LOS ANGELES — California lawmakers approved two bills to regulate Property Assessed Clean Energy programs in the state.

The bills would add regulations designed to protect consumers when they take advantage of PACE financing, which adds an assessment on property tax bills, to pay for energy retrofits to homes and businesses. The companion bills, Assembly Bill 1284, and Senate Bill 242, would create a comprehensive consumer protection, underwriting and regulatory framework for PACE.

California State Sen. Nancy Skinner championed PACE regulatory changes.
California State Sen. Nancy Skinner championed PACE regulatory changes.

Assembly member Matt Dababneh, Sen. Nancy Skinner and Assembly member Ian Calderon co-authored AB 1284, which both houses of the legislature approved on Friday. SB 242, co-authored by Skinner and Dababneh, was approved earlier last week.

“These negotiations have gone on for more than a year between clean energy, environmental groups, the banking industry and consumer advocates,” said Greg Frost, a spokesman for San Diego-based Renovate America.

In the last month and a half, there was a sense of urgency from legislators, who championed the bills, and the governor’s office, Frost said.

“The leadership of Senator Skinner and Assemblyman Dababneh has evolved PACE into a long-term viable solution for homeowners, while providing a model for states across the nation to base PACE on income and ability-to-pay, and with a comprehensive suite of consumer protections and enforcement tools,” said JP McNeill, Renovate’s chief executive officer.

More than 150,000 Californians have used PACE to make energy and efficiency improvements to their properties and pay for them over time via an additional line item on their property taxes, according to Renovate America.

AB 1284 strengthens and standardizes underwriting standards in PACE based on home equity and on-time mortgage and tax payment history. It also establishes new underwriting standards predicated on income verification and ability to pay to determine that property owners can meet their annual PACE obligation in addition to their current debt obligations and basic household expenses.

Under the process, if lenders are going through the application process concurrent with construction, if it is discovered that a homeowner doesn’t have the ability to pay, the lender has to make up the difference, Frost said.

The new regulations "are both a carrot and a stick,” he said.

SB 242 provides added consumer protections like requiring a recorded, live confirmation of terms through a call confirming terms with the property owner before he or she signs the assessment contract. The bill also requires data tracking on energy savings to local government partners.

“This is going to reshape PACE, because it models the approval process for PACE on what exists in the mainstream financial services sector,” Frost said.

The legislation garnered support from interests that are typically in conflict such as banking, environmental and consumer protection, he said.

“Our trade associations support energy efficiency, water efficiency, and seismic strengthening improvements,” said a letter signed by the California Bankers Association and five other trade associations representing the state’s financial services and mortgage industry. “Ensuring there are adequate safeguards that protect consumers need not work at odds with the underlying goals of the PACE program. We believe your measure strikes the important balance.”

The legislation moves to the desk of Gov. Jerry Brown.

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