BILL ANALYSIS �
AB 239
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Date of Hearing: April 29, 2013
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Steven Bradford, Chair
AB 239 (Hagman) - As Amended: April 8, 2013
SUBJECT : Energy: school facilities: energy efficiency upgrade
projects.
SUMMARY : Transfers 50 percent of funds allocated by the Clean
Energy Jobs Act (Prop 39) for clean energy projects to the Clean
Energy School Fund (CES Fund) to be expended by the Office of
Public School Construction (OPSC) to fund zero-interest
revolving loans and grants for energy efficiency retrofits or
clean energy installation projects at public schools.
Specifically, this bill :
1)Transfers 50 percent of the moneys deposited in the CEJC Fund
to the CES Fund.
2)Requires OPSC, in consultation with the California Energy
Commission (CEC) and the California Public Utilities
Commission, to expend the CES Fund, upon appropriation by the
Legislature, to fund a zero-interest revolving loan program
(60 percent) and a grant program (40 percent) for energy
efficiency retrofit or clean energy installation projects at
public schools.
EXISTING LAW :
1)Establishes the Clean Energy Job Creation Act to create
good-paying energy efficiency and clean jobs in California;
put California to work repairing and updating schools and
public buildings to improve efficiency and make clean energy
improvements; promote new private sector job creation through
energy efficiency improvements in commercial and residential
buildings; achieve maximum job creation and energy benefits;
and supplement, complement, and leverage existing energy
efficiency and clean energy programs. (Public Resources Code
26201)
2)Allocates up to $550 million to the Job Creation Fund in
fiscal years 2013-14, 2014-15, 2015-16, 2016-17, and 2017-18.
(Public Resources Code 26205)
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3)Creates the Clean Energy Job Creation Fund to improve energy
efficiency and expand clean energy generation, including all
of the following:
a) Public schools, Universities, and Colleges: Energy
efficiency retrofits and clean energy installations, along
with related improvements and repairs that contribute to
reduced operating costs and improved health and safety
conditions
b) Other public buildings and facilities: Financial and
technical assistance including revolving loan funds,
reduced interest loans, or other financial assistance for
cost-effective energy efficiency retrofits and clean energy
installations on public facilities.
c) Job training and workforce development: Funding to the
California Conservation Corps, Certified Community
Conservation Corps, YouthBuild, and other existing
workforce development programs to train and employ
disadvantaged youth, veterans, and others on energy
efficiency and clean energy projects.
d) Public-private partnerships: Assistance to local
governments in establishing and implementing PACE programs
or similar financial and technical assistance for
cost-effective retrofits that include repayment
requirements. Funding shall be prioritized to maximize job
creation, energy savings, and geographical and economic
equity. Where feasible, repayment revenues shall be used to
create revolving loan funds or similar ongoing financial
assistance programs to continue job creation benefits.
(Public Resources Code 26205)
4)Establishes criteria for expenditures from the funds:
a) Existing state and local government agencies, with
expertise in managing energy projects and programs shall
provide project selection and oversight.
b) All projects awarded funds are to be based on in-state
job creation and energy benefits for each project type.
c) All projects must be cost effective and may include
consideration of non-energy benefits, such as health and
safety.
d) All project contracts must include project
specifications, costs, and projected energy savings.
e) All projects shall be subject to audit.
f) Program overhead costs shall not exceed 4 percent of
total funding.
g) Funds can only be appropriated only to agencies with
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established expertise in managing energy projects and
programs.
h) All programs must be coordinated with the CEC and the
California Public Utilities Commission (PUC) to avoid
duplication and maximize leverage of existing energy
efficiency and clean energy efforts.
i) Eligible expenditures include costs associated with
technical assistance, and with reducing project costs and
delays, such as development and implementation of processes
that reduce the costs of design, permitting or financing,
or other barriers to project completion and job creation.
(Public Resources Code 26206)
5)Creates a COB comprised of three members appointed by the
Treasurer, three members by the Controller, and three members
by the Attorney General. Each appointing office shall appoint
one member with expertise in building construction and design,
financial transactions and cost-effectiveness, and expertise
in energy efficiency and clean energy. The CEC and PUC each
serve as ex officio members.
6)The duties of the board include:
a) An annual review of all expenditures
b) And annual independent audit of the fund and a selection
of projects completed
c) A publicly available accounting of expenditures
d) An annual evaluation of the program to be provided to
the Legislature
(Public Resources Code 26210)
FISCAL EFFECT : Unknown.
COMMENTS : According to the author, "as a state we are
innovators in energy efficiency. AB 239 is one more step our
state will take to ensure we meet our energy goals and save
money so our school districts can utilize those funds in the
classroom".
1)Yes on 39 : In November 2012, California voters approved Prop
39 to close a corporate tax
loophole that previously allowed multi-state businesses to
select one of two different methods to determine the amount of
taxable income associated with California and taxable by the
state. Prop 39 now requires these businesses to determine their
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California taxable income using a single sales factor method
which is estimated to increase the state's annual corporate tax
revenues by as much as $1.1 billion.
Prop 39 also specifies how a portion of this new revenue should
be spent. Half of the revenue generated from the measure - up to
$550 million - will be transferred to a new Clean Energy Job
Creation Fund to support projects intended to improve energy
efficiency and expand the use of alternative energy at public
schools, colleges, universities, and other public buildings, as
well as public-private partnerships and workforce training
related to energy efficiency. Prop 39 funding can only be
appropriated to agencies with established expertise in managing
energy projects. In addition, the programs must be coordinated
with the CEC, and PUC in order to avoid duplication among
agencies, and leverage existing energy efficiency and
alternative energy efforts.
However the state's funding obligations under Prop 98 is
impacted by Prop 39. In 1988, the voters passed Proposition 98,
modified it in 1990, which requires a minimum level of state and
local funding each year for school districts and community
colleges. This is commonly known as the Prop 98 minimum
guarantee. This assures local school districts and community
colleges that they will receive at least a minimal level of
funding from the state and local governments. The Prop 98
guarantee can grow with increases in state General Fund revenues
(including those collected from state corporate income taxes).
Therefore, revenues generated by Prop 39 can affect the state's
Prop 98 funding requirements.
The Governor's 2013-14 Budget includes a plan to implement the
provisions of Prop 39, including funds allocated to energy
projects toward the Prop 98 minimum guarantee. The Governor also
proposes to designate all energy-related Prop 39 funds to K-12
schools ($400.5 million) and the community colleges ($49.5
million) for the next five years. The proposal would allocate
funds on a per student basis, which averages school districts
and community college district to receive $67 and $45 per
student, respectively.
The Legislative Analyst's Office (LAO) has raised serious
concerns with the Governor's Prop 39 proposal. In sum, the LAO
argues:
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Governor's treatment of Prop 39 revenue to count toward
Prop 98 purposes is questionable and a departure from the
state's longstanding view of how revenues are to be treated
for the purposes of 98. In fact, it is contrary to what
the voters were told in the official voter guide as to how
the revenues would be treated.
The Governor's proposed treatment of funds, which is
based on the accounts the funds are deposited into, is
subject to manipulation.
The proposal excludes many eligible projects that could
potentially achieve a greater level of energy benefits,
fails to account for energy consumption differences, does
not sufficiently leverage existing programs and experience,
and excludes job training and workforce development funding
for disadvantaged youth, and veterans which is a primary
component of the Prop 39.
1)Loans for Schools - Reinvent the Wheel. This bill proposes
that OPSC, in consultation with
the CEC and PUC, to expend Prop 39 revenues to fund a zero
interest revolving loan program and a grant program for school
districts to perform energy efficiency retrofits or clean energy
installation projects at public schools. The Center for the
Next Generation released a white paper, dated December 2012,
titled "Proposition 39: Investing in California's Future".
According to the white paper, California serves over 6.2 million
students each year. These students are housed in over 10,000
schools in which over 70 percent of school buildings are over 25
years old. Presumably a vast number of these schools are in
need of maintenance and energy retrofitting, thus underscoring
the need for Prop 39.
The author may wish to consider an amendment to require the CEC
to administer the program within its existing programs instead
of creating a new program within OPSC.
The CEC currently administers the Bright Schools Loan Program.
All publicly funded California K-12 school districts are
eligible for assistance from the Bright Schools Program. Since
1988, $4 million the program has provided technical assistance
to public schools to over 300 participating public school
districts with over 80% small school districts (ADA <
501students). The schools have achieved annual energy savings of
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approximately 20%.
2)Coordinating with overlapping and similar programs :
Throughout California, state gas and
electric utilities administer programs to help utility customers
improve energy efficiency and reduce energy usage. In addition,
some local governments in California offer incentives for clean
energy improvements. For example, the City and County of San
Francisco administers a program for solar photovoltaic
installations. (The San Francisco program limits the total
incentives to no more than 95% of the total project costs).
Some school projects also qualify for federal energy efficiency
and/or solar energy tax credits. These tax credits could provide
as much as a 30% reduction in the total cost of the improvement.
California Department of Education's (CDE) School Nutrition
Program provides reimbursement to schools for energy expenses
related to the school lunch program. If the energy bill is
reduced as a result of the Prop 39 funds then the OPSC, CEC and
PUC should work with the CDE to ensure that schools are properly
claiming their reduced expenses.
Some school districts reside in counties which rely on local
bond financing to anchor a school improvement project. For
instance, the Nuview Union School District in Riverside County
passed a school improvement bond last November. The bond was
used to finance school projects such as upgrading and replacing
outdated heating, ventilation and air-conditioning systems,
renovating and modernizing outdated classrooms and school
facilities and improving safety enhancements at each campus. Not
every school district, however, can afford to implement a bond
measure.
The author may wish to consider an amendment to ensure that all
grants and loans applications provide information on incentives
applied for and that the grants and loans are adjusted so that
the net amount of the grant or loan is reduced by the value of
any and all incentives or support from federal, state, local,
utility, or other programs.
Any incentives available from federal, state, and local
government or from public utilities or other sources used by the
entity awarded a grant, loan, or financial assistance, shall be
used to reduce the amount of the grant awarded.
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3)Setting expectations : OPSC is under the authority of the State
of California's Department of
General Services. As staff to the State Allocation Board (SAB)
OPSC implements and administers a $35 billion voter-approved
school facilities construction program. For example, OPSC
administers The Modernization Grant which provides state funds
on a 60/40 state and local sharing basis for improvements to
educationally enhance school facilities. Projects eligible under
this program include, but are not limited to, modifications such
as air conditioning, plumbing, lighting, and electrical systems.
Given OPSC's role in overseeing school facilities construction
programs, it is not clear if they possess the level of expertise
in evaluating various packages of energy efficiency and clean
energy improvements. The vendors presenting these options are
not required to use consistent assumptions regarding electricity
and gas rates. Nor are they required to use consistent
assumptions with regard to projected energy rate escalation or
potential demand reduction and cost savings. A school district
recently entered into a $7 million loan based on the premise
that PG&E rates would escalate 5% per year. A review of PG&E's
A-10 rates (one of several possible tariffs that a school could
be using) shows that PG&E's A-10 rates were 12.941 cents in
2008, 14.867 cents in 2010, 14.574 cents in 2011, 14.430 cents
in 2011, and are presently 14.671 cents per kilowatt-hour.
A recent report provided by the Contractors State License Board
shows that in 2012 it received approximately 2000 complaints
against Heating and Air Conditioning, Glaziers, Insulation, and
Solar Contractors. The majority of these complaints were for
failure to meet trade standards, permitting violations, failure
to comply with regulations, and contract violations. These
particular items relate to quality control and are critical to
ensuring a successful outcome.
For these reason the author may wish to consider an amendment to
require the CEC to establish standard criteria to be used in
evaluating contracts, loan limits for technology improvements,
and qualifications of contractors to construct or install
improvements.
The commission shall establish criteria, including but not
limited to:
a) Standard methods for estimating energy benefits,
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including reasonable assumptions for current and future
costs of energy.
b) Existing qualifications, licensing and certifications
for contractors applicable to the occupations that perform
the work.
c) Limits for grants or loans for each type of eligible
improvement .
1)Incorporate the loading order: State policies and programs
typically incorporate "the Loading
Oder" in recognition that energy efficiency and demand response
are the least-costly of the various ways to improve energy use
at a site. In the loading order, on-site renewable generation
follows energy efficiency and demand response.
The author may wish to consider an amendment requiring any
eligible applying for a grant, loan, or financial assistance to
demonstrate that the institution has implemented cost-effective
energy efficiency and demand response improvements.
Any eligible institution applying to the commission for a grant,
loan, or financial assistance to install solely a clean energy
technology shall demonstrate to the commission that the
institution has implemented all cost-effective energy efficiency
and demand response improvements.
6)Tracking results: Provisions in the bill require OPSC to
maintain a database on the inventory
of the school district's facilities, and basic site and energy
related information for the facilities.
According to a Legislative Analyst's Office (LAO) report
released December 19, 2012, titled, "Energy Efficiency and
Alternative Energy Programs," California currently maintains
over a dozen major programs that are intended to support the
development of energy efficiency and alternative energy in the
state. Over the past 10 to 15 years, the state has spent a
combined total of roughly $15 billion on such efforts, the vast
majority of which has been funded by utility ratepayers. The LAO
went on to recommend that the Legislature develop a
comprehensive strategy for meeting the state's energy efficiency
and alternative energy objectives.
In the interest of ensuring that the results of Prop 39 meet
expectations, the author may wish to consider directing the OPSC
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to track the school's energy consumption prior to the
improvements, energy consumption following the improvements,
types of improvements, and total cost.
The commission shall maintain a public database of the eligible
entities that receive grants, loans, or other financial
assistance through this program. The database shall include
relevant metrics, to be determined by the commission, for
electric, gas, and cost savings of the projects.
7)No need for zero interest loans : This bill proposes that OPSC
fund zero interest loans for
energy efficiency retrofits or clean energy installation
projects at public schools. The CEC's program currently provide
a 1 percent interest loan program to eligible entities for
energy projects with proven and/or demand cost savings. The
repayment term is based on the estimated annual energy cost
savings from the aggregated project(s), using energy costs and
operating schedules at the time of loan approval.
The author may wish to consider an amendment to require CEC to
administer a loan program, similar to the CEC's Bright Schools
program, which offers a 1 percent interest loans to any eligible
institution .
8)Related legislation:
AB 39 (Skinner), pending in this committee, establishes a
program to be administered by the CEC for the distribution of
funds to clean energy projects undertaken by public schools,
with 75 percent to be awarded as grants and 25 percent to fund
revolving loans.
AB 114 (Salas) requires the Employment Development Department,
using funds made available from the Clean Energy Job Creation
Fund for job training and workforce development purposes, to
administer grants, no-interest loans, or other financial
assistance for allocation to existing workforce development
programs for the purposes of creating green energy jobs in
California.
AB 293 (Allen) requires the CEC, in consultation with the PUC
and other state agencies it deems appropriate, to develop a
program to award funding, on a competitive basis, for the
purposes established by Proposition 39, and requires a report to
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the Legislature on the progress, applicants and disbursement of
funds and to make recommendations to improve allocation of these
funds by July 1, 2016.
SB 39 (De Leon, 2013) establish a competitive grant program to
provide assistance to K-12 school districts for the purpose of
energy efficiency upgrade projects and a financing program by
evaluating the potential to fund energy efficiency projects for
K-12 schools, California Community Colleges (CCC) and campuses
of the University of California (UC) and the California State
University (CSU), through matching funds, low-interest loans, or
other financing methods.
SB 64 (Corbett) designates the California Energy Commission as
the lead agency to establish a grant program to distribute
Proposition 39 funds to school districts cities and counties for
energy efficiency and clean energy technology in school and
municipal facilities.
SB 729 (Fuller) states the intent of the Legislature to enact
legislation to implement the provisions of Proposition 39.
AB 1186 (Skinner, 2012) was vetoed by Governor Brown. The
Governor stated, in his veto message, "Though well intended, it
jumps the gun by establishing a program before we are ready."
REGISTERED SUPPORT / OPPOSITION :
Support
None on file.
Opposition
None on file.
Analysis Prepared by : DaVina Flemings / U. & C. / (916)
319-2083