BILL ANALYSIS SB 5 X1 Page 1 Date of Hearing: April 3, 2001 ASSEMBLY COMMITTEE ON APPROPRIATIONS Carole Migden, Chairwoman SB 5 X1 (Sher) - As Amended: April 2, 2001 Policy Committee: E.C.&A.Vote:16-1 Urgency: Yes State Mandated Local Program: No Reimbursable: SUMMARY This bill provides a total of $927 million from the General Fund for new and existing energy efficiency programs and for programs to provide assistance to low-income households in paying their energy bills. Specifically, this bill: 1)Allocates the funds to the following state agencies: Public Utilities Commission (PUC) $326 million; California Energy Commission (CEC) $405.5 million; Department of Consumer Affairs (DCA) $10 million; Department of General Services (DGS) $50 million; Community Services and Development (DCSD) $120 million; Department of Water Resources (DWR) $15.46 million. 2)Allocates $240 million of the funds for the following low-income assistance programs: a) $100 million to augment the existing California Alternate Rates for Energy (CARE) program, which provides discounts on gas and electric bills. b) $20 million to the PUC to fund weatherization activities. c) $120 million for the DCSD to implement the a California Low Income Home Energy Assistance Program. At least $60 million of this total would be for weatherization and the remainder for assistance with bill paying. 3)Includes, in the amount appropriated to the CEC, a total of $87 million to locally-owned public utilities for energy efficiency and low-income assistance. SB 5 X1 Page 2 4)Requires the PUC and CEC to adopt guidelines and cost-effectiveness criteria for the funded energy efficiency programs and limits administrative costs to 2.5 percent of the appropriated amounts. 5)Requires the state agencies to report to the Legislature quarterly, commencing January 1, 2002, on the activities funded with these appropriations. 6)Exempts contracts entered into pursuant to the above appropriations from specified statutory provisions relating to consulting, architectural and engineering, and services contracts, advertising for such contracts, and DGS approval of contracts. 7)Sunsets all of the above provisions on January 1, 2005. On that date any unencumbered funds would revert to the General Fund. 8)Shortens the period for legislative review of energy services contracts proposed by DGS from 45 days to 15 days. 9)Exempts state energy projects from competitive bidding requirements at the discretion of the Director of General Services. (State energy projects are defined as equipment and measures that reduce energy consumption in state buildings and community college buildings.) 10)Exempt state energy projects from the state capital outlay process at the discretion of the Department of Finance. 11)Sunsets the exemptions in (9) and (10) on June 30, 2003. FISCAL EFFECT One-time General Fund appropriation of $927 million. COMMENTS 1)Energy Efficiency . The electric restructuring statutes provided for substantial funding of energy efficiency programs through a non-bypassable surcharge on electric bills. Last year AB 995 (Wright), Chapter 1051, Statutes of 2000, and SB 1194 (Sher), Chapter 1050, Statutes of 2000, extended that SB 5 X1 Page 3 surcharge for 10 years. The energy efficiency portion of the surcharge is less than 1% of each customer's bill and the money derived from the surcharge pays for energy efficiency programs administered by PUC and delivered by the investor-owned utilities. Last year, the Legislature also approved AB 970 (Ducheny), Chapter 329, Statutes of 2000, which authorized $50 million for a variety of energy efficiency programs. Those funds have been committed to six types of projects specified in the legislation. SB 5X provides General Fund monies to supplement both the PUC and CEC programs and includes funding for efficiency measures in state and local government buildings. 2)Low-Income Assistance . Current law establishes a low income energy assistance program for electric and natural gas service customers of the IOUs known as CARE which is funded by a surcharge on energy bills. The CARE program includes both discounts on the electric and natural gas bill, as well as a residential weatherization program. The recent 40% rate increase ordered by CPUC for electrical corporations and the recent increases in natural gas prices in California make it more important to ensure that enrollment in the CARE program is expanded. The $100 million allocation in SB 5 X1 could help finance additional outreach as well as supplement existing assistance. SB 5X also appropriates $120 million to DCSD to increase energy conservation and reduce demand for energy pursuant to a state Low Income Home Energy Assistance Program (LIHEAP). This would complement the existing federally-funded LIHEAP to assist customers in coping with high energy costs by providing for weatherization services. Cash assistance payments. Eligibility for California LIHEAP is to include households with incomes not exceeding the greater of 60% of the state median income or 80% of the county median income. Under the measure's specification DCSD is to examine the penetration of other energy programs, including federal LIHEAP and utility company programs, and identify the adequacy of services to elderly, disabled, limited English speaking persons and migrant farm workers and households with very young children. The program allows up to 15% for outreach and training for consumers. At least 50% of the funds must be used for weatherization and cash assistance is to be maximized by allowing the state funds to be used as a supplement to federal LIHEAP payments. SB 5 X1 Page 4 3)Municipal Utilities . The bill provides $87 million to the CEC for distribution to the state's municipal utilities for energy efficiency and low-income assistance efforts analagous to the those fund through the PUC. This is in recognition that these state taxpayers dollars should be available to all utility customers and not just those served by the IOUs. 4)Amendments . The following amendments are recommended: a) Reduce the total funding to $710.3 million, as shown on the attached chart. Generally the funding changes include (1) eliminating overlap with AB 29X-the other major energy conservation legislation (2) matching funding levels to a shorter implementation period of summer and fall 2001; and (3) increasing funding for agriculture-related programs by $35 million. b) Clarifying that funding provided for the CARE program is to supplement, not supplant existing CARE funding, allow only up to 20 percent of funds for increasing enrollment, and place priority for funding on assisting eligible customers that have payment arrangements or overdue notices. c) Allow the Department of Consumer Affairs an exemption from state services contracting procedures until November 1, 2001. This will allow the department to engage a contract in time to commence it's media campaign for the summer. d) Make all funding, except for CARE and LIHEAP, and the contracting exemptions in Sections 5 and 6 of the bill, operative only until March 31, 2002. Any funds unencumbered by that time will revert to the General Fund and be available for consideration during next year's budget process. e) Add provisions requiring the PUC to include the following in their interruptible/curtailment programs: allowing aggregation of agricultural customers to meet minimum kilowatt requirements for participation, and limiting curtailments for agricultural customers to 4 hours per day and 20 hours per month. SB 5 X1 Page 5 f) Require the Department of Finance to report quarterly to the Legislature, commencing October 1, 2001, on any state energy projects exempted from the state capital outlay process or the advertising and competitive bidding requirements of the Public Contract Code and change the sunset date on those exemptions to January 1, 2003. g) Making the community colleges ineligible for the low-energy usage building materials program if funding for community college energy efficiency projects is enacted in AB 29X. Analysis Prepared by : Chuck Nicol / APPR. / (916)319-2081