BILL ANALYSIS � 1
SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
ALEX PADILLA, CHAIR
AB 1953 - Skinner Hearing Date:
June 23, 2014 A
As Amended: May 23, 2014 FISCAL B
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DESCRIPTION
Current law establishes the University of California (UC) as a
public trust, administered by the Regents and provides that
statutes related to UC are applicable only to the extent that the
UC Regents make such provisions applicable.
Current law confers upon the California State University (CSU)
Trustees the powers, duties, and functions with respect to the
management, administration, and control of the CSU system.
Current law requires the California Energy Commission (CEC) to
develop and administer a series of programs to provide
cost-effective energy efficiency and conservation contracts,
grants, and loans to eligible entities. (Public Resources Code �
25410-25474)
Current law establishes the Clean Energy Job Creation Fund to
provide financial assistance to projects that create jobs in
California improving energy efficiency and expanding clean energy
generation. Up to $550 million is available fiscal years 2013-14,
2014-15, 2015-16, 2016-17, and 2017-18 the source of which is
increased state corporate tax revenues. (Proposition 39, Public
Resources Code � 26200 et seq.)
This bill establishes the Higher Education Energy Efficiency Act
and Fund and directs the CEC, in coordination with the UC
Chancellor and CSU President, to provide financial assistance to
eligible UC and CSU campuses for building retrofits that reduce
energy demand, which may include no-interest or low-interest
loans, and loan loss reserves.
This bill requires the CEC to ensure that adequate energy audit,
measurement, and verification procedures are employed to ensure
that energy savings occur as a result of the financial assistance.
This bill authorizes an eligible institution to submit an
application to CEC for financial assistance from the Fund and
requires the CEC, in consultation with the CSU Chancellor and the
UC President, to prioritize eligible financial assistance, taking
into consideration age of the facilities and any recent
modernization, proportion of students receiving Cal Grant awards,
the potential for demand reduction, and the campus's energy score.
This bill requires each institution that receives financial
assistance to report to the CEC the amount of energy saved as a
result of implementing projects funded by the assistance and
requires the CEC to determine the total amount of energy savings
achieved.
BACKGROUND
Loading Order - The "loading order" guides the state's energy
policies and decisions according to the following order of
priority: (1) decreasing electricity demand by increasing energy
efficiency; (2) responding to energy demand by reducing energy
usage during peak hours; (3) meeting new energy generation needs
with renewable resources; and (4) meeting new energy generation
needs with clean fossil-fueled generation. This policy has been
adopted by the energy agencies - the CEC and California Public
Utilities Commission (CPUC) - and its principles guide all energy
programs.
Existing CEC Programs - The CEC has administered several grant
programs to fund energy efficiency retrofits. The "ECCA" (Energy
Conservation Assistance Act of 1979) program was established more
than 30 years ago 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 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.
In 2009 the CEC received $314.5 million for energy efficiency and
renewable energy programs as a result of the American Recovery and
Reinvestment Act of 2009 (ARRA) and administered four programs:
the State Energy Program ($226 million), the Energy Efficiency
Conservation Block Grant Program ($49.6 million), Appliance Rebate
Program ($35.2 million), and Energy Assurance Planning ($3.6
million) with several subsets.
Existing CPUC Programs - California's investor-owned utilities
(IOUs) administer energy efficiency programs with ratepayer funds
and approved by the CPUC. Currently funded at about $1 billion
per year, they include a portfolio of financial incentives, loans,
and rebates for installing energy efficient appliances, lighting,
windows, HVAC systems, whole-house retrofits, and specialized
programs aimed at a variety of sectors. Each IOU has a "Statewide
and Institutional Partnerships" program to provide building
retrofit, commissioning, incentive, training, design advice and
other services with the UC, CSU and California Community Colleges,
among other government agencies. According to the UC, the energy
efficiency projects implemented through the IOU partnerships have
been the main strategy utilized by campuses to meet the UC's
energy goals. In 2013 the UC received $18.2 million in incentives
from the partnerships to implement 150 projects, which are
projected to save approximately 54.2 million kilowatt-hours (kwh)
of electricity and 5.5 million therms of natural gas. So far the
partnerships have focused on "low-hanging fruit" but future
projects are expected to emphasize deeper energy efficiency
retrofits.
Proposition 39 - This ballot initiative was approved by voters at
the November, 2012 election. Titled the California Clean Energy
Jobs Act of 2012, it requires most multistate businesses to
determine their California taxable income using a single sales
factor method. (Previously, state law allowed such businesses to
pick one of two different methods to determine the amount of
taxable income associated with California and taxable by the
state.) This change has the effect of increasing state corporate
tax revenue.
For a five-year period (2013-14 through 2017-18), Proposition 39
requires that half of the annual revenue raised from the measure,
up to $550 million, 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. "Moneys in
the fund shall be available for appropriation for the purpose of
funding projects that create jobs in California improving energy
efficiency and expanding clean energy generation." Proposition 39
specifically requires that the funds maximize energy and job
benefits by supporting:
Energy efficiency retrofits and alternative energy
projects in public schools, colleges, universities, and other
public facilities;
Financial and technical assistance for energy retrofits;
and
Job training and workforce development programs related to
energy efficiency and alternative energy.
Proposition 39 also requires that funded programs be coordinated
with the CEC and CPUC in order to avoid duplication and leverage
existing energy efficiency and alternative energy efforts. In
addition, Proposition 39 states that the funding is to be
appropriated only to agencies with established expertise in
managing energy projects and programs. None of the funding is
currently allocated to the UC or CSU.
COMMENTS
1. Author's Purpose . According to the author, the UC and CSU
currently are not eligible for existing CEC or CPUC revolving
loan programs, nor for any funding under Proposition 39.
After years of budget cuts, deferred maintenance, tuition
hikes and increasing fees, there is a need to reinvest in
higher education for long-term stability. Since many UC and
CSU facilities were built in the 1960s and 1970s, before
California had building efficiency standards, one opportunity
to reduce economic cost from campus operations is through
advanced energy efficiency projects. This bill provides an
opportunity for California's higher education institutions to
lead the nation in novel energy projects and more efficient
buildings, operations, and maintenance. Most importantly,
the financial savings from such measures would provide
flexibility to the universities to pay for other upgrades
that enhance the learning environment and improve education
for students.
2. Projects Ready to Go . Although this bill does not provide
funding for higher education energy efficiency projects, it
does establish a fund in the State Treasury and a process for
awarding financing to eligible UC and CSU institutions,
should funding become available. With energy efficiency and
carbon reduction a high priority for both the Governor and
President, a new influx of state or federal funding for
energy efficiency is not unlikely at some point. This bill
will help prioritize campus projects for financial assistance
and identify "shovel-ready" projects. Federal funds that
come with expenditure deadlines present a challenge if
extensive time is required to plan and ramp up before getting
funds out the door, as was the case with ARRA funds for
energy efficiency. This bill will help ensure that projects
are ready to go as soon as funding is available.
3. Don't Reinvent the Wheel . This bill mirrors other energy
efficiency programs that provide loans and other financial
assistance to schools and other public entities, including
the CEC's ECCA program and the new Proposition 39 program for
K-12 and community colleges. This bill states that the CEC,
"to the extent possible, shall utilize existing resources and
expertise in implementing this article." The CEC also should
take advantage of the IOU college and university
partnerships, which are part of the CPUC-approved portfolios
to help campuses in their service territories make their
operations more energy-efficient. In addition, the UC, as
part of the UC President's initiative, has identified a
series of energy-related projects to achieve the goal to
bring the UC to carbon-neutrality in its operations by 2025.
CEC should build upon and not duplicate these efforts with
the program required by this bill.
4. Calculating Energy Savings . This bill requires each
institution to submit to CEC an annual report of the amount
of energy saved from financed projects and to compute the
cost of energy saved "in a manner established by the
commission." This will help determine whether investments
from the Fund are cost-effective. The bill also contemplates
that UC and CSU institutions will leverage this Higher
Education Act Energy Assistance Fund with incentives
available from federal, state, and local government, public
utilities and other sources. These other funding sources for
a single project typically would also have energy savings
reporting requirements. For example, the CPUC requires a
cost-effectiveness calculation for IOU energy efficiency
projects. About $40 million of the $1 billion per year in
CPUC-approved energy efficiency programs is spent on
evaluation, measurement, and verification of claimed energy
savings. Calculating energy savings is complicated,
expensive, and very difficult to prove conclusively because
of so many variables that affect energy use over the life of
an energy efficient investment. In order to avoid excessive
use of the funds for redundant or duplicative energy savings
calculations, the author and committee may wish to consider
amending the bill to allow an institution to report to CEC,
as an alternative, the energy savings calculation that may be
required for any other funding source for a project.
ASSEMBLY VOTES
Assembly Floor (72-3)
Assembly Appropriations Committee (16-0)
Assembly Higher Education Committee
(13-0)
POSITIONS
Sponsor:
Author
Support:
American Federation of State, County and Municipal Employees
California State University
Sierra Club California
University of California
Oppose:
None of file
Jacqueline Kinney
AB 1953 Analysis
Hearing Date: June 23, 2014