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  








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            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. 









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          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  








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          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.
           








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          Analysis Prepared by  :    Hugh Bower / H. & C.D. / (916) 319-2085