BILL ANALYSIS AB 653 Page 1 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 Page 2 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