BILL ANALYSIS 1
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SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
DEBRA BOWEN, CHAIRWOMAN
AB 653 - Nunez Hearing Date:
June 24, 2003 A
As Amended: March 24, 2003 FISCAL B
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DESCRIPTION
Current law authorizes the State Public Works Board (SPWB),
until January 1, 2005, to issue revenue bonds, notes, and bond
anticipation notes to finance cogeneration equipment,
alternative energy equipment, and conservation measures in
public buildings.
This bill extends the sunset date of the SPWB's bonding
authority by five years to January 1, 2010.
Current law doesn't specify whether the bonds can be used for
projects that combine conservation measures with alternative
energy equipment purchases.
This bill permits the bonds to be used for projects that combine
conservation measures with alternative energy equipment
purchases.
Current law requires energy efficiency and conservation projects
to save enough money in operational costs to cover the expense
of financing the project. Generally, the Department of General
Services (DGS) requires projects to pay for themselves within
ten years.
This bill requires the SPWB to evaluate each project based on
the costs and savings over the life of the project, rather than
over a ten-year timeframe.
BACKGROUND
In 1982, the Legislature passed SB 701 (Dills), Chapter 1523,
Statutes of 1982, to create the state's "Energy Conservation in
Public Buildings" program. It gave SPWB the authority to issue
bonds in $50 million increments beginning with the 1982-83
fiscal year to finance energy and water conservation projects in
state buildings that would eventually save the state money, and
allowed whatever money wasn't spent to be rolled over to
subsequent years. AB 1551 (Pescetti), Chapter 981, Statutes of
1999, extended the program from January 1, 2000, to January 1,
2005, and capped the bonding authority at $500 million.
According to SPWB, there's an estimated $215 million worth of
bonding authority available.
COMMENTS
1.The Beginning of the End . In anticipation of the 2005 sunset
and because of the long lead time necessary to develop
projects and issue bonds to finance them, the SPWB will begin
scaling back its work on future projects during this calendar
year if the sunset isn't extended. By extending the sunset of
the program a year early, the hope is the SPWB won't have to
slow down or interrupt projects due to any uncertainty over
whether the program will continue.
2.If The Money Is Capped, Why Is There A Sunset ? Since the
total bonding authority is capped at $500 million ($285
million of which has already been spent), it's not clear what
purpose is served by sunsetting the program before the money
may run out. As such, the author and committee may wish to
consider simply removing the sunset provision of the bill.
3.Ten Years to Life . This moves away from the DGS requirement
that projects pay for themselves within ten years and replaces
it with one that allows projects to receive financing as long
as they pay for themselves over their lifetime. The goal of
this change is to allow more types of conservation and
alternative energy projects to be eligible for funding through
the program. For example, while the cost of photovoltaic (PV)
equipment may not be recoverable in the first ten years of
installation, it may be recoverable over a longer period of
time, but under current law, bonds issued under this program
can't be used to pay for anything where the payback time
exceeds ten years.
While the change affected by this bill may promote more
investment in projects that will eventually save the state
more money, it also makes it more difficult to determine the
true cost-effectiveness of a project since "life of the
project" is relatively open-ended. The author and committee
may wish to consider whether the bill should be amended to, in
cases where the project involves the purchase of
energy-efficient equipment, require the project to pay for
itself over the life of the product warranty.
4.Bundle Up . This bill allows groups of energy projects to be
"bundled" and evaluated as to their long-term energy and costs
savings as a package, rather than individually. This change
will also permit more solar projects to be funded through the
program by allowing them to be coupled with other conservation
and efficiency projects for a total cost savings that's
greater than the cost of financing the projects.
ASSEMBLY VOTES
Assembly Floor (78-0)
Assembly Appropriations Committee (24-0)
Assembly Natural Resources Committee
(12-0)
Assembly Business and Professions Committee
(13-0)
POSITIONS
Sponsor:
Planning and Conservation League
Support:
City of San Diego
Clean Power Campaign
Sierra Club California
Vote Solar Initiative
Oppose:
None on file.
Jennie Bretschneider
AB 653 Analysis
Hearing Date: June 24, 2003