Lawmakers consider priority options in awarding billions for energy projects

School districts with above-average utility bills and those in economically-disadvantaged communities would be first in line for a share of some $2.5 billion in energy efficiency money, under legislation proposed by two powerful state senators.

Authors of SB 39 - Senate leader Darrell Steinberg and Sen. Kevin De León, chair of the Appropriations Committee - are also considering other priority criteria, including schools located in areas of high unemployment; districts looking to involve students in project planning and design; as well as programs that will enhance workforce development and job opportunities.

There are other proposals for awarding the new revenues including one from Gov. Jerry Brown and two plan from the Assembly. And last week, the nonpartisan Legislative Analyst weighed in with a fourth option.

There is, however, a growing sense that the senate version will emerge as the likely vehicle for governing use of the energy monies given the stature of the authors - especially since the legislative alternative, AB 39 from Assemblywoman Nancy Skinner, D-Berkeley, includes some similar components.

Known as the California Clean Energy Jobs Act, Proposition 39 was approved by voters last November and will increase state revenues by $1 billion annually by requiring multi-state businesses to pay income taxes based on a percentage of their sales in California. The statute directs that half the new income, for a period of five years, go toward improving energy efficiency in schools and other public facilities.

No matter the mix of legislative components ultimately adopted to govern the program - lawmakers recognize that the new money represents an enormous opportunity.

It's hard to pass any type of revenue enhancement in the state of California so we're in a good position; an amazing position; an historic position, really, to leverage, or multiply, these dollars and bring about real energy savings, job creation, health benefits for kids in the classroom and, obviously, reduce our carbon footprint," said De León, D-Los Angeles, at a hearing last week on implementing the requirements of the proposition.

The governor's plan lost some of its luster last week at the hands of the LAO, which sharply criticized the Brown plan on multiple issues.

Among the issues raised is the fact that the governor would award the money to K-12 schools and community colleges on a per-student basis.

The Steinberg-De León bill would provide the money to schools under a competitive grant format, an idea also favored by the LAO. Skinner's plan, too, would allocate the money via grant or loan.

Although the voter initiative would allow the new revenue to be used for other public projects - such as hospitals - so far lawmakers seem to like the idea of making schools the exclusive target.

Certainly, the K-12 system itself presents enormous need.

With about 70 percent of school facilities in California more than 25 years old, there are hundreds of thousands of K-12 students in classrooms in need of modernization, according to a recent report by the San Francisco-based Center for the Next Generation. It estimates that statewide, schools spend about $700 million on energy each year.

More and more research points out that improved air quality and lighting has a positive effect on student health, which generates more learning time and, in turn, better student performance.

Spending the money on schools, supporters say, will help modernize the state's aging school facilities and save districts millions by reducing utility costs while also promoting academic growth and environmental goals.

Like any public works project, school energy spending will also stimulate the economy. The Next Generation study calculated that the program envisioned by SB 39 will create some 66,000 new jobs in California.

"It's a pretty big deal. This money is going to go a long way toward helping school districts make improvements that are not only energy efficient but are long overdue," said Lauren Casentini, president of Resource Solutions Group, an environmental consulting firm in Half Moon Bay that specializes in overseeing programs that promote energy efficiency.

"There are schools that are in really bad shape - places where the environment isn't even comfortable," said Casentini, whose firm also administers PG&E's School Energy Efficiency program that supports some K-12 school projects.

Fresno Unified School District is among some 200 districts who have worked with RSG to take advantage of the utility company's energy efficiency program.

In 2002, the district created an internal conservation department- a move that has led to a cost savings of more than $29 million, according to Frank DiLiddo, energy manager at the district.

What began 10 years ago as an effort to create energy savings through human behavioral changes - retraining staff to turn off lights and computers, and keep doors closed when air conditioning units are on - has morphed into a highly technical system of electronic controls, data keeping and project installations: modern lighting and HVAC (heating, ventilation and air cooling) systems, which account for the majority of a school's electrical load.

DiLiddo has learned to save money through existing utility and state and federal programs that provide rebates, low-cost loans and other incentives to reduce energy consumption. In addition to its School Energy Efficiency program, PG&E offers "on bill financing," a zero percent interest loan where the payment is included on the utility bill. The California Energy Commission offers a school program similar to PG&E's in which it makes low-cost loans for energy efficiency projects in schools.

DiLiddo was able to obtain $195,000 in rebates and $628,000 in on-bill financing for a $1.4 million lighting retrofit of 34 district schools and offices. Another $250,000 project to install skylights and more efficient lighting in a district warehouse will save approximately $40,000 in electricity costs and was 100 percent financed by on-bill financing and rebates.

"Once that six-year loan is paid off, we'll be putting $40,000 a year in our pocket," said DiLiddo.

It is incentive programs such as these which state officials hope will leverage the Proposition 39 funding beyond its actual worth.

The competitive grant system proposed under the Steinberg-De León bill would be administered by the state's Office of Public School Construction, which already runs the bond-funded school construction program.

Eligible projects would include: HVAC systems, lighting and system controls, water use, windows and doors, insulation and electrical systems.

Assemblywoman Skinner's proposal would be administered by the state's energy commission, which could award grants or low-cost loans to schools that apply based on criteria that includes the age of the school facilities, the number of students receiving free and reduced-price meals and the potential for energy demand reduction.

Brown's proposal is to create a fund overseen by the Superintendent of Public Instruction and the Chancellor of the California Community Colleges.

The LAO would have the energy commission as lead agency and invite grant proposals from all public agencies possibly based on a tiered system for large, medium and smaller projects.

As of now, lawmakers are focused on hearing feedback from the people and businesses who would be most affected by a new program.

Last week, both Skinner and De Leon held separate workshops in Oakland and Los Angeles, respectively, to receive stakeholder input on funding distribution, energy improvement guidelines and reporting, auditing and accountability measures related to their proposed programs.

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