BILL ANALYSIS �
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|SENATE RULES COMMITTEE | SB 679|
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THIRD READING
Bill No: SB 679
Author: Pavley (D)
Amended: 5/31/11
Vote: 27
SENATE ENERGY, UTIL. & COMM. COMMITTEE : 10-0, 4/28/11
AYES: Padilla, Fuller, Berryhill, Corbett, De Le�n,
DeSaulnier, Pavley, Rubio, Simitian, Wright
NO VOTE RECORDED: Strickland
SENATE APPROPRIATIONS COMMITTEE : 8-0, 5/26/11
AYES: Kehoe, Walters, Alquist, Lieu, Pavley, Price,
Runner, Steinberg
NO VOTE RECORDED: Emmerson
SUBJECT : Energy: energy conservation projects: financial
assistance: local governments and public institutions.
SOURCE : Author
DIGEST : This bill reappropriates up to $25 million for
energy conservation projects, from funds originally
appropriated in SB 77 (Pavley, 2010).
ANALYSIS :
Existing law
1.Establishes the Energy Conservation Assistance Account
CONTINUED
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(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.
2.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.
3.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.
4.Appropriates $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.
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.
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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
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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
According to the author's office, this bill simply
appropriates $25 million of the $50 million 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
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provide good jobs and lower energy use and greenhouse gas
emissions."
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
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.
FISCAL EFFECT : Appropriation: Yes Fiscal Com.: Yes
Local: No
According to Senate Appropriations Committee:
Fiscal Impact (in
thousands)
Major Provisions 2011-12 2012-13
2013-14 Fund
Energy efficiency loans Up to $50,000
General *
* Renewable Resources Trust Fund
SUPPORT : (Verified 5/26/11)
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CA League of Cities
Environment CA
Regional Council of Rural Counties
Southern California Edison
RM:rm 5/31/11 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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