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