BILL ANALYSIS � 1
SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
ALEX PADILLA, CHAIR
SB 679 - Pavley Hearing Date:
April 28, 2011 S
As Introduced: February 18, 2011 FISCAL B
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DESCRIPTION
Current law establishes the Energy Conservation Assistance
Account (ECCA) program and requires the State Energy Resources
Conservation and Development Commission (CEC) to administer the
program and provide grants and loans for local governments,
public schools, hospitals, government buildings and non-profit
organizations to finance energy efficiency projects.
Current law establishes the California Alternative Energy and
Advanced Transportation Financing Authority (CAEATFA) within the
State Treasurer's Office and authorizes it to issue revenue or
prepayment bonds to industry for the purpose of promoting the
development and utilization of alternative energy sources and the
development and commercialization of advanced transportation
technologies.
Current law establishes the Renewable Resources Trust Fund (RRTF)
with up to $65.5 million per year collected from a customer
surcharge to support renewable energy programs administered by
the CEC.
Current law appropriated $50 million from the RRTF to the CAEATFA
to implement the Property Assessed Clean Energy (PACE) Reserve
program to help lower the cost to local governments for issuing
bonds secured by voluntary contractual assessments on property to
finance the installation of distributed generation renewable
energy sources, electric vehicle charging infrastructure, or
energy or water efficiency improvements.
This bill would appropriate the unencumbered balance of the $50
million that was appropriated to the CAEATFA for the PACE Reserve
program to the ECCA program for the purpose of providing
low-interest energy efficiency revolving loans to eligible
entities under the existing ECCA program.
BACKGROUND
ECCA Loan Demand Exceeds Fund Supply - ECCA, established more
than 30 years ago by the Energy Conservation Assistance Act of
1979, is one of the oldest of California's many programs designed
to reduce statewide energy consumption through energy efficiency
measures. The program makes low-interest loans (currently 3%) to
cover up to 100 percent of a project with a maximum loan amount
of $3 million and maximum repayment term of 15 years. A loan
repayment amount cannot exceed the estimated energy savings from
a funded project.
According to the CEC, the ECAA program has made loans to more
than 800 entities totaling more than $208 million, with about 58
percent of the total loan amount going to local governments, 12
percent to K-12 public schools, 10 percent to public colleges, 10
percent to hospitals and public care facilities, and 2 percent to
special districts. Since 2000, the program has provided $130
million in loan funds for lighting (32%), LED traffic signals
(6%), HVAC (27%), renewables (18%), self-generation (13%) and
other miscellaneous improvements (4%).
Funding for ECAA loans has been from a variety of sources over
the years, including the General Fund, the Petroleum Violation
Escrow Account, and tax-exempt revenue bonds. Funding generally
has been adequate to meet demand for loans. More recently, the
American Recovery and Reinvestment Act of 2009 (ARRA) provided
$25 million for ECAA loans and about $34 million for CEC to award
as grants to 279 small cities and counties for energy efficiency
projects. According to CEC staff, cities and counties seeking to
leverage the grant awards have applied for ECAA loans, leading to
overall demand for ECAA loans far exceeding available funds.
ECAA Loans Currently are Administered Under Three Separate
Programs - Energy Partnership Program for local governments,
Bright Schools Program for public schools, and the ECAA/ARRA
program for any loan using ARRA funds. The ECAA program sunsets
on January 1, 2013.
According to CEC staff, ECAA currently has about $1.6 million in
unrestricted accounts, significantly under the $3 million limit
for any one loan. The Energy Partnership and Bright Schools bond
fund balance is at $2.2 million, and the ARRA balance is $78,000.
Loan repayments generate about $1 million to $1.2 million per
year. CEC staff predicts that, given pent up demand, it would
take only about 2 to 3 years to award an additional $50 million
in loans for approved projects under the ECAA program.
CEAA Program Quality Controls - Current law authorizes the CEC to
contract and provide grants for performing services for eligible
institutions, including feasibility analysis, project design,
field assistance, and operation and training. According to CEC
staff, each project applicant gets a technical evaluation and
feasibility study to ensure that the project is realistic and has
baseline information to monitor energy savings. Inspections are
conducted during project construction, prior to payment of the
final 10 percent of the loan, and after project completion to
verify energy savings.
PACE Programs Halted - PACE programs provide up-front financing
for renewable and energy efficiency-related upgrades to
properties. Property owners can borrow funds from participating
local governments, which are then repaid over 20 years through an
annual assessment on the owner's property tax bill. The
assessment remains on the property when sold or transferred.
This repayment feature makes PACE loans acquire a priority lien
over existing mortgages, which may pose unusual and difficult
risk management challenges for lenders and mortgage security
investors. As a result, in July 2010, the Federal Housing
Financing Agency (FHFA) issued a directive to the federal
residential lending agencies that has effectively halted the
operation of residential PACE programs across the country.
SB 77 (Pavley, 2010) appropriated $50 million from the RRTF to
the CAEATFA for local PACE programs. That bill was chaptered
prior to the FHFA directive that froze PACE programs. Although
that directive is being challenged in court, the legal
uncertainty about the program led the Legislative Analyst to
recommend that the $50 million not be transferred from the RRTF
to the CAEATRA.
COMMENTS
1. Author's Purpose . According to the author, this bill
"simply appropriates the money originally intended for PACE
financing from CAEATFA to ECAA. This will ensure that the
state continues to fund quality energy efficiency projects
that save local governments money and provide good jobs and
lower energy use and greenhouse gas emissions."
2. ECCA Program Outcomes . The ECAA program appears to be an
effective program for providing eligible institutions with
low-interest financing for energy efficiency projects and
technical assistance to ensure project success in achieving
energy savings. CEC data on loans approved since 2000
identifies the following savings:
Total number of approved loans
232
Total approved loan amount
$196,810,765
Total annual energy cost savings
$25,650,100
Total annual electric savings (kWh)
264,759,662
Total annual demand savings (kWh) 38, 703
Total annual CO2 reductions (tons)
90,450
3. Related Legislation . AB 1X 14 (Skinner) would require
CAEATFA to administer a "Clean Energy Upgrade" program to be
developed by CEC and CAEATFA 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 authorize the $50 million appropriated
for the PACE program for this purpose.
POSITIONS
Sponsor:
Author
Support:
Regional Council of Rural Counties
Southern California Edison
Oppose:
None on file
Jackie Kinney
SB 679 Analysis
Hearing Date: April 28, 2011