Fiscal Note & Local Impact Statement
126 th General Assembly of Ohio
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BILL: |
DATE: |
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STATUS: |
SPONSOR: |
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LOCAL IMPACT
STATEMENT REQUIRED: |
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STATE FUND |
FY 2007 |
FY 2008 |
FUTURE YEARS |
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State Architect's Fund
(Fund 131) Department of Administrative Services |
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Revenues |
Potential minimal gain in
State Architect fees |
Potential minimal gain in
State Architect fees |
Potential minimal gain in
State Architect fees |
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Expenditures |
Potential increase in
staffing costs up to $200,000 |
Potential increase in
staffing costs up to $200,000 |
Potential increase in
staffing costs up to $200,000 |
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General Revenue Fund and
other state funds |
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Revenues |
- 0 - |
- 0 - |
- 0 - |
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Expenditures |
Variable increase in
design, construction, and administrative costs |
Variable increase in
design, construction, and administrative costs |
Variable increase in
design, construction, and administrative costs |
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State institutions of
higher education |
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Revenues |
- 0 - |
- 0 - |
- 0 - |
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Expenditures |
Variable increase in
administrative and construction costs to meet guidelines |
Variable increase in
administrative and construction costs to meet guidelines |
Variable increase in
administrative and construction costs to meet guidelines |
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Various Federal Funds
Department of Development |
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Revenues |
- 0 - |
- 0 - |
- 0 - |
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Expenditures |
Minimal increase in
administrative expenses |
Minimal increase in
administrative expenses |
Minimal increase in
administrative expenses |
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Advanced Energy Fund (Fund
5M5) |
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Revenues |
- 0 - |
- 0 - |
- 0 - |
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Expenditures |
Increase up to $25 million
for wind and advanced energy projects |
- 0 - |
- 0 - |
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Administrative
Building Fund (Fund 026) |
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Revenues |
Gain of $3.6
million |
- 0 - |
- 0 - |
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Expenditures |
- 0 - |
-0 - |
- 0 - |
Note: The state
fiscal year is July 1 through June 30.
For example, FY 2007 is July 1, 2006 June 30, 2007.
·
DAS energy efficiency administrative costs. The Department of Administrative Service's State Architect Fund
(Fund 131) may experience a minimal gain from State Architect fees associated
with charges to state agencies for costs to implement and enforce energy
efficiency design standards and rules.
These fees may not be enough to cover the anticipated personnel needs to
adopt and implement the rules. The
Department estimates it may need one to two additional personnel at a cost up
to $200,000 in the first few years. As
a result, it is possible other State Architect fees may be increased to offset
the added payroll cost if it is found these added costs cannot be supported by
the General Services Division budget.
Some of these added costs may include providing training, completing
various forms, preparing and reviewing life cycle and energy consumption cost
analyses, reviewing purchasing documents, and enforcing rules.
·
State agency energy efficiency costs. Various state agency funds and/or the GRF may experience an
increase in expenditures in order to comply with the new rules adopted by
DAS. LSC is uncertain of the fiscal impact
the new rules and design standards will have on the planning and design costs
of agency capital projects. Currently,
LSC does not have an estimate of the costs associated with bringing certain
state-funded facilities into compliance with energy efficiency standards
adopted by DAS.
·
Committee of the Interuniversity Council of Ohio. State
colleges and universities and DAS' Office of Energy Services may experience
minimal travel and administrative costs to assist the Interuniversity
Council of Ohio in developing guidelines for state colleges and universities to
use in ensuring energy efficiency and conservation in on- and off- campus
buildings.
·
Energy efficiency at state colleges and universities. State colleges and universities are
likely to experience various expenditures increases to meet energy efficiency
goals, incorporate various energy efficiency standards, develop an energy plan,
prepare project impact assessments, and prepare reports, pursuant to the
guidelines adopted by the Interuniversity Council. Currently, an accurate estimate of what these costs may be is
unknown and are likely to vary per college and university based on the
institutions financial resources available to meet the goal.
·
Department of Development Technical Assistance. The bill requires the Department of Development to cooperate in
providing information and technical expertise to the Office of Energy Services
(OES) within DAS to ensure adoption of energy efficiency rules and to assist
OES in providing training programs and workshops to state employees involved in
the purchasing process. Currently, the
Department does not have a cost estimate of these provisions; however, LSC
anticipates these costs to be minimal, and that these costs would be paid from
federal funds that currently support Development's Office of Energy Efficiency
(OEE).
·
Advanced Energy Fund and Administrative Building Fund (Department of
Development). The bill transfers the name,
purpose, and appropriations of the current Energy Efficiency Revolving Loan
Fund (Fund 5M5) to the newly created Advanced Energy Fund. The Advanced Energy Fund will experience a
gain in revenue from permanent electric riders. These riders will generate up to $5 million per year in revenue
to the fund. The bill also requires $3.6
million in FY 2007 to be transferred from Fund 5M5 to the Administrative
Building Fund (Fund 026) to incorporate energy efficiency into the design and
construction of state buildings.
·
Financial Incentive Program Advanced Energy Fund (Fund 5M5). In addition to its current uses, in FY 2007 up to $25 million
would be available for energy projects involving wind and advanced energy
sources. This would be available for
private investment.
·
No
direct fiscal effect on political subdivisions. However, after December 2010, the bill makes permanent the
current rider on electricity rates to fund the new Advanced Energy
Program. As a result, eligible local governments
may have the opportunity to apply for more grant and loan funds. Over time, with these funds continuing to be
available by purchasing more energy efficient products and services, political
subdivisions may experience some savings.
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The bill makes
several changes to current law regarding energy efficiency in state
government. Most notably, the bill:
·
Grants
DAS permissive authority to adopt energy efficiency and conservation standards
for state-funded facilities;
·
Makes
changes to life cycle cost analysis and energy consumption analysis specifications;
·
Creates
the Interuniversity Council of Ohio to develop energy efficiency guidelines for
college and university buildings; and
·
Changes
the current Energy Efficiency Revolving Loan Fund (Fund 5M5) to the Advanced
Energy Fund.
Energy efficiency rules
To assist the
Department of Administrative Services' (DAS) Office of Energy Services (OES) in
cost-effectively reducing the energy consumption of state-funded facilities,
the bill allows the OES to adopt permissive rules specifying cost-effective,
energy efficiency and conservation standards that shall govern the lease,
design, construction, operation, and maintenance of all state-funded
facilities. These rules however, do not
apply to the facilities of state institutions of higher education or public
schools. Furthermore, the bill requires
the Department of Development (DOD) to cooperate in providing information and
technical expertise to OES to ensure adoption of rules of maximum
effectiveness.
Overall, DAS notes that at a
minimum, since the rules initially will be permissive and fairly flexible, the
costs to implement and evaluate the rules may require the Department to hire
one to two additional staff. With
fringe benefits, these added costs could be upwards of $200,000. These added payroll costs would result in an
increase in expenditures to the State Architect's Fund (Fund 131). To cover these costs it is possible the
State Architect's Office may increase their service fees, which are calculated
as a small percentage of the overall project construction budget.
Below is a
discussion of some of the rules in detail the bill requires DAS to adopt.
1.
Rules related to life cycle cost analysis and energy consumption
analysis specifications
The bill states that no
state agency, department, division, bureau, office, unit, board, commission,
authority, quasi-governmental entity, or institution shall lease, construct, or
cause to be leased or constructed, a state-funded facility without having
secured from OES, a life cycle cost analysis and an energy consumption
analysis. Both a life cycle cost
analysis and an energy consumption analysis are needed to construct a facility
of 5,000 square feet or more. Only an
energy consumption analysis is needed to lease a facility of 20,000 square feet
or more. Currently, this requirement is
only applicable to state agencies.
Under the bill, public schools are exempt from this requirement.
Currently, the number of new
cost analyses to be reviewed by DAS is unknown. Also, the bill requires these entities, whenever they request a
release of capital improvement funds for any state-funded facility, to submit
copies of all pertinent life cycle cost analyses. Currently this submission requirement applies only to a state
department, agency, or institution.
DAS notes that
the majority of agencies currently do not submit these analyses. In order to comply with the provisions of
the bill various state agencies, authorities, quasi-governmental agencies, and
institutions may have to use internal staff or contract with private
architectural and engineering firms to provide them, thus incurring additional
costs. Currently a cost estimate of
these analyses is not available and will likely vary by project.
2. Rules related to waiver of application
The bill states that the
rules shall allow a project manager of a state-funded facility, except a
facility of a state institution of higher education (who are exempt from this
requirement) to apply for a waiver of compliance of the rules regarding
cost-effective, energy efficiency and conservation standards governing the
lease, design, construction, and operation, and maintenance of state-funded
facilities. The development of a
waiver, subsequent review of the waiver application, and notification
requirements are likely to create minimal costs to OES. Similarly, project managers of certain
state-funded facilities are likely to experience minimal costs to prepare the
waiver.
3. Rules requiring a building operator
The bill also requires the
rules to include a requirement that not later than two years after the
effective date of the bill, each state-funded facility, except a facility of a
state institution of higher education, be managed by at least one building
operator certified under the building operator certification program or any
equivalent program or standards. Currently, it is unknown how many building operators will
be hired or whether state agencies will actually use current employees to
fulfill this responsibility.
Regardless, agencies are likely to incur training costs, which according
to DAS is estimated to cost about $1,200 per student. DAS notes that many of these costs would be covered by payroll
assessments to the Workforce Development Fund (Fund 5D7).
4. State Purchasing
Department of Administrative
Services Role. The bill makes several
changes to state purchasing requirements.
The bill specifies that (1) the OES must adopt rules ensuring
consideration of energy efficiency and conservation in state purchasing, (2)
permits DAS to adopt minimum purchasing standards based on federal testing and
labeling or on standards developed by the OES, (3) requires the OES to work
with OEE in identifying savings opportunities and providing technical
assistance in purchasing, and (4) requires DAS to monitor the potential savings
of the state purchases of motor vehicles and major energy-consuming items. All
of these duties will pose a minimal fiscal effect, if any, and will likely be
covered with current budgeted resources. DAS reports that many of these requirements
codify current practices.
Department of Development
Role. As part of the procurement of energy
efficient products, the bill requires OES to work cooperatively with the
Department of Development's (DOD) Office of Energy Efficiency to identify available
energy efficiency and conservation opportunities. Currently, OES alone is only required to identify energy
conservation opportunities. Further,
the bill requires OES to provide technical assistance and training programs to
state employees involved in the purchasing process cooperatively with DOD's
Office of Energy Efficiency. Under
current law, OES is required to provide training programs and workshops to
state employees involved in the purchasing process but without DOD's
assistance.
LSC assumes that DOD's
Office of Energy Efficiency is likely to incur minimal administrative costs to
assist OES in identifying available energy efficiency and conservation
opportunities. This may include the
monitoring and evaluating the cost-effectiveness of the states purchases and
use of motor vehicles and of major energy consuming systems having a
significant impact on energy consumption by government. As far as the requirement that OES provide
training and technical assistance to state employees in the purchasing process,
DAS reports that current procurement staff would assume these duties with no
additional costs.
Fiscal effect on various
state agencies. LSC is
uncertain about what the new rules as a whole will have on the planning,
design, and costs of capital projects.
Currently, LSC does not have an estimate of the costs associated with
bringing certain state-funded facilities into compliance with energy efficiency
standards adopted by DAS. Costs are
likely to vary based on the square footage of buildings and the cost of the
systems, components, and equipment at each facility. Any added costs are likely to affect various state agency funds
and possibly the GRF. However, the bill does transfer $3.6 million in FY 2007
from the Energy Efficiency Loan and Grant Program Fund (Fund 5M5) to the
Administrative Building Fund (Fund 026) under CAP-835, Energy Conservation
Projects to provide support for agency energy efficiency upgrades.
Committee of the Interuniversity Council
The bill requires the
creation of a committee under the Interuniversity Council. The committee shall be comprised of the
presidents of the state institutions of higher education or their
designees. The committee in
consultation with OES, shall develop guidelines for the board of trustees of
each state institution of higher education to use in ensuring energy efficiency
and conservation in on- and off campus buildings.
The guidelines are required
to include: (1) a goal of reducing
energy expenditures by at least 20% by 2014, (2) minimum energy and efficiency
standards for any new on- or off-campus capital improvement project with a
construction cost of more than $100,000 or more, (3) minimum energy efficiency
and conservation standards for the leasing of an off-campus space of at least
20,000 square feet, (4) the use of best practices into energy efficiency and
conservation standards and plans, (5) a provision that each board of trustees
develop its own 15-year plan for phasing-in energy efficiency and conservation
projects, (6) project impact assessments including the fiscal effects of energy
efficiency and conservation recommendations and plan, and (7) a mechanism for
each board of trustees to report periodically to the committee on its progress
relative to the guidelines.
Further, the bill requires
the board of trustees of a state institution of higher education adopt rules to
carry out the guidelines outlined above.
The OES and presidents of
state institutions of higher education may experience minimal administrative
and travel costs to meet to develop the guidelines. Once these guidelines are adopted state colleges and universities
may experience costs to carry out the guidelines. These costs may include hiring additional personnel and acquiring
additional resources. Further, to meet
the goal of reducing energy expenditures by at least 20% by 2014, may involve
the replacement or modification to current heat,
ventilation, and air conditioning systems as well as lighting systems. Currently, an accurate estimate of
what these costs may be is unknown and are likely to vary per college and
university based on the institutions financial resources available to meet the
goal.
Background on the New Fund. The bill eliminates the Department of Development's Energy
Efficiency Revolving Loan Fund (Fund 5M5) and renames it the Advanced Energy
Fund. Fund 5M5 was originally created by the General Assembly under the 1999
Electric Restructuring Act (S.B. 3).
The revenues to the Advanced Energy Fund will be the same as the
revenues that were credited to Fund 5M5.
These revenues included: riders
on retail electric distribution rates, revenues from loan repayments, and
revenues remitted by municipal electric companies and rural electric
cooperatives.
The rider is a fee on the electric bills of the customers of the five
investor-owned electric utilities in Ohio (AEP, Cinergy, First Energy, Dayton
Power and Light, and Monongahela/Allegheny Power). The rider is approximately nine cents per month from a typical
residential customer. Collections of
the current rider began on January 1, 2001 and are expected to last ten years
generating no more than $100 million in total.
The collection rate was designed to generate $15 million each year for
the first 5 years (January 2001 to December 2005) and then drop to $5 million
for the last five years (January 2006 to December 2010). Once Fund 5M5 reaches $100 million the rider
will be eliminated. Under the bill, the current
rider will remain the same; however, it will now be permanent rather than
temporary. Thus, as originally planned,
Fund 5M5 will continue to receive no more than $5 million annually but the
revenue will continue to be credited to Fund 5M5 beyond December 2010 and into
future years with no revenue collection limit.
New Advanced Energy Program. As part of renaming the Energy Efficiency Revolving Loan Fund to
the Advanced Energy Fund, the bill also renames the Energy Efficiency Revolving
Loan Program to the Advanced Energy Program.
The bill expands the program to include technical and related assistance
for projects and financial incentives.
The program will continue to provide loans, grants, loan participation
agreements, linked deposits, and award contracts as it does under the Energy
Efficiency Revolving Loan Program. The
entities eligible to apply for funding under the program can borrow money from
Fund 5M5 at an interest rate typically half the standard bank interest rate. The projects that the fund will support will
be for technologies, products, activities, or management practices or
strategies that reduce or support the reduction of energy consumption or
support the production of clean, renewable energy for industrial, commercial,
institutional, governmental, research, not-for-profit, or residential energy
users. Examples of renewable energy
include: wind power, geothermal energy,
solar thermal energy, energy from micro turbines, from heat and power
applications, and from fuel cells powers by various sources.
To effectuate this transfer,
the bill amends the Department of Development's appropriation section of Am.
Sub. H.B. 66 (the main appropriations bill for the FY 2006-2007 biennium) and
changes the name of the Energy Efficiency Loan and Grant Program (Fund 5M5) to
Advanced Energy Program. Appropriations
to the fund in both FY 2006 and FY 2007 is unchanged, remaining $12 million in
each fiscal year. The transfer of the
name and purpose of Fund 5M5 to the Advanced Energy Fund will not affect any
current projects or funding already approved or in progress.
Financial Incentive Program. As stated previously, the bill expands the Energy Efficiency
Revolving Loan Fund (under the Advanced Energy Fund) to provide financial
incentives to businesses. The bill states
that up to $25 million in FY 2007 may be used to establish and administer a
financial incentive program directed toward the generation and distribution of
electricity derived from wind and advanced energy sources located within the
state. For example these funds may be
awarded to a company that makes bearings of turbines used for wind energy
devices, or for a company that plans to install a wind field. These funds can only be expended upon
Controlling Board approval. The
Director of Development may submit a request to the Controlling Board to
increase the appropriation authority of $12 million in Fund 5M5 up to $25
million for the financial incentive program.
The current available fund balance in Fund 5M5 is between $10 - $12
million.
Energy Conservation Projects
The bill amends H.B. 66 and
requires that in FY 2007 the Director of Budget and Management transfer $3.6
million in cash from the Energy Efficiency Loan and Grant Program Fund 5M5
(changed to the Advanced Energy Fund in the bill) to the Administrative
Building Fund (Fund 026) under CAP-835, Energy Conservation Projects. This transfer will increase CAP-835, Energy
Conservation Projects from $890,085 (as appropriated in Am. Sub. H.B. 530 the
recent capital reappropriations bill) to $4,490,085. This transfer will be used by the Department of Administrative
Services to incorporate energy efficiency into the design and construction of
state buildings. For example, the funds
will be used to assist agencies in purchasing more efficient heating systems,
controls, lighting systems, and motors.
The DAS reports that in the long run this transfer may generate more
than $500,000 in energy savings annually for a period of 10 to 15 years.
LSC fiscal
staff: Ann Braam,
Budget Analyst
Jonathan Lee, Senior Analyst