BILL ANALYSIS 1
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SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
DEBRA BOWEN, CHAIRWOMAN
AB 2924 - Wiggins Hearing Date: June
22, 2004 A
As Amended: April 13, 2004 FISCAL B
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DESCRIPTION
Current law provides $135 million annually to the Renewable Resource
Trust Fund from investor-owned utility (IOU) customers rates to
provide rebates and credits for renewable energy programs. Subsidies
for photovoltaic systems total about $30 million annually, which
account for roughly half of the installed cost of a system.
Current law establishes a separate program for the installation of
photovoltaic systems on affordable housing projects. The subsidy for
these systems is capped at 75% of the installed cost, compared to the
50% subsidy awarded to other photovoltaic projects.
This bill increases the subsidy for photovoltaic systems on
affordable housing projects by creating a revolving loan program to
finance the unsubsidized cost of the photovoltaic system beginning in
2006 and ending January 1, 2010. The bill appropriates $45 million
annually from the Renewable Resource Trust Fund for this purpose.
BACKGROUND
California has long encouraged the use of renewable energy,
encouragement that's been backed by significant funding, policy
support, and renewable energy programs, such as the net metering
program for solar and wind energy.
The $135 million Renewable Resource Trust Fund provides money to
three categories of programs:
Existing Renewable Facilities. These are typically existing
biomass and solar thermal projects.
New Renewables. These include wind, geothermal, landfill gas,
small hydro, biomass projects.
Emerging Renewable: These are limited to residential and
commercial photovoltaic systems.
According to the California Energy Commission (CEC), a typical
photovoltaic system for an apartment complex will cost about $10,000
per unit, while for a 3-4 bedroom home, the cost is closer to
$25,000.
COMMENTS
1.Re-Cutting The Pieces Of The Pie . As noted above, $135 million is
collected every year from IOU ratepayers and is directed into the
Renewable Resource Trust Fund. This bill takes $45 million of that
$135 million, or 33%, to increase the already enhanced subsidy for
affordable housing solar projects between 2006 and 2009.
Because this is a zero sum game, the author and committee may wish
to consider whether providing a subsidized loan for the
unsubsidized portion of solar installations on low-income housing
will result in more renewable energy being installed. Or will it
simply be a subsidy that rewards activity that will take place
anyway, meaning $45 million will no longer be available to bring
new renewable energy on line?
2.Will This Undercut The State's RPS Program? The CEC allocates the
$135 million in renewable energy funds every year to a wide variety
of programs. The newest, and potentially most costly, renewable
energy program will be funding the Renewable Portfolio Standard
(RPS), which encourages IOUs to increase their renewable energy
purchases by one percent per year (SB 1078 [Sher], Chapter 516,
Statutes of 2002). Under that program, the IOUs only have to
increase their investment in renewable energy - which in theory is
supposed to benefit all ratepayers - if money is available in the
Renewable Resource Trust Fund to help pay for those investments.
By taking $45 million out of the account to create the loan program
established by this bill, less money will be available to help
utilities meet the mandate established by SB 1078 (Sher). The
author and committee may wish to consider whether it's appropriate
to take money designed to benefit all ratepayers and allow it to be
used to benefit a select group of ratepayers.
3.How Much Is Enough? The existing solar electric program for
affordable housing provides a subsidy - up to 75% - that's much
more generous than the 50% standard rebate for solar electric
systems. Solar electric systems benefit from the existing net
metering requirements, which credit the net-metered customer for
all the power generated by their photovoltaic system at retail
rates. Customers who install solar energy systems also receive a
7.5% state tax credit. There is in addition a federal 10%
investment tax credit. The author and committee may wish to
consider whether the additional subsidy provided by this bill is
warranted.
4.Will Low-Income Customers Actually Benefit From This Program? The
cost of the solar electric system is typically born by the
affordable housing developer, not the tenant, so the rebates in
current law and the loan created by this bill will accrue to the
developer. Clearly, a solar electric system will reduce the
monthly utility bills for tenants, but any reduction may very well
be offset by rent increases needed to pay for the cost of
installing the system and paying for the loan envisioned by this
bill.
5.Making The State A Bank - How Will The Loan Program Work? An
affordable housing developer can already go out and get a
conventional loan to finance the 25% of the cost of buying and
installing a photovoltaic system that isn't covered by the
existing grant program. This bill, presumably, would allow
developers to finance that system cost at a lower rate through the
state than they could otherwise get from a bank. The author and
committee may wish to consider whether this is appropriate.
This bill requires the CEC to transfer $45 million from the
Renewable Resource Trust Fund to pay for a loan program created by
this bill and makes it a continuous appropriation, thus making it
more difficult for the Legislature to review how the money is
spent. The author and committee may wish to consider whether this
lack of legislative oversight is appropriate.
The bill allows an unnamed agency - it simply refers to "the
appropriate state agency that currently administers loans to
low-income housing developers" - to administer the program. That
agency is allowed to use any interest earnings on the $45 million
to cover its administrative costs, a figure that may be too high
or too low depending on the interest rate the agency is able to
get on its money. The author and committee may wish to consider
whether a more specific administrative fee cap should be
established.
The agency is allowed to make loans to local government, private
businesses, and non-profit entities, set fees to cover the cost of
processing an application, and establish its own schedule of fees
or points to pay for the administration of the program. However,
the bill doesn't provide any guidance to the agency relative to
what type of interest rate it should charge on these loans. The
author and committee may wish to consider whether a loan rate
should be set, what it should be set at, and whether it's wise to
tie it to, for example, the Pooled Money Investment Account rate.
The agency can set aside money it deems necessary to protect the
state's position as a lender-creditor to cover foreclosure
expenses, auction fees, title searches, appraisals, real estate
brokerage fees, attorney fees, mortgage payments, insurance
payments, utility costs, repair costs, removal and storage costs
for repossessed equipment and inventory, and additional
expenditures to purchase a senior lien in foreclosure or bankruptcy
proceedings.
6.Related Legislation . SB 1478 (Sher) moves the deadline for
achieving a 20% renewable portfolio from 2017 to 2010 and creates a
renewable energy credit (REC) trading program to allow the sale of
the renewable attribute of renewable electricity as a commodity.
This bill was scheduled to be heard in the Assembly Utilities &
Commerce Committee on June 21, 2004.
SB 1652 (Murray) requires an unspecified number of for-sale
single-family residences in new developments of at least 25 units,
must be build with a solar photovoltaic energy system. This bill
is scheduled to be hearing in the Assembly Housing & Community
Development Committee on June 23, 2004.
PRIOR VOTES
Assembly Floor (50-28)*
Assembly Appropriations Committee (16-5)*
Assembly Natural Resources Committee (7-3)*
* Votes were on a prior, unrelated version of the bill.
POSITIONS
Sponsor:
Global Green
Support:
California Housing Partnership Corporation
California Solar Energy Industries Association
City of Oakland
Clean Power Campaign
East Bay Habitat for Humanity
The Enterprise Foundation
Environment California
First Community Housing
Global Possibilities
Green Affordable Housing Coalition
Housing California
Linda J. LeZotte, Councilmember, City of San Jose
Mercy Housing California
The Non-profit Housing Association of Northern California
Planning and Conservation League
Tenderloin Neighborhood Development
Vote Solar
Oppose:
Department of Finance
Randy Chinn
AB 2924 Analysis
Hearing Date: June 22, 2004