficiency
loans. This proposed governance structure may conflict with
current PUC energy efficiency efforts. If the measures that
qualify for these loans conflict with current measures in the
IOUs portfolios, this loan program may inadvertently encourage
commercial customers to install measures that are not
cost-effective and not coordinated with IOUs programs and thus
negatively impact the IOUs ability to implement the programs
they are required by the PUC to implement. The financing of
commercial building retrofits should require an optimal level of
expertise in energy efficiency in order to achieve the State's
overall goal to reduce electricity demand. Absent the
appropriate oversight, the loans will end up financing energy
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efficiency improvements that may be less effective thus
undermining State's energy efficiency programs administered by
the PUC.
Therefore, the author and this committee may wish to amend the
bill to authorize the PUC, in consultation with the CEC, State
Treasurer's Office, and CAEAFTA to determine appropriate energy
efficient financing measures, programs, and funding sources for
the residential, commercial, and public building sectors in
order to achieve the statewide energy efficiency goals for these
sectors identified in the California Energy Efficiency Strategic
Plan.
7)Related legislation : Currently in 2011-2012 Legislative
Session, there are three bills pending
in the Assembly and Senate that seek to reauthorize or revise
various aspects of the public goods charge program.
AB 723 (Bradford) extends until January 1, 2020
authority to collect the funds for energy efficiency
programs.
AB 1303 (Williams) extends until January 1, 2020
authority to collect the funds for Public Interest Energy
Research (PIER) and the programs funded by the Renewable
Resources Trust Fund (RRTF)
SB 35 (Padilla) establishes the California Energy
Research and Technology (CERT) program to be administered
by the CEC for the purpose of funding Research,
Development, Demonstration and Deployment Program (RD&D)
that may lead to technological advancement and
breakthroughs to overcome the barriers that prevent
achievement of the state's statutory energy goals.
REGISTERED SUPPORT / OPPOSITION :
Support
None on file.
Opposition
None on file.
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Analysis Prepared by : DaVina Flemings / U. & C. / (916)
319-2083