BILL ANALYSIS
AB 653
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Date of Hearing: May 7, 2003
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Darrell Steinberg, Chair
AB 653 (Nunez) - As Amended: March 24, 2003
Policy Committee: Business and
Professions Vote: 13-0
Natural Resources 12-0
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill extends the sunset date and revises eligibility
requirements for bond funding through the "Energy Conservation
in Public Buildings" program. Specifically, this bill:
1)Extends the program sunset date from January 1, 2005 to
January 1, 2010.
2)Expands program eligibility to projects that combine
conservation measures and alternative energy equipment.
3)Requires each project be evaluated based on its costs and
finance and energy savings over the project life.
FISCAL EFFECT
Extends annual program administration costs of about $2 million
within the Department of General Services for another five
years. (All program and project costs are financed with revenue
bonds issued by the State Public Works Board (PWB) that are
retired with energy cost savings resulting from the projects.)
COMMENTS
Purpose . This bill, sponsored by the Planning and Conservation
League, is intended to extend the life of the state's energy
revenue bond program and expand eligibility requirements so that
more projects might be feasible.
The Energy Conservation in Public Buildings program was created
AB 653
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in 1982 and provided the PWB with authority to issue up to $500
million in revenue bonds to finance conservation or alternative
energy projects in state buildings. Legislation enacted in 1993
made public school buildings eligible for this financing. Under
this program, the PWB issues bonds to finance all
project-related costs, and the bond principal and interest
payments are made from the energy cost savings generated by the
project. According to the sponsor, there is still about $235
million in available bonding authority for the program. Without
extending the sunset date, DGS will stop approving future
projects this year because of lead time needed for development
and bond sales.
The bill also attempts to make a larger number of projects
feasible under the program by making two eligibility changes:
"bundling" of projects and expanding the scope of evaluation to
the "life of the project." A program administrative requirement
is that projects must pay for themselves within 10 years,
regardless of the project's life span. 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 are more likely to be feasible. 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) may become feasible.
Analysis Prepared by : Chuck Nicol / APPR. / (916) 319-2081