BILL ANALYSIS                                                                                                                                                                                                    




                   Senate Appropriations Committee Fiscal Summary
                            Senator Carole Migden, Chair

                                           1383 (Pavley)
          
          Hearing Date:  August 15, 2005      Amended: July 13, 2005
          Consultant:  John Decker        Policy Vote: EU&C (7-3)
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          BILL SUMMARY:   AB 1383 creates a grant and loan program to  
          facilitate the installation of solar energy systems in  
          low-income housing.  
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                            Fiscal Impact (in thousands)

           Major Provisions               2005-06     2006-07    2007-08    Fund
           Transfers                    $5,000    $10,000  $10,000   
          Special*                               
          *The bill transfers funds from the Emergency Renewable Resources  
          Account and the fund identified (and unnamed) in subdivision (a)  
          of Chapter 329 (Statutes of 2000), or from the funds  
          appropriated in SB 1 (Murray and Campbell), the Million Solar  
          Roofs Initiative.
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          ____

          STAFF COMMENTS:   The bill meets the criteria for referral to  
          Suspense File.  

          According to the sponsor, the bill is intended to provide up to  
          100 percent financing for solar units installed in low-income  
          housing, and loan up to $100 million over ten years.  

          The bill creates a revolving fund, to be administered by the  
          energy commission.  The revolving fund is capitalized with  
          transfers from special funds which derive their revenues from  
          rate payers.  The commission may make annual allocations from  
          the fund to providers of low-income housing.  The commission may  
          make loans or grants.    The revolving fund sunsets on January  
          1, 2016.  

          Section 1 of the bill contains findings and declarations.  Among  
          other things, the section says that California needs a steady  
          supply of affordable electricity and expanding the number of  
          solar energy units will help the state's manufacturing base.   










          Section 1 also declares that by establishing the loan program,  
          the state will (a) make a cost-effective investment, (b) modify  
          solar energy incentives and (c) provide more reliability to its  
          electricity supplies.  
          
          The bill could result in transfers of up to $10 million  
          annually, with offsetting revenue in the future deposited in the  
          revolving fund as the loans are repaid.
          
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          AB 1383 (Pavely)
          Page 2 

          STAFF NOTES:
              1)    Neither the sponsors nor the commission are able to  
                identify the size of the potential demand for the bill's  
                loans.  Nor does the bill identify how the bill will  
                ensure cost-effectiveness or reliability.  Though the  
                bill's findings and declarations provide general  
                information, they do not provide a basis for measuring  
                program effectiveness.  For example. on what basis will  
                the commission measure whether the loans merely crowd out  
                other subsidies?  On what basis should the Legislature  
                consider whether ill the new solar units are a  
                cost-effective allocation of state funds?  When should the  
                Legislature expand the program?   The author should  
                clarify  .  

              2)    In the Senate Energy, Utilities and Communications  
                Committee, the bill's continuous appropriation was deleted  
                and replaced with a provision requiring the Legislature to  
                make annual appropriations.  It is not clear what is being  
                appropriated.  Is it the amount of the transfer from the  
                special funds to the revolving fund, or is it the amount  
                from the revolving fund which the commission may allocate  
                for the loans?
            
               Moreover, because the sponsors are unable to identify the  
               on-going need for these loans, the Legislature should  
               require the commission to report on the loan portfolio and  










               the health of the revolving fund.  Staff recommend that the  
               bill be amended to (a)  clarify that the Legislature  
               annually appropriate funds from the revolving fund for  
               allocation by the commission, and (b) require the  
               commission to report on the program's loan portfolio and  
               the condition of the revolving fund .

              3)    To the extent the commission makes loans which are due  
                after January 1, 2016, who manages the repayments?  Where  
                do the payments go?  Presumably, the funds are still paid  
                to the commission, who re-deposits the money into the  
                accounts from which the funds were originally transferred.  
                 

               In addition, the bill authorizes the commission to charge  
               an application fee.  The bill should specify that the fee  
               cover the costs of the entire application process, and the  
               fee revenue be deposited in the revolving fund.   The author  
               should clarify  .  

              4)    The bill authorizes the commission to make grants, in  
                addition to loans, to the housing developers.  Because the  
                amount of the grants are likely to be offset  
                dollar-for-dollar for any low income housing tax credit  
                allocated by the Treasurer, the grants may not be the best  
                way to encourage solar units. The sponsors did not intend  
                for the commission to make any grants.   The author should  
                clarify  .  





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          AB 1383 (Pavely)
          Page 3


              5)    According to the sponsor, the bill is directed at  
                non-profit development corporations.  However, the bill is  
                not limited to them. Other non-profits, local governments,  
                for-profit corporations, and individuals all could qualify  
                for the loans.  Given the limits of the likely funding  
                streams,  the author should clarify  .  











              6)    The state and federal government currently has various  
                tax, loan and grant programs for subsidizing the  
                installation of solar panels.  It is possible that the  
                bill would authorize subsidizing an installation by more  
                than 100 percent of the developer's costs.   The author  
                should clarify  that the loans provided in this bill-when  
                combined with the other state and federal incentives--will  
                not provide financing in excess of 100 percent of cost.