BILL ANALYSIS �
SB 1268
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Date of Hearing: June 18, 2012
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Steven Bradford, Chair
SB 1268 (Pavley) - As Amended: May 1, 2012
SENATE VOTE : 33-0
SUBJECT : Energy: energy conservation assistance
SUMMARY : SB 1268 extends the operation of two existing energy
efficiency loan program for local jurisdictions. Specifically,
this bill :
1)Extends the sunset date, from January 2013 to January 2028, of
the existing Energy Conservation Assistance Account (ECAA) at
the California Energy Commission (CEC).
2)Extends the sunset date, from January 2016 to January 2028, of
the existing Local Jurisdiction Energy Assistance Account
(LJEAA) at the CEC.
3)Expands the scope of the use of the funds to include reducing
peak electricity demand.
4)Expands the definition of a local government to include a
joint powers authority.
5)Requires the CEC to establish loan rates of not less than 1%
for the LJEAA loans.
6)Specifies requirements for unexpended funds:
a. Funds from bond sales shall remain in the ECAA account.
Once bond obligations are satisfied, unexpended funds are
to revert to the General Fund.
b. Funds from the federal American Recovery and
Reinvestment Act (ARRA) of 2009 (Public Law 111-5)
remaining in the ECAA account on January 1, 2028, are to
revert to the Federal Trust Fund.
c. Funds from the LJEAA are to revert to the Petroleum
Violation Escrow Account.
1)Specifies that unexpended funds in the ECAA account,
appropriated from the Renewable Resources Trust Fund (RRTF)
are to be available for appropriation by the Legislature to be
used for the benefit of ratepayers.
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EXISTING LAW :
1)Establishes loan programs to fund energy efficiency
improvements at facilities used by local governments. (25410
and 25422 Public Resources Code)
2)Establishes the CEC as the administrator of those loan
programs.
FISCAL EFFECT : Unknown
COMMENTS :
1)Author's Statement. ECAA was established in 1979 and has
offered low interest loans (3%) to local governments, school
districts, and hospitals to improve their energy efficiency
for over three decades. Likewise, the LJEAA was founded in
1986 and offers loans to local jurisdictions to reduce energy
costs. ECAA and LJEAA are set to sunset on January 1, 2013
and January 1, 2016, respectively.
ECAA has a proven track record since its inception, has funded
more than 800 loans, allowing local jurisdictions to install
new lighting systems, efficient pumps and motors, automated
energy management systems, replace heating and air condition,
and much more. It can provide loans of up to $3 million with
interest rates as low as 3%. SB 1268 will extend ECAA and
LJEAA until January 1, 2028, thereby ensuring that these
beneficial programs can continue to help California meet its
energy usage goals and save taxpayer funds.
2)ECAA and LJEAA Loans for Energy Efficiency . ECAA, which
sunsets in 2013, was established more than 30 years ago by the
Energy Conservation Assistance Act of 1979 and 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 to cover up to
100 percent of a project with a maximum repayment term of 15
years. A loan repayment amount cannot exceed the estimated
energy savings from a funded project.
Funding for ECAA loans has been from a variety of sources over
the years, including the General Fund and tax-exempt revenue
bonds. In 2009, ARRA provided $25 million to CEC for ECAA
loans, to supplement approximately $34 million in ARRA funds
that CEC awarded as grants to 279 small cities and counties
for energy efficiency projects. SB 679 (Pavley, 2011)
appropriated an additional $25 million to CEC for ECAA loans.
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That $25 million originated as ratepayer funds deposited into
the RRTF and was part of the $50 million transferred by SB 77
(Pavley, 2010) from the RRTF to the California Alternative
Energy and Advanced Transportation Financing Authority
(CAEATFA) within the State Treasurer's Office for a Property
Assessed Clean Energy (PACE) loan program that has since been
put on hold for residential energy efficiency loans.
The LJEAA program, which was established in 1986 and sunsets
in 2016, is substantially similar to the ECAA program but has
funding from a one-time appropriation from the federal
Petroleum Violation Escrow Account, which was funded by a
federal settlement with oil companies for overcharging
customers in the 1970s. In addition to different sunset
dates, program differences include that LJEAA loans are
available to any "local jurisdiction" defined to include a
joint powers authority, while ECAA loans are available to any
"unit of local government" not including a joint powers
authority.
3)Need for the programs . According to the U.S. Environmental
Protection Agency, "upfront costs of energy efficiency
retrofits can present a barrier to improving energy efficiency
in school buildings. However, delaying energy efficiency
improvements can also be costly: an activity not undertaken
can result in increased operating costs."
4)Program History . According to CEC, these two programs have
made loans to more than 771 entities totaling more than $267
million, with about 58% of the total loan amount going to
local governments, 12% to K-12 public schools, 10% to public
colleges, 10% to hospitals and public care facilities, and 2%
to special districts. Since 2000, the programs have 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%).
5)Program Quality Controls . Existing law authorizes the CEC to
contract and provide grants for performing services for
eligible loan recipients, including feasibility analysis,
project design, field assistance, and operation and training.
According to CEC, each project applicant receives 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% of the loan,
and after project completion to verify energy savings.
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6)Program Results and Distribution of Loans . The CEC maintains
a comprehensive database on the recipients of ECAA loans, the
amount of the loans, and energy efficiency improvements made
as a result of the loans. It is not clear whether the CEC has
established criteria to ensure that loan funds are distributed
equitably throughout the state or whether the CEC has
prioritized distribution of the loans in areas with high
summer peak electricity demand or limited availability of
natural gas.
The author may wish to consider an amendment directing the CEC
to take steps to perform loan solicitations in a manner that
results in an equitable distribution of loans statewide,
prioritizes awards to regions with high summer peak loads or
have electrical or natural gas system distribution
constraints; and place an emphasis on offering these loans in
disadvantaged communities.
7)Current Account Status . According to CEC, ECAA currently has
about $30 million in unrestricted accounts, with loan
applications for about $12 million now under review. CEC
staff predicts that, with additional loan applications coming
in, remaining funds are likely to be encumbered by the end of
2012.
8)Ratepayers unaffected. Southern California Edison points out
in its support letter for this bill that the program has
provided financing through measures that do not require
ratepayer funding. Similarly, the South San Joaquin
Irrigation District points out in their support letter that
revenue bond funding is used to support energy efficiency
upgrades.
REGISTERED SUPPORT / OPPOSITION :
Support
League of California Cities
Natural Resources Defense Council (NRDC)
San Diego Gas & Electric Company (SDG&E)
Sempra Energy Utilities
South San Joaquin Irrigation District (SSJID)
Southern California Edison (SCE)
Southern California Gas Company (SoCalGas)
Opposition
None on file.
SB 1268
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Analysis Prepared by : Susan Kateley / U. & C. / (916)
319-2083