BILL ANALYSIS
AB 1383
Page 1
Date of Hearing: April 25, 2005
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Lloyd E. Levine, Chair
AB 1383 (Pavley) - As Amended: April 18, 2005
SUBJECT : Solar energy: Low-Income Housing Development
Revolving Loan Program.
SUMMARY : Creates the Low-Income Housing Development Revolving
Loan Program (Program) for the purpose of financing distributed
photovoltaic (PV) 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 PV 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 solar energy systems for low income
housing. Also requires the PUC and the CEC to consider
whether existing PV 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 PV 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 PV
energy systems on affordable housing projects. The subsidy
for these systems is capped at 75% of the installed cost.
4)Requires the CEC to prescribe building design and construction
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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 : According to the author's office the purpose of this
bill is to provide affordable housing developers with access to
a revolving loan fund to help finance the installation of solar
energy systems and to bridge the gap between the current solar
rebate programs and the total cost of installing a solar energy
system.
1) Solar rebate program at the CEC : The CEC already administers
programs to provide rebates to consumers who install qualifying
renewable energy systems, including PV systems, on their homes.
This program provides customers with a rebate of $2.80 per watt
based on the potential output of the PV system. With the
average residential system producing 2 kilowatts (kW), the
average rebate to a residential customer equals $5,600 per home.
Based on current retail prices for solar systems, the rebate
will reduce the total cost of installing a system from $12,000
to $6,400.
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%. Since
March, 2003, the CEC has approved 327 affordable housing rebate
requests representing 765 kW of potential electricity
production. If all of the projects are completed the CEC will
pay out approximately $3.7 million in rebates to affordable
housing projects.
This program at the CEC is heavily oversubscribed. In order to
meet demand, the CEC has had to transfer funds from other
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programs.
2) Other Solar Programs: Rebate programs already exists at both
the CEC and the PUC to offset the installation of PV systems on
both residential and commercial properties, and California
Renewable Portfolio Standard (RPS) provides a mechanism to pay
producers of large-scale solar energy plants for the above
market costs of producing solar energy. Beyond the direct
rebates a number of ratepayer funded programs help offset the
cost of installing and operating solar energy systems, including
net metering, exemptions from standby charges, exemption from
DWR bond costs, and exemption from public goods programs
charges.
Several bills moving through the Legislature this year,
including SB 1 (Murray) and AB 1547 (Levine), propose to create
new statewide solar programs to dramatically increase the number
of installed solar energy systems across the state over the next
10 year. The sponsors of this bill feel that the current
programs do not meet all of the needs of affordable housing
developers and miss an opportunity to help lower the power bills
of affordable housing residents.
3) Why single out affordable housing: According to the sponsors,
affordable housing developers currently have a difficult time
paying for the installation of solar energy systems because they
cannot afford the added debt on the projects. State sponsored
loans with lower interest rates would help reduce their debt
costs.
Additionally, federal tax programs grant tax credits to
affordable housing developers, but these credits can be reduced
if the developers receive grants since grants lower the total
costs to the developers. The developer can maximize their
federal tax credits if the state helps fund solar installations
through loan programs, which do not lower the total cost of the
project for tax purposes and consequently do not reduce the tax
credits.
4) Funding this program: This bill requires the PUC to open a
ratemaking proceeding for the purpose of implementing a program
to incent solar energy in low-income residential housing. While
language in the bill is not clear as to the ultimate goal of
this proceeding, the sponsor indicates that the intent is to
authorize the PUC to increase existing surcharges to fund the
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Low-Income Housing Development Revolving Loan Program created in
this bill.
If the PUC does not make funds available, the bill orders the
CEC identify funds in the current Renewable Resource Trust Fund
(RRTF) to fund this program. The RRTF currently funds a number
of renewable energy programs, including the rebate programs
described above and California's RPS. The RPS also provides that
if funding is not available in the Trust Fund to pay the above
market costs, the utilities do not need to procure more
renewable power to meet their RPS obligations. While there is
currently money available to in the Trust Fund to pay for the
above market costs for renewable power, taking money from this
fund to pay for other programs could result in insufficient
money to fund the RPS.
5) Impacts on rates: The benefits of the program created in this
bill are clear, the bill will help reduce the costs of
installing new solar energy systems on affordable housing
projects, and will allow the developers to better leverage
federal money. However, the bill also intends to give the PUC
the authority to increase ratepayer surcharges to pay for the
program, at a time when electricity rates are already high.
6) Why just PV? : The provisions of this bill only apply to PV
systems. Currently, there are others methods other than
photovoltaic for converting the solar energy into electricity.
Some forms of solar thermal energy systems, which use the sun to
create steam to turn a turbine, are more cost effective than
photovoltaic energy systems. If the goal of this legislation is
to increase the total amount of solar energy produced in
California, it may be best not to mandate a specific form of
technology in the bill and instead allow the CEC to determine
which forms of solar power will be the most cost effective. The
committee may wish to amend the bill to make the legislation
technology neutral and allow the CEC to determine which forms of
solar energy will be most cost effective .
7) Technical amendments :
a) Section three of the bill, which directs the PUC to open
a ratemaking proceeding and directs how money will be
spent, is uncodified. This section should be amended so
that it is placed in the Public Utilities Code .
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b) Subparagraph (d) of section three controls how money
raised through an increased surcharge or a transfer from
other renewable programs should be spent but as it is
drafted now, it could be read to require that 10% of money
intended to go toward the revolving loan program in the
bill should be required to fund different affordable
housing programs or that only 5% percent of the total money
raised could be applied to the revolving loan. Since this
is not the intent of the author, this section should be
redrafted to reflect the author's intent of funding a
revolving loan program for affordable housing.
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.
Analysis Prepared by : Edward Randolph / U. & C. / (916)
319-2083