CEC Cancels $30M Muni Renewable Financing

By Published On: July 30, 2010

The California Energy Commission July 28 halted sending $30 million of federal stimulus funds to support burgeoning municipal renewable and energy efficiency financing programs. “The battle over [Property Assessment Clean Energy] financing isn’t over yet,” insisted commissioner Anthony Eggert. “PACE is one of most effective financing mechanisms,” he said, noting it increases fossil-lite energy supplies, creates green jobs, and cuts greenhouse gases. Earlier this month, California sued the federal government for undermining the regional PACE financing regime developed in Berkeley in 2007 (Current, July 16, 2010). It was created to fill the clean energy project financing void. On July 27, Sonoma County also sued the Federal Housing Finance Agency, and mortgage lenders, Fannie Mae and Freddie Mac. Sonoma seeks from the U.S. District Court for Northern California a temporary restraining order to thwart the agencies’ impacts to local renewable funding programs. The Energy Commission switched position this week after the federal housing agency July 6 disemboweled county and city programs offering residents and small businesses upfront financing for energy efficiency and solar rooftop installations in exchange for property tax assessments. The Energy Commission also announced mid-week it is reworking its financing guidelines to allow it to redirect the $30 million of federal stimulus it won to other regional energy efficiency projects. “Losing $30 million for California is not an option,” said Claudia Chandler, Energy Commission deputy director. She added that the state energy agencies “all agree that achieving energy efficiency retrofits in existing buildings is a very high priority for this state.” The commission is under a tight deadline to expand its financing options beyond mortgage financing programs because the Department of Energy requires the funds to be allocated by September 30. Many believe that the Department of Energy will extend its allocation deadline at the last minute. The reworked CEC guidelines are expected to be approved at the Energy Commission’s August 6 meeting. The Energy Commission “is the leading energy commission in the country and it needs to continue to lead on this issue,” said John Haig, Sonoma County general services energy and sustainability division head. Municipal financing under the PACE mechanism was supported by a total $50 million in federal stimulus funds, estimated to leverage close to $400 million in public and private loans. According to Representative Doris Matsui (D-CA), the municipal renewable financing is “expected to create more than 21,000 jobs across the State of California and create more than $1 billion in new investments.” In a July 28 letter to the commission, Matsui also urged the commission to help revitalize the PACE program. The Sacramento representative is one of dozens of federal lawmakers calling to void the federal agencies actions. Senator Barbara Boxer (D-CA) introduced legislation last week to revive the PACE programs but few expect it to advance without bipartisan support. “We are trying to find some agreement to move forward, but it is challenging to get something done before the end of session,” said Mimi Frusha, chief financial officer for the organization Renewable Funding. The entity was created to facilitate Property Assessment Clean Energy programs. The housing agency, along with the Comptroller of the Currency, claimed that PACE programs, which give municipalities senior property liens, jeopardize federal home loans. A senior lien puts county tax assessors first in line to collect in the event of a mortgage default. More than half of the homes in the country have mortgages backed by Freddie Mac and Fannie Mae. The housing agency’s action pits it against Vice President Joe Biden and the Department of Energy, which have been strong backers of PACE programs. “There is tremendous support from the federal government,” said commissioner Jim Boyd. “But, one agency just doesn’t get it.” In exchange for upfront financing, the participating homeowner or business owner agrees to repayment via a 20-year tax assessment, which attaches to the property. The commission voted this week to unanimously halt its $30 million allocation also in response to a July 27 letter from the DOE warning that the funds must be redirected in light of the July 6 Federal Housing Financing Agency protest. “The [CEC] action is unfortunate but our community is not reliant on Energy Commission funding because of how we structured our program,” said Jim Leddy, Sonoma County spokesperson. Sonoma launched a $30 million dollar Property Assessment Clean Energy program. It initially froze its program after the federal housing agency ruling but subsequently decided to go forward. That was largely because the money on loan to homeowners is not private funds but money from the county treasury and because dozens of contractors protested shutting down the program. Numerous other cities and counties in California were initiating or had launched PACE financing programs, including Los Angles County, Berkeley, Palm Desert, San Francisco, San Diego and Santa Monica. All but Palm Desert suspended their clean energy financing programs earlier this month (Current, July 6, 2010.). The Department of Energy noted in its letter to the commission that “the administration continues to believe strongly that an appropriately structured pilot PACE financing program is viable and appropriate.”

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