BILL ANALYSIS                                                                                                                                                                                                    �



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          Date of Hearing:   August 16, 2012

                        ASSEMBLY COMMITTEE ON APPROPRIATIONS
                                  Mike Gatto, Chair

                   SB 1268 (Pavley) - As Amended:  August 13, 2012 

          Policy Committee:                              
          UtilitiesVote:12-0
                        Natural Resources                       9-0

          Urgency:     No                   State Mandated Local Program: 
          No     Reimbursable:               

           SUMMARY  

          This bill extends the sunset on two energy efficiency loan 
          programs administered by the California Energy Commission (CEC) 
          that assist local governments. Specifically, this bill:

          1)Extends the sunset date on the Energy Conservation Assistance 
            Account (ECAA) from January 1, 2013 to January 1, 2028.

          2)Extends the sunset date for the Local Jurisdiction Energy 
            Assistance Account (LJEAA) from January 1, 2016 to January 1, 
            2018.

          3)Expands allowable use of the ECAA funds to include reducing 
            peak electricity demand, and makes joint powers authorities 
            eligible for these loans.

          4)Specifies that unexpended funds:

             a)   From bond sales shall remain in the ECAA account on the 
               sunset date shall remain in the account until expended for 
               purposes of the bonds.

             b)   From the American Recovery and Reinvestment Act (ARRA) 
               of 2009 remaining in the ECAA on the sunset date shall 
               revert to the Federal Trust Fund.

             c)   From the LJEAA are to revert to the Petroleum Violation 
               Escrow Account.

          5)Requires the CEC, for both programs, to solicit loan 








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            applications to:

             a)   Encourage an equitable distribution of loans statewide.

             b)   Award loans in regions with high summer peak loans, high 
               heating costs, or energy distribution system constraints.

             c)   Emphasize loans for disadvantaged communities.

           



          FISCAL EFFECT  


             1)   With extension of the ECAA sunset to 2028, and based 
               only on currently outstanding loans, at least $88 million 
               (an average of $5.5 million annually) will flow back into 
               the ECAA rather than to the General Fund absent the sunset 
               extension. The actual amount would be greater based on 
               future repayment of additional loans expected to be 
               approved prior to the current sunset date. According to 
               CEC, the ECAA currently has about $32 million in restricted 
               and unrestricted accounts, with loan applications for about 
               $9 million now under review. CEC staff expects the 
               remaining funds to be encumbered by the end of 2012.


          2)Extending the sunset will continue the CEC's administrative 
            costs for the ECAA, which total 12 positions in the current 
            year.

          3)The LJEAA has a current balance of about $1.3 million. There 
            has been no completed loan activity with this fund for several 
            years. One loan for $651,000 was approved but subsequently 
            cancelled.

           COMMENTS  

           1)The ECAA  was created in 1979 to provide grants and loans to 
            fund energy efficiency measures in schools, hospitals, public 
            care institutions, and local government entities. The loan 
            repayment is based on cost savings as a result of installing 
            efficiency measures. Initially, the borrower's energy payment 








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            does not decrease because the savings are used to pay back the 
            loan. After the loan is fully repaid, the borrower entirely 
            benefits from the savings.

            Funding for ECAA loans has come 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 and SB 679 (Pavley, 2011) appropriated an additional $25 
            million to the program. 


           2)LJEAA.  In the 1980s the federal government brought several 
            lawsuits against the Organization of Petroleum Exporting 
            Countries (OPEC). There were five overcharge cases against 
            domestic oil producers in California that settled for a total 
            of $426 million, with these penalties intended to provide 
            restitution to victims of the overcharges. Expenditure of the 
            funds was to benefit energy consumers and could not supplant 
            state funds already allocated for energy-related programs. To 
            fund projects of statewide benefit, the state created the 
            Petroleum Violation Escrow Account (PVEA). The LJEA was 
            created from a $40.5 million appropriation from the PVEA for 
            energy training and management assistance, and to provide 
            loans to local jurisdictions for energy project assistance. 


           Analysis Prepared by  :    Chuck Nicol / APPR. / (916) 319-2081