BILL ANALYSIS
AB 653
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Date of Hearing: April 8, 2003
ASSEMBLY COMMITTEE ON BUSINESS AND PROFESSIONS
Lou Correa, Chair
AB 653 (Nunez) - As Amended: March 24, 2003
SUBJECT : Energy efficiency: public buildings.
SUMMARY : Extends the sunset date and eligibility requirements
for bonding authority related to a State Public Works Board
(PWB) "Energy Conservation in Public Buildings" program
(Program). Specifically, this bill :
1)Expands the Program's eligibility to include projects that
combine conservation and alternative energy equipment.
2)Requires PWB, in determining whether to issue funding, to
evaluate each proposed project in its entirety and analyze the
costs and financial and energy savings over the life of the
project.
3)Extends the sunset date of the Program's bonding authority by
5 years to January 1, 2010.
4)Makes related definitional clarifications.
EXISTING LAW authorizes the State Public Works Board, until
January 1, 2005, to issue revenue bonds, notes, and bond
anticipation notes to finance the cost of cogeneration
equipment, alternative energy equipment, and conservation
measures in public buildings.
Existing law also states that "it is the policy of the state to
use available resources at state facilities which can substitute
for traditional energy and water supplies or produce electricity
or water at its facilities when use or production will reduce
long-term energy or water
expenditures."
FISCAL EFFECT : Unknown
COMMENTS :
Purpose of this bill . This bill is intended to extend the life
of the "Energy Conservation in Public Buildings" program by
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expanding its eligibility requirements and adding another 5
years to its sunset date.
The original Program was created in 1982 and provided bonding
authority to PWB for up to $500 million to finance the cost of
conservation or alternative energy projects in state buildings.
According to the sponsor, the Program still has approximately
$235 million available for projects. This bill would expand
Program eligibility and extend the sunset date so that it is
easier to use the remaining bonding authority for
environmentally friendly projects on state property.
Without extension of the sunset date, DGS will stop approving
future projects under the Program this year because of "the
significant lead time for development and bond sales" required.
Changes in Eligibility . This bill attempts to make a larger
number of projects viable under this Program by making two
eligibility changes: "bundling" of projects and expanding the
scope of evaluation to the "life of the project." Under current
law, any project must pay for the service of its bond costs and
interest - meaning that all projects must be revenue positive in
order to be approved.
However, a second administrative requirement held that projects
must pay for themselves within 10 years, regardless of the life
span or usefulness of the project. By extending the evaluation
period to the full span of the project, longer-term investments
that pay off more slowly but are still revenue positive can be
approved. Furthermore, by "bundling" cogeneration and
conservation projects together, some projects like solar
cogeneration (which, according to DGS, can be more difficult to
make cost-effective) are more likely to be approved as well.
The 'Energy Conservation In Public Buildings' Program . In 1982,
the Legislature enacted the Program to assist PWB in developing
"energy and water conservation and cogeneration and alternative
energy and water supply sources at state facilities." The
Program was to "provide a mix of financing options [generally,
bonds, notes and commercial paper] for the development of cost
saving state energy and water conservation projects." Financing
was to be provided in $50 million increments, up to a total of
$500 million for the life of the Program. According to the
sponsor, only $265 million has been appropriated to date. The
bonding authority for the remaining funds was last extended in
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1999.
The Program's eligibility criteria were focused on cost-saving
proposals, requiring all project expenditures to have costs
lower than the anticipated marginal cost of the energy or water
that would have otherwise been purchased. In practice, all
projects must create enough savings to pay for the service of
their revenue bond.
Arguments in favor . According to the sponsor, the Planning and
Conservation League, "AB 653 will ensure that funding already
available for energy efficiency and alternative power projects
will continue to flow to those projects." The sponsor further
argues that extension of the sunset date will allow the state to
"continue saving money by saving energy and investing in clean,
renewable power? [Specifying] that full lifecycle costs should
be used to evaluate energy improvements, [will ensure] that the
State does not leave savings on the table when it comes to both
energy efficiency and alternative generation."
Finally, supporters argue that "AB 653 will also allow the State
to fund programs using a design-build contract system, allowing
more flexibility when beginning new projects." The design-build
contract system is one that bundles the initial "design" portion
of a construction project (typically done by architecture firms)
with the subsequent "building" portion (typically done by
construction firms or contractors).
Double-referral to Natural Resources . This bill is double
referred, with secondary jurisdiction going to the Committee on
Natural Resources.
REGISTERED SUPPORT / OPPOSITION :
Support
Planning and Conservation League (sponsor)
Vote Solar
Opposition
None on file.
Analysis Prepared by : Hank Dempsey / B. & P. / (916) 319-3301
AB 653
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