BILL ANALYSIS �
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|SENATE RULES COMMITTEE | SB 679|
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UNFINISHED BUSINESS
Bill No: SB 679
Author: Pavley (D)
Amended: 8/15/11
Vote: 27
SENATE ENERGY, UTILITIES & 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
SENATE FLOOR : 39-0, 6/2/11
AYES: Alquist, Anderson, Berryhill, Blakeslee, Calderon,
Cannella, Corbett, Correa, De Le�n, DeSaulnier, Dutton,
Emmerson, Evans, Fuller, Gaines, Hancock, Harman,
Hernandez, Huff, Kehoe, La Malfa, Leno, Lieu, Liu,
Lowenthal, Negrete McLeod, Padilla, Pavley, Price, Rubio,
Simitian, Steinberg, Strickland, Vargas, Walters, Wolk,
Wright, Wyland, Yee
NO VOTE RECORDED: Runner
ASSEMBLY FLOOR : 69-6, 09/01/11 - See last page for vote
SUBJECT : Energy: energy conservation projects:
financial assistance: local governments and
public institutions
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SOURCE : Author
DIGEST : This bill appropriates $25 million to the Energy
Conservation Assistance Account (ECAA) from $50 million
previously appropriated from the Renewable Resource Trust
Fund (RRTF) to the California Alternative Energy and
Advanced Transportation Financing Authority to support
Property Assessed Clean Energy (PACE) programs.
Assembly Amendments (1) revert any unexpended funds
appropriated in the provision remaining in the ECAA on and
after January 1, 2013, except to the extent those funds are
encumbered, back to the RRTF for use by the authority for
the PACE Reserve program, and (2) remove the appropriation,
an amount of up to $50 million , from the RRTF.
ANALYSIS : Existing law:
1. Creates the California Alternative Energy and Advanced
Transportation Financing Authority (CAEATFA) within the
State Treasurer's Office for the purpose of promoting
the development and utilization of alternative energy
sources and the development and commercialization of
advanced transportation technologies. The CAEATFA is
authorized to issue up to $1 billion in revenue or
prepayment bonds to fund projects.
2. Requires the CAEATFA to develop and administer a PACE
Reserve program, to be used to reduce the overall costs
to property owners of PACE bonds issued by a local
jurisdiction, by providing a reserve of no more than 10
percent of the initial principal amount of the PACE
bond.
3. Defines PACE bond as a bond that is secured by voluntary
contractual assessment on a property or through a
voluntary special tax for the purposes of financing the
installation of renewable energy sources, or energy or
water efficiency improvements.
4. Appropriates up to $50 million from the California
Energy Commission (CEC) RRTF to be used by the CAEATFA
for purposes of the PACE Reserve Program, and authorizes
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the CAEATFA to spend up to $300,000 for its
administrative costs.
Background
ECAA Loan Demand Exceeds Fund Supply . ECAA, 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
ECAA makes low-interest loans (currently three percent) 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 percent), LED traffic signals (six
percent), heating, ventilation, and air conditioning (27
percent), renewables (18 percent), self-generation (13
percent) and other miscellaneous improvements (four
percent).
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
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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 two to three years to award an additional $50 million
in loans for approved projects under the ECAA program.
ECAA 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), Chapter 15, Statutes of 2010, appropriates
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$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 CAEATFA.
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
provide good jobs and lower energy use and greenhouse gas
emissions."
ECAA 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 (kilowatt-hour �kWh])
264,759,662
Total annual demand savings (kWh) 38, 703
Total annual carbon dioxide reductions (tons) 90,450
Related Legislation . AB 14X1 (Skinner), Chapter 9,
Statutes of 2011-12, First Extraordinary Session, requires
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
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Local: No
According to the 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 8/31/11)
California State Association of Counties
League of California Cities
Natural Resources Defense Council
Regional Council of Rural Counties
Southern California Edison
Union of Concerned Scientist
ASSEMBLY FLOOR : 69-6, 09/01/11
AYES: Achadjian, Alejo, Allen, Ammiano, Atkins, Beall,
Bill Berryhill, Block, Blumenfield, Bradford, Brownley,
Buchanan, Butler, Charles Calderon, Campos, Carter,
Cedillo, Chesbro, Conway, Cook, Dickinson, Feuer,
Fletcher, Fong, Fuentes, Furutani, Beth Gaines, Galgiani,
Garrick, Gordon, Grove, Hagman, Hall, Harkey, Hayashi,
Roger Hern�ndez, Hill, Huber, Hueso, Huffman, Jeffries,
Jones, Lara, Logue, Bonnie Lowenthal, Ma, Mendoza,
Miller, Mitchell, Monning, Nestande, Norby, Olsen, Pan,
Perea, V. Manuel P�rez, Portantino, Silva, Skinner,
Smyth, Solorio, Swanson, Torres, Valadao, Wagner,
Wieckowski, Williams, Yamada, John A. P�rez
NOES: Donnelly, Gatto, Halderman, Knight, Morrell, Nielsen
NO VOTE RECORDED: Bonilla, Davis, Eng, Gorell, Mansoor
RM:kc 9/1/11 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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