BILL ANALYSIS AB 1383 Page 1 Date of Hearing: April 13, 2005 ASSEMBLY COMMITTEE ON HOUSING AND COMMUNITY DEVELOPMENT Gene Mullin, Chair AB 1383 (Pavley) - As Amended: April 6, 2005 As Proposed to be Amended SUBJECT : Solar Energy: Low-Income Housing SUMMARY : Creates the Low-Income Housing Development Revolving Loan Program (Program) for purposes of financing distributed solar energy systems in low-income housing units. Specifically, this bill : 1)Makes findings and declarations with respect to the statewide need and importance of procuring a steady supply of affordable and reliable electricity for affordable housing units. 2)Creates the Program to subsidize the financing gap, not to exceed 75% of the total cost, of a solar energy system provided for low-income housing units. 3)Requires the California Public Utilities Commission (PUC) in consultation with the California Energy Commission (CEC) to begin ratemaking proceedings by July 1, 2006 to adopt a program to invest in residential solar energy systems. Also requires the PUC and the CEC to consider whether existing solar energy programs are adequately funded to achieve the goal of placing solar systems on low-income housing units by December 31, 2018. 4)Provides that if funds are not available through a ratemaking proceeding, the CEC shall identify funds from either: a) Resources that are currently available in the Renewable Resource Trust Fund, or b) Resources available in the next reauthorization of the Renewable Resource Trust Fund. 5)Allows the CEC to make below market rate loans to local government, private businesses and non-profit entities for the purposes of this measure. 6)Allows the CEC to collect application fees to cover costs of AB 1383 Page 2 processing applications for loans as well as loan fees to cover the administrative costs of the program. 7)Requires that revenue from any loan repayments including interest and fees as well as funds collected through foreclosure actions and other sources be deposited into the Program fund. 8)Requires that for a project to be eligible, it must demonstrate that it is at least 10% or more energy efficient than existing law (Title 24) standards. Applicants that exceed energy efficiency by more than 10% will receive an additional 25% interest rate reduction for every 5% additional improvements in energy efficiency. 9)Requires the CEC to ensure that grants will not exceed 10% of overall program funds for solar energy assistance to low income housing developers in the form of rebates. Additionally, the CEC shall also ensure that funding will not exceed 5% of overall program funds for other programs set aside specifically for low-income households, including the revolving loan fund. 10)Requires the CEC to consult with the California Tax Credit Allocation Committee, the California Housing Finance Agency and the Department of Housing and Community Development to develop fund guidelines. 11)Sunsets January 1, 2016. EXISTING LAW 1)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. 2)Provides subsidies for photovoltaic solar energy systems which total about $30 million annually, accounting for roughly half of the installed cost of a system. 3)Establishes a separate program for the installation of photovoltaic solar energy systems on affordable housing projects. The subsidy for these systems is capped at 75% of the installed cost. AB 1383 Page 3 4)Requires the CEC to prescribe building design and construction standards as well as energy conservation design standards that increase energy efficiency for new residential and non-residential buildings. 5)Establishes the Emerging Renewables Program within the CEC to stimulate market demand for renewable energy systems by offering rebates to reduce the initial cost of the system to the customer. Establishes higher and additional renewable energy rebates for affordable housing under the Program. FISCAL EFFECT : Unknown. COMMENTS : As noted under existing law, currently the CEC provides rebates to consumers who install qualifying renewable energy systems on their homes. Affordable housing projects can qualify for an extra 25% rebate above the standard rebate, not to exceed 75% of the system cost if certain eligibility criteria are met. To be eligible, each unit of the project must be rented or purchased by low or moderate income households, each unit must have its own electric utility meter, and the applicant for the rebate must show that each unit will reduce its energy use by at least 10%. Solar units on residential housing often cost in the range of $20,000 for purchase and installation. With the CEC rebate, (50% is the standard rebate) plus the additional rebate of 25% available to affordable housing units, most builders would be looking at about $7, 000 per unit for solar panels. According to the CEC, most solar panel units will last about 30 years, significantly lowering utility costs and will recoup their up-front investment back in 4 to 12 years. This program is heavily oversubscribed. Need for the bill According to the author, AB 1383 seeks to provide affordable housing developers with access to a revolving loan fund for the purpose of providing financing for the gap between the amount received through the current solar rebate program and the total installed costs of a solar system. As noted under existing law, the CEC provides rebates for installation of photovoltaic home energy systems. The CEC AB 1383 Page 4 provides a special program for affordable housing developers, offering a rebate of up to 75% of the cost of installation. According to the author, this bill is designed to make up the difference between what the existing, low-income housing rebate provides, and the actual cost of installation. Arguments in Support Housing California states, with utilities second only to rent in expenses for low-income housing residents, lowering utility bills can significantly impact a low-income family's finances. Further, resources saved by affordable housing developers can be reinvested in additional housing units or used for other improvements. Technical amendments As AB 1383 is currently drafted there are several technical issues and inconsistencies. The author and committee staff have drafted amendments to address those concerns. Double referred The Assembly Committee on Rules referred AB 1383 to Housing and Community Development and Utilities and Commerce Committee. If AB 1383 is approved by the Assembly Housing Committee, the bill must be referred to the Assembly Committee on Utilities and Commerce. REGISTERED SUPPORT / OPPOSITION : Support Global Green (Sponsor) American Federation of State County Municipal Employees Greenpeace Housing California Kyocera Solar, Inc., San Diego Sierra Club California Opposition None on file. AB 1383 Page 5 Analysis Prepared by : Hugh Bower / H. & C.D. / (916) 319-2085