Existing law authorizes counties, cities, and other local agencies to impose various taxes and fees in connection with activity or property within those jurisdictions. The California Constitution also authorizes a charter city to levy local taxes to raise revenues for local purposes, subject to restrictions imposed by that citys charter or preemption in matters of statewide concern.

The Passenger Charter-party Carriers Act authorizes the Public Utilities Commission to regulate charter-party carriers in California, including transportation network companies that provide prearranged transportation services for compensation using an online-enabled application or platform to connect passengers with drivers. For purposes of provisions applicable to transportation network companies, the act also defines a participating driver or driver as any person who uses a vehicle in connection with a transportation network companys online-enabled application or platform to connect with passengers.

This bill would authorize the City and County of San Francisco, subject to applicable voter approval requirements, to impose a tax on each ride originating in the City and County of San Francisco provided by an autonomous vehicle, whether facilitated by a transportation network company or any other person, or by a participating driver in an amount not to exceed 3.25% of net rider fares, as defined, for a ride and 1.5% of net rider fares for a shared ride, as specified. The bill would also authorize the City and County of San Francisco to set a lower tax rate for net rider fares for a ride provided by a zero-emission vehicle. The bill would require moneys collected by the City and County of San Francisco from this tax to be dedicated to fund transportation operations and infrastructure within the City and County of San Francisco. The bill would require a tax imposed pursuant to this authority to expire no later than November 5, 2045.

This bill would make legislative findings and declarations as to the necessity of a special statute for the City and County of San Francisco.

Existing law authorizes counties, cities, and other local agencies to impose various taxes and fees in connection with activity or property within those jurisdictions. The California Constitution also authorizes a charter city to levy local taxes to raise revenues for local purposes, subject to restrictions imposed by that citys charter or preemption in matters of statewide concern.

The Passenger Charter-party Carriers Act authorizes the Public Utilities Commission to regulate charter-party carriers in California, including transportation network companies that provide prearranged transportation services for compensation using an online-enabled application or platform to connect passengers with drivers. For purposes of provisions applicable to transportation network companies, the act also defines a participating driver or driver as any person who uses a vehicle in connection with a transportation network companys online-enabled application or platform to connect with passengers.

This bill would authorize the City and County of San Francisco, subject to applicable voter approval requirements, to impose a tax on each ride originating in the City and County of San Francisco provided by an autonomous vehicle, whether facilitated by a transportation network company or any other person, or by a participating driver in an amount not to exceed 3.25% of net rider fares, as defined, for a ride and 1.5% of net rider fares for a shared ride, as specified. The bill would also authorize the City and County of San Francisco to set a lower tax rate for net rider fares for a ride provided by a zero-emission vehicle. The bill would require moneys collected by the City and County of San Francisco from this tax to be dedicated to fund transportation operations and infrastructure within the City and County of San Francisco. The bill would require a tax imposed pursuant to this authority to expire no later than November 5, 2045.

This bill would make legislative findings and declarations as to the necessity of a special statute for the City and County of San Francisco.

Existing law establishes the Air Quality Improvement Program that is administered by the State Air Resources Board for the purposes of funding projects related to, among other things, the reduction of criteria air pollutants and improvement of air quality. Pursuant to its existing statutory authority, the state board has established the Clean Vehicle Rebate Project, as a part of the Air Quality Improvement Program, to promote the production and use of zero-emission vehicles by providing rebates for the purchase of new zero-emission vehicles. Existing law creates the enhanced fleet modernization program to provide compensation for the retirement and replacement of passenger vehicles and light-duty and medium-duty trucks that are high polluters.

This bill would state the intent of the Legislature to supplement current funding levels to the state board to support low-carbon transportation projects, including, among others, specified car-sharing programs and additional incentives for existing electric vehicle programs. require the state board, by January 1, 2019, to submit to the Legislature a report on the operations of its vehicle incentive programs containing specified information.

(1)Existing law establishes the Air Quality Improvement Program that is administered by the State Air Resources Board for the purposes of funding projects related to, among other things, the reduction of criteria air pollutants and improvement of air quality. Pursuant to its existing statutory authority, the state board has established the Clean Vehicle Rebate Project, as a part of the Air Quality Improvement Program, to promote the production and use of zero-emission vehicles by providing rebates for the purchase of new zero-emission vehicles.

This bill would establish the California Electric Vehicle Initiative that would be administered by the state board, in coordination with the State Energy Resources Conservation and Development Commission and the Public Utilities Commission, as part of the Clean Vehicle Rebate Project to provide incentives to the market to achieve a statewide deployment of 1.5 million electric vehicles by 2025, as specified.

This bill would require the state board, no later than February 1, 2018, to begin a review to adopt revisions to all other specified vehicle electrification programs to ensure those programs consider funding benefits for disadvantaged individuals, low-income individuals, or both for all eligible vehicle types, as specified. The bill would require the state board to annually develop and approve a low-carbon transportation funding plan.

(2)The California Global Warming Solutions Act of 2006 designates the state board as the state agency charged with monitoring and regulating sources of emissions of greenhouse gases. The act authorizes the state board to include the use of market-based compliance mechanisms. Existing law requires all moneys, except for fines and penalties, collected by the state board as part of a market-based compliance mechanism to be deposited in the Greenhouse Gas Reduction Fund and to be available upon appropriation. Existing law continuously appropriates 35% of the annual proceeds of the fund for transit, affordable housing, and sustainable communities programs and 25% of the annual proceeds of the fund for certain components of a specified high-speed rail project.

This bill would continuously appropriate $5 million each year from the Greenhouse Gas Reduction Fund state the intent of the Legislature to supplement current funding levels to the state board to support low-carbon transportation projects, including, among others, specified car-sharing programs and additional incentives for existing electric vehicle programs, thereby making an appropriation. programs.

This bill also would authorize the state board to provide for advance payment for projects funded by the state board from the Greenhouse Gas Reduction Fund, as specified.

(3)Existing law requires, until January 1, 2024, that a portion of the registration fees for motor vehicles and vessels be deposited into the Air Quality Improvement Fund and, upon appropriation, be expended for the implementation of the Air Quality Improvement Program. Existing law specifies the types of projects that are eligible to receive funding under the program.

This bill would authorize the state board to provide for advance payment for projects funded by the state board as part of the Air Quality Improvement Program, including from the Air Quality Improvement Fund, as specified.

Under existing law, the Public Utilities Commission (PUC) has regulatory authority over public utilities, including electrical corporations. Existing law requires the PUC, in consultation with the State Energy Resources Conservation and Development Commission (Energy Commission), the State Air Resources Board (state board), electrical corporations, and the motor vehicle industry, to evaluate policies to develop infrastructure sufficient to overcome any barriers to the widespread deployment and use of plug-in hybrid and electric vehicles and, by July 1, 2011, to adopt rules that address specified related issues. Existing law requires the PUC, in cooperation with the Energy Commission, the state board, air quality management districts and air pollution control districts, electrical and gas corporations, and the motor vehicle industry, to evaluate and implement policies to promote the development of equipment and infrastructure needed to facilitate the use of electric power and natural gas to fuel low-emission vehicles. Existing law, enacted as part of the Clean Energy and Pollution Reduction Act of 2015, requires the PUC, in consultation with the Energy Commission and the state board, to direct electrical corporations to file applications for programs and investments to accelerate widespread transportation electrification to reduce dependence on petroleum, meet air quality standards, achieve the goals set forth in the Charge Ahead California Initiative, and reduce emissions of greenhouse gases to 40% below 1990 levels by 2030 and to 80% below 1990 levels by 2050. The PUC is required to approve, or modify and approve, programs and investments in transportation electrification, including those that deploy charging infrastructure, through a reasonable cost recovery mechanism, if they are consistent with the above-described purposes, do not unfairly compete with nonutility enterprises, include performance accountability measures, and are in the interests of ratepayers.

The bill would require the PUC to establish the California Electric Vehicle Initiative, to be administered by electrical corporations, subject to the PUCs supervision. supervision, and funded by credits earned by the electrical corporations pursuant to the Low-Carbon Fuel Standard regulations. The bill would require that the program incentivize the purchase of electric vehicles in the state.

The Public Utilities Act makes any public utility that violates the act, or that fails to comply with any part of any order, decision, rule, direction, demand, or requirement of the PUC, guilty of a crime.

Because the provisions of this bill would be a part of the act and because a violation of an order or decision of the commission implementing its requirements would be a crime, the bill would impose a state-mandated local program by creating a new crime.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

Under existing law, the Public Utilities Commission (PUC) has regulatory authority over public utilities, including electrical corporations. Existing law requires the PUC to open a proceeding to determine appropriate targets, if any, for each load-serving entity, as defined, to procure viable and cost-effective energy storage systems, as defined, to be achieved by December 31, 2015, and December 31, 2020. If determined to be appropriate, the PUC is required to adopt the procurement targets, by October 1, 2013, and to reevaluate the determinations not less than once every three years. Existing law excludes an electrical corporation that has 60,000 or fewer customer accounts within California from these requirements. PUC, in consultation with the State Energy Resources Conservation and Development Commission (Energy Commission), the State Air Resources Board (state board), electrical corporations, and the motor vehicle industry, to evaluate policies to develop infrastructure sufficient to overcome any barriers to the widespread deployment and use of plug-in hybrid and electric vehicles and, by July 1, 2011, to adopt rules that address specified related issues. Existing law requires the PUC, in cooperation with the Energy Commission, the state board, air quality management districts and air pollution control districts, electrical and gas corporations, and the motor vehicle industry, to evaluate and implement policies to promote the development of equipment and infrastructure needed to facilitate the use of electric power and natural gas to fuel low-emission vehicles. Existing law, enacted as part of the Clean Energy and Pollution Reduction Act of 2015, requires the PUC, in consultation with the Energy Commission and the state board, to direct electrical corporations to file applications for programs and investments to accelerate widespread transportation electrification to reduce dependence on petroleum, meet air quality standards, achieve the goals set forth in the Charge Ahead California Initiative, and reduce emissions of greenhouse gases to 40% below 1990 levels by 2030 and to 80% below 1990 levels by 2050. The PUC is required to approve, or modify and approve, programs and investments in transportation electrification, including those that deploy charging infrastructure, through a reasonable cost recovery mechanism, if they are consistent with the above-described purposes, do not unfairly compete with nonutility enterprises, include performance accountability measures, and are in the interests of ratepayers.

Under existing law, the Public Utilities Commission (PUC) has regulatory authority over public utilities, including electrical corporations. Existing law requires the PUC to open a proceeding to determine appropriate targets, if any, for each load-serving entity, as defined, to procure viable and cost-effective energy storage systems, as defined, to be achieved by December 31, 2015, and December 31, 2020. If determined to be appropriate, the PUC is required to adopt the procurement targets, by October 1, 2013, and to reevaluate the determinations not less than once every three years. Existing law excludes an electrical corporation that has 60,000 or fewer customer accounts within California from these requirements.

This bill would make a nonsubstantive change to the definition of an energy storage system applicable to the above-described requirements.

 THIRD READING  

Bill No: AB 1184

Author: Ting and Chiu (D)

:

Vote:

PRIOR VOTES NOT RELEVANT

SENATE GOVERNANCE & FIN. COMMITTEE: 4-2, 8/31/18 (Pursuant to Senate Rule 29.10)

AYES: McGuire, Hernandez, Hertzberg, Lara

NOES: Nguyen, Moorlach

NO VOTE RECORDED: Beall

SUBJECT:

SOURCE: Author

DIGEST:

This bill enacts the Transportation Assistance Funding Act, which authorizes the City and County of San Francisco to impose a tax on each ride originating in San Francisco provided by a participating or autonomous driver.

ANALYSIS:

Existing law:

1. Prohibits the Legislature from imposing taxes for local purposes. Instead, the Legislature can authorize local agencies to impose them (California Constitution, Article XIII, Section 24).
2. Requires voter approval for all new or increased local taxes. Majority voter approval is required for general taxes, while 2/3 of voters must approve special taxes (California Constitution, Article XIIIC)
3. Allows charter cities to impose taxes which have not been preempted by the state or federal government (California Constitution, Article XI, Section Five).
4. Permits general law cities to levy any tax which can be levied by a charter city, unless a different law limits or prohibits such a tax.
5. Establishes the California Public Utilities Commission (CPUC) and grants it the authority to regulate public utilities, as well as more limited authority over other corporations, including railroads, rail transit, and charter-party carriers, among others. Charter-party carriers are companies which transport people for compensation, which include limousines and charter buses, but exclude taxis and municipal buses.
6. Regulates some aspects of transportation network companies (TNCs) by requiring TNCs and TNC drivers to maintain certain levels of primary liability insurance coverage, and directing TNCs to inform their drivers of the insurance coverage they provide and that the drivers’ personal insurance may not cover them while they drive for a TNC.
7. Defines “transportation network company” to mean an organization, including, but not limited to, a corporation, limited liability company, partnership, sole proprietor, or any other entity, operating in California that provides prearranged transportation services for compensation using an online-enabled application or platform to connect passengers with drivers using a personal vehicle.
8. Defines “Participating driver” or “driver” as any person who uses a vehicle in connection with a transportation network company’s online-enabled application or platform to connect with passengers.
9. Prohibits a local government from requiring business licenses from drivers for transportation network companies who do not reside in its jurisdiction.

This bill:

1. Authorizes the City and County of San Francisco to impose a tax on each ride originating in San Francisco provided by a participating driver.
2. Caps the amount of the tax to:
   1. 1.5% of net rider fares for a shared ride a passenger requests through the transportation network company’s online-enabled application or platform to share the ride with one or more passengers, and each passenger is charged a fare calculated based on the passenger’s request to share all or part of the ride with one or more passengers, regardless of whether the passenger actually shares all or part of the ride.
   2. 3.25% of net rider fees when the passenger does not request to share the ride with one or more other passengers.
3. Authorizes the City and County of San Francisco to impose a tax on each ride originating in San Francisco provided by an automated vehicle, whether facilitated by a transportation network company or another person.
4. Caps the amount of the tax to:
   1. 1.5% of net rider fares for a shared ride a passenger requests to share the ride with one or more passengers, and each passenger is charged a fare calculated based on the passenger’s request to share all or part of the ride with one or more passengers, regardless of whether the passenger actually shares all or part of the ride.
   2. 3.25% of net rider fees when the passenger does not request to share the ride with one or more passengers.
5. Permits the City and County of San Francisco to set a lower rate for rides provided by zero-emission vehicles (ZEVs).
6. Defines “net rider fare” to mean all charges for a ride, including, but not limited to, charges based on time or distance, or both, and excluding any additional charges such as taxes, airport or venue fees, or fees imposed by the California Public Utilities Commission.
7. Requires the City and County of San Francisco to use revenues from any tax to fund transportation operations and infrastructure within the City and County of San Francisco.
8. Prohibits any tax imposed from expiring before November 5, 2045.
9. Contains a legislative finding justifying the need for special legislation that applies solely to the City and County of San Francisco.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

SUPPORT: (Verified 8/29/18)

San Francisco Mayor London Breed

San Francisco Supervisor Aaron Peskin

Chinatown Community Development Center

Chinatown Transportation Research and Improvement Project

Lyft

San Francisco Bicycle Coalition

San Francisco Chamber of Commerce

San Francisco County Transportation Authority

San Francisco Transit Riders

Sierra Club California

Uber

Walk San Francisco

OPPOSITION: (Verified 8/30/18)

Alliance of Automobile Manufacturers

Silicon Valley Leadership Group

ARGUMENTS IN SUPPORT: According to the author, “As San Francisco’s streets become increasingly crowded, more investments in public transit and transportation infrastructure are needed so people can move around the city in the fastest and safest way possible. AB 1184 would allow voters in the City and County of San Francisco to approve a tax on Transportation Network Company (TNC) rides to fund critical local transportation projects.”

ARGUMENTS IN OPPOSITION: According to the Alliance of Automobile Manufacturers, “AB 1184 creates a new tax on privately owned autonomous vehicles. While the intent of the bill is to create a tax on transportation network company passenger rides, it imposes the tax on rides ‘provided by an autonomous vehicle, whether facilitated by a transportation network company or any other person’ So in the not too distant future, if an autonomous vehicle owner arranges a ride to pick up a family member or friend with no compensation, that person which used their privately owned vehicle to pick up a friend would have to pay a tax. The deployment of AVs has the potential to save hundreds of thousands of lives and increase mobility options for thousands of Californians. It is important that California’s laws serve as a catalyst for, not an obstacle to, continued innovation. We encourage the legislature not to pass legislation that thwarts the deployment of this technology. AB 1184 does tax ZEVs at a different rate than other vehicles in an attempt to ‘incentivize’ their use. However, we believe if the bill truly wanted to incentivize the use of ZEVs, the tax should not be applied to them. The State of California has a long history of supporting the deployment of ZEVs. The work on ZEV market penetration is far from over and the Legislature will need to continue to pass important laws to facilitate market expansion, adoption and deployment. We believe that exempting ZEVs from the new tax proposal is consistent with the State’s critical and ongoing support for ZEV technology and deployment. It would also send an important message to industry, consumers, and most importantly, incentivize TNC drivers and riders to purchase and use ZEVs.”

Prepared by:

8/31/18 10:06:08

**** END ****

CONCURRENCE IN SENATE AMENDMENTS

CSA2 Bill Id:AB 1184

Author:(Ting and Chiu)

As Amended Ver:August 22, 2018

Majority vote

(vote not relevant)

Communications and Conveyance

Original Committee Reference: C. & C.

SUMMARY: Authorizes the City and County of San Francisco to impose a tax on each transportation network company (TNC) ride originating in the City and County.

The Senate amendments delete the previous contents in the bill and insert the following:

1. Authorizes the City and County of San Francisco to impose a tax on each ride originating in the City and County of San Francisco provided by a TNC participating driver in an amount not to exceed the following:
   1. One and one-half percent of net rider fares for a shared ride in which, prior to commencement of the ride, a passenger requests through the TNC's online-enabled application or platform to share the ride with one or more passengers and each passenger is charged a fare that is calculated, in whole or in part, based on the passenger's request to share all or part of the ride with one or more passengers, regardless of whether the passenger actually shares all or part of the ride; or,
   2. Three and one-quarter percent of the net rider fare for a ride other than the previously specified ride.
2. Authorizes the City and County of San Francisco to impose a tax on each ride originating in the City and County of San Francisco provided by an autonomous vehicle (AV), whether facilitated by a TNC or any other person, in an amount not to exceed the following:
   1. One and one-half percent of net rider fares for a shared ride in which, prior to commencement of the ride, a passenger requests to share the ride with one or more passengers and each passenger is charged a fare that is calculated, in whole or in part, based on the passenger's request to share all or part of the ride with one or more passengers, regardless of whether the passenger actually shares all or part of the ride; or,
   2. Three and one-quarter percent of the net rider fare for a ride other than the previously specified.
3. Authorizes the City and County of San Francisco to set a lower tax rate for net rider fares for a ride originating in the City and County of San Francisco provided by a zero-emission vehicle to further incentivize deployment of zero-emission vehicles.
4. Defines "net rider fare" to mean all charges for a ride, including, but not limited to, charges based on time or distance, or both, and excluding any additional charges such as taxes, airport or venue fees, or fees imposed by the commission.
5. Requires moneys collected by the City and County of San Francisco pursuant to this bill to be dedicated to fund transportation operations and infrastructure within the City and County of San Francisco.
6. Requires a tax imposed pursuant to this bill to be subject to applicable voter approval requirements imposed by law.
7. Specifies that a tax imposed pursuant to this bill shall expire no later than November 5, 2045.

EXISTING LAW:

1. Establishes the "Passenger Charter-Party Carriers Act," which authorizes the California Public Utilities Commission (CPUC) to supervise and regulate every charter-party carrier (CPC) in the State and may do all things, necessary and convenient in the exercise of such power and jurisdiction, including issuing permits or certificates, investigating complaints against carriers, and cancel, revoke, or suspend permits and certificates for specific violations. (Public Utilities Code (PUC) Section Code 5381 et seq.)
2. Defines a "Transportation network company" to mean an organization, including, but not limited to, a corporation, limited liability company, partnership, sole proprietor, or any other entity, operating in California that provides prearranged transportation services for compensation using an online-enabled application or platform to connect passengers with drivers using a personal vehicle. (PUC Section 5431)
3. Defines a "Participating driver" or "driver" to mean any person who uses a vehicle in connection with a TNC's online-enabled application or platform to connect with passengers. (PUC Section 541)
4. Requires the Department of Motor Vehicles (DMV), as soon as practicable, but no later than January 1, 2015, to adopt regulations setting forth requirements for the specified submission of evidence of insurance, surety bond, or self-insurance, and the submission and approval of an application to operate a specified AV. (Vehicle Code (VEH) Section 38750)
5. Defines "autonomous vehicle" to mean any vehicle equipped with autonomous technology that has been integrated into that vehicle. Specifies that an AV does not include a vehicle that is equipped with one or more collision avoidance systems, including, but not limited to, electronic blind spot assistance, automated emergency braking systems, park assist, adaptive cruise control, lane keep assist, lane departure warning, traffic jam and queuing assist, or other similar systems that enhance safety or provide driver assistance, but are not capable, collectively or singularly, of driving the vehicle without the active control or monitoring of a human operator. (VEH Section 38750)
6. Authorizes charter cities to impose taxes which have not been preempted by the state or federal government, as specified. (California Constitution, Article XI, Section Five)
7. Prohibits the Legislature from imposing taxes for local purposes but may authorize local governments to impose them, as specified. (California Constitution, Article XIII, Section 24).

FISCAL EFFECT: Unknown. This bill is keyed non-fiscal by the Legislative Counsel.

COMMENTS:

1. Authors Statement: According to the author, "As San Francisco's streets become increasingly crowded; more investments in public transit and transportation infrastructure are needed so people can move around the city in the fastest and safest way possible. AB 1184 would allow voters in the City and County of San Francisco to approve a tax on TNC rides to fund critical local transportation projects."
2. Background: The CPUC has regulatory authority over CPCs which are charter vehicles that offer transportation services on a prearranged basis for the exclusive use of an individual or group. Charges are based on either, or a combination of, mileage or time of use. TNCs are companies that offer prearrange transportation services through an app on their smartphone or computer, and are considered CPCs regulated by the CPUC.

Under current law, the Legislature can authorize local agencies, such as cities, to impose taxes for local purposes. Some local tax authorizations apply to all cities, while others apply only to individual cities. Local agencies generally propose such tax increases by adopting local ordinances or resolutions at a public hearing. In addition, current law allows charter cities to levy taxes which are not preempted by the state or federal governments.

1. CPUC Regulations of TNCs: Since the inception of TNCs, the Legislature and the CPUC has sought to balance the need to adopt rules and regulations that promote the public safety aspects of the TNC industry, while not obstructing the public's demand for such new mode of transportation. In 2013, the CPUC adopted requirements on TNC licensing, including requiring all TNC drivers to have a valid California driver's license; requiring TNCs to obtain permits to operate; conduct background checks on drivers; check driver record prior to driving and quarterly thereafter; establish driver training programs; implement a zero-tolerance policy on drugs and alcohol; conduct vehicle inspections, among others.
2. Autonomous Vehicles and TNCs: In 2012, the Legislature passed SB 1298 (Padilla), Chapter 570, Statutes of 2012, which established conditions for the operation of AVs upon public roadways. The DMV adopted testing regulations in May 2014 for AVs with a driver present, while regulations governing driverless testing of AVs were adopted in February 2018. The DMV can now issue permits for driverless testing for deployment of AVs if it determines that the applicant has met all safety and permitting requirements.

In May 2018, the CPUC issued a decision (R. 12-12-011) authorizing CPUC regulated transportation companies, such as TNCs, using AVs; and have obtained AV permits from the DMV, to conduct pilot programs to provide rides to the public. The pilot program is designed to work in tandem with the DMV's AV regulations to ensure safety and consumer protections for passengers. Participating companies may not charge for rides until further CPUC approval. Although the technology is not fully developed, arguably such actions represent the first steps in allowing AVs to be used to transport individuals in exchange for consideration in the future.

1. San Francisco Transportation Task Force 2045: The San Francisco Transportation Task Force 2045 was created in early 2017 to explore the potential for new transportation revenue measures in San Francisco. The Task Force composes of member representing multiple stakeholders including neighborhood organizations, transportation advocacy groups, business and civil organization and public agencies. The Task Force was tasked with identifying transportation funding needs and gaps in resources; and potential revenue options to close those gaps.

In December 2017, the Task Force issued its final report with recommendations on how to address the city's transportation challenges. The report found that TNCs accounted for an estimated 15% of intra-city trips, and an estimated 20-26% of vehicle trips Downtown during peak periods. On an average weekday, more than 5,700 TNC vehicles operate on San Francisco streets during the peak period. On Fridays, over 6,500 TNC vehicles are on the street at the peak. The report recommended a TNC trip fee as a potential new funding source to help address the city's transportation funding needs.

1. TNC Trip Fee: In April 2018, San Francisco Supervisor Aaron Peskin introduced a local ballot measure to expand the city's commercial gross receipts tax to private transportation companies, such as TNCs. Supervisor Peskin withdrew the ballot measure after reaching an agreement with the TNCs that would only tax the amount that TNCs actually received, excluding additional charges such as tolls, airport fees and tips to drivers. This bill reflects that agreement.

To implement the agreement the City would first need the Legislature to affirm the City's authority to levy local taxes on TNC trips. The California Constitution allows charter cities, such as the City and County of San Francisco, to levy taxes which are not preempted by state or federal governments. It is unclear whether this bill would confer any additional authority to San Francisco beyond what it currently possesses. The measure would then require local voter approval before it would go into effect in 2020 until 2045.

The bill authorizes the City and County of San Francisco to impose a tax on each TNC ride originating in the City and County in a specified amount to fund transportation operations and infrastructure within the City. The fee would also apply to rides provided by AVs, should such vehicles one day become available to provide passenger transportation for consideration, including by TNCs. The funds would be used solely for transportation operations and infrastructure within the City.

Arguably, TNCs would be passing along some or all of the cost on to its riders. Because TNC drivers could drive through multiples jurisdiction in any single day, this bill would arguably only increase cost to passengers requesting rides originating in the City. However, the argument can be made that TNCs should contribute to the City's transportation costs because of the increasing pressures to the City's transportation infrastructure due to the additional number of vehicles on City roads from TNCs. However, TNCs also operate throughout the state and other jurisdictions have the same transportation budgetary pressures, hence, it is unclear why such provisions would apply only to a single local authority.

Analysis Prepared by: Edmond Cheung / C. & C. / (916) 319-2637 FN: 0005229

SENATE COMMITTEE ON GOVERNANCE AND FINANCE

Senator Mike McGuire, Chair

2017 - 2018 Regular

City and County of San Francisco: local tax: transportation network companies: autonomous vehicles.

Allows the City and County of San Francisco to impose a tax on rides either arranged by TNCs or provided by autonomous vehicles.

Background

Local Taxes. Article XIII, Section 24 of the California Constitution prohibits the Legislature from imposing taxes for local purposes; instead, the Legislature can authorize local agencies to impose them. As a result, the Legislature has authorized a broad range of taxes for local agencies, such as cities. Some taxes have been imposed by all or even many cities, such as taxes on the sales of tangible personal property under the Bradley-Burns Local Sales and Use Tax Law, or the Transactions and Use Tax Law. Others have been imposed by few or no cities, like taxes on aerosol paint containers or felt tip markers to raise revenue to prevent and remove graffiti. Some local tax authorizations apply to all cities, while others specify individual cities. The Legislature can authorize cities to tax by enacting a statute by majority vote.

Article XIIIC of the California Constitution states that taxes levied by local governments are either general taxes, subject to majority approval of its voters, or special taxes, subject to 2/3 vote. Proposition 13 (1978) required a 2/3 vote of each house of the Legislature for state tax increases, and 2/3 vote of local voters for local special taxes. Proposition 62 (1986) prohibited local agencies from imposing general taxes without majority approval of local voters, and a 2/3 vote for special taxes. Proposition 218 (1996) extended those vote thresholds to charter cities, and limited local agencies’ powers to levy new assessments, fees, and taxes. Local agencies generally propose to increase taxes by adopting an ordinance or a resolution at a public hearing.

While the Constitution requires the Legislature to authorize local agencies to impose taxes in Article XIII, the Constitutional municipal affairs doctrine derived from Article XI allows charter cities to levy taxes which are not preempted by the state or federal governments. The Government Code also allows all general law cities to levy any tax which may be levied by any charter city unless a different general law limits or prohibits such a tax. This blanket authority means that a general law city’s authority to tax is similar, but not identical, to a charter city’s authority.

Transportation Networking Companies. The California Public Utilities Commission (CPUC) regulates public utilities, as well as other corporations, including railroads, rail transit, and charter-party carriers, among others. Charter-party carriers are companies that transport people for compensation, which include limousines and charter buses, but exclude taxis and municipal buses.

In 2014, the Legislature first began to regulate some aspects of transportation network companies (TNCs) by requiring TNCs and TNC drivers to maintain certain levels of primary liability insurance coverage, and directing TNCs to inform their drivers of the insurance coverage they provide and that the drivers’ personal insurance may not cover them while they drive for a TNC (AB 2293, Bonilla). AB 2293 added new Article 7 to Chapter 8 of the Public Utilities Code, which puts TNCs under the CPUC’s regulatory authority. AB 2293 also defined:

• “Transportation network company” to mean an organization, including, but not limited to, a corporation, limited liability company, partnership, sole proprietor, or any other entity, operating in California that provides prearranged transportation services for compensation using an online-enabled application or platform to connect passengers with drivers using a personal vehicle.
• “Participating driver” or “driver” as any person who uses a vehicle in connection with a transportation network company’s online-enabled application or platform to connect with passengers.

Autonomous vehicles. Autonomous vehicles or autonomous driving systems can operate in traffic without the intervention of a human driver, and are classified across a spectrum according to how much control a driver has versus the vehicle’s technology. The Legislature required the Department of Motor Vehicles (DMV) to adopt regulations for the operation of autonomous vehicles on California's public roads (SB 1298, Padilla, 2012). Testing regulations with a human driver became effective on September 6, 2014, while regulations governing the driverless testing and public use of autonomous vehicles on California roads became effective on February 26, 2018. DMV can issue permits for driverless testing or deployment of autonomous vehicles; however, it states that it will not approve any permits until it is clear that the applicant has met all of the safe operation requirements set forth in the regulations. Should autonomous vehicles begin transporting individuals in exchange for consideration in the future, it is likely that these activities would come under CPUC jurisdiction consistent with its authority to regulate charter-party carriers.

Seeking additional transportation funding options, the author wants to allow the City and County of San Francisco to impose a tax on rides either arranged by TNCs or provided by autonomous vehicles.

Proposed Law

Assembly Bill 1184 authorizes the City and County of San Francisco to impose a tax on each ride originating in San Francisco provided by a participating driver by adding to provisions in current law relating to TNCs under the authority of the CPUC. The measure caps the amount of the tax to:

• 1.5% of net rider fares for a shared ride when a passenger requests through the transportation network company’s online-enabled application or platform to share the ride with one or more passengers, and each passenger is charged a fare calculated based on the passenger’s request to share all or part of the ride with one or more passengers, regardless of whether the passenger actually shares all or part of the ride.
• 3.25% of net rider fees when the passenger does not request to share the ride with one or more other passengers.

The bill also allows the City and County of San Francisco to impose a tax on each ride originating in San Francisco provided by an automated vehicle, whether facilitated by a transportation network company or another person. AB 1184 similarly caps the amount of the tax to:

• 1.5% of net rider fares for a shared ride when a passenger requests to share the ride with one or more passengers, and each passenger is charged a fare calculated based on the passenger’s request to share all or part of the ride with one or more passengers, regardless of whether the passenger actually shares all or part of the ride.
• 3.25% of net rider fees when the passenger does not request to share the ride with one or more passengers.

The bill also permits the City and County of San Francisco to set a lower rate for rides provided by zero-emission vehicles (ZEVs). AB 1184 also defines “net rider fare” to mean all charges for a ride, including, but not limited to, charges based on time or distance, or both, and excluding any additional charges such as taxes, airport or venue fees, or fees imposed by the CPUC.

AB 1184 requires the City and County of San Francisco to use revenues from any tax to fund transportation operations and infrastructure within the City and County of San Francisco. The bill prohibits any tax imposed from expiring before November 5, 2045. The measure also contains a legislative finding justifying the need for special legislation that applies solely to the City and County of San Francisco.

State Revenue Impact

No estimate.

Comments

1. Purpose of the bill. According to the author, “As San Francisco’s streets become increasingly crowded, more investments in public transit and transportation infrastructure are needed so people can move around the city in the fastest and safest way possible. AB 1184 would allow voters in the City and County of San Francisco to approve a tax on Transportation Network Company (TNC) rides to fund critical local transportation projects.”

2. Necessary? The California Constitution allows charter cities to levy taxes which are not preempted by the state or federal governments. As a charter city, the City and County of San Francisco can choose to tax almost anything it wants, so long as the federal or state government hasn’t taxed it first. It’s unclear whether AB 1184 confers any additional authority to San Francisco beyond what it currently possesses.

3. Why not us? To the extent that AB 1184 confers new taxing authority, why should it be restricted solely to the City and County of San Francisco? Despite pockets of poverty and a significant homeless population, San Francisco is currently enjoying an economic boom: the typical San Francisco household makes about $96,677 each year, which is far more than the national median household income of $57,617, according to the US Census Bureau. In May 2018, the San Francisco median house sales price was $1,650,000, and the median condominium sales price was $1,250,000. San Francisco also houses many of the world’s most profitable companies. To the extent that new revenues are needed to support transportation infrastructure, San Francisco’s existing tax base is able to meet these needs in ways that other cities cannot. Other cities with less robust tax bases may have transportation financing needs too, but could not avail themselves of any authority added by AB 1184.

4. Timely? Considerable debate exists regarding whether and when autonomous vehicles will displace the current model of private car ownership, especially in a state with a car culture as strong as California. Individuals only operate their vehicles 94% of the time they own them, so tremendous economic gains await whichever firm or firms can first deploy autonomous vehicle fleets at scale. If and when such a transition occurs, the state and local agencies will have to comprehensively reassess the way it pays for transportation infrastructure if no one needs to pay vehicle license or registration fees because they no longer own cars, or vehicles become so fuel efficient that gasoline excise taxes cease to produce sufficient revenue. However, this concern is currently only speculative: autonomous vehicles do not yet currently transport people in exchange for consideration in California, as the technology is not yet fully developed and deployed. AB 1184 states that the City and County of San Francisco could tax rides provided by autonomous vehicles before this technology has reached market scale. The Committee may wish to consider the effects of taxing a business model that does not yet exist.

5. Consistent? TNC drivers rarely operate solely in one jurisdiction. In some areas of the state, a TNC driver can pick up, drop off, and drive through many jurisdictions in a single day. Last year, the Legislature prohibited local agencies from requiring business licenses for drivers from TNCs who do not reside in its jurisdiction (SB 182, Bradford). As such, SB 182 limited local authority to license TNC drivers that provide rides in exchange for consideration to the benefit of TNC drivers’ ability to do business without burdensome licensing requirements. AB 1184 doesn’t allow San Francisco to tax drivers, but it does state that one city can tax rides originating in its jurisdiction, regardless of where it terminates, or where the driver resides. The Committee may wish to consider whether AB 1184 is consistent with recent efforts to limit local authority necessary to help TNC drivers do business in California.

6. Gut and amend. As approved by the Senate Energy, Utilities, and Communications Committee last year, AB 1184 required the Air Resources Board to report to the Legislature, by January 1, 2019, the funding levels necessary to support continuous, year-round operation of each of its ZEV and near-ZEV incentive programs. On August 22, 2018, the author deleted those contents and inserted the current version of the bill.

7. Special legislation. The California Constitution prohibits special legislation when a general law can apply (Article IV, Section 16). AB 1184 contains findings and declarations explaining the need for legislation that applies only to the City and County of San Francisco.

Assembly Actions

Not relevant to this version of the bill.

Support and Opposition

(8/30/18)

Support: San Francisco Mayor London Breed, San Francisco Supervisor Aaron Peskin, Chinatown Community Development Center, Chinatown Transportation Research and Improvement Project, Lyft, San Francisco Bicycle Coalition, San Francisco Chamber of Commerce, San Francisco County Transportation Authority, San Francisco Transit Riders, Sierra Club California, Uber, Walk San Francisco.

Opposition: Alliance of Automobile Manufacturers, Silicon Valley Leadership Group.

-- END --

 THIRD READING  

Bill No: AB 1184

Author:

Amended: 9/1/17 in Senate

Vote:

PRIOR VOTES NOT RELEVANT

SENATE APPROPRIATIONS COMMITTEE: 5-2, 9/1/17

AYES: Lara, Beall, Bradford, Hill, Wiener

NOES: Bates, Nielsen

SUBJECT:

SOURCE: Author

DIGEST:

This bill requires the Air Resources Board (ARB) to report to the Legislature, by January 1, 2019, the funding levels necessary to support continuous, year round operation of each of its zero-e mission vehicle (ZEV) and near-zero emission vehicle incentive programs, as well as any changes necessary to ZEV incentive programs in order to increase the market penetration of ZEVs, as specified.

ANALYSIS: Existing federal law, the Federal Clean Air Act (FCAA) and its implementing regulations, set National Ambient Air Quality Standards (NAAQS) for six criteria pollutants, designate air basins that do not achieve NAAQS as nonattainment, allow only California to set vehicular emissions standards stricter than the federal government, and allow other states to adopt either the federal or California vehicular emissions standards. (42 U.S.C. §7401 et seq.)

Existing state law:

1. Establishes the Air Resources Board (ARB) as the air pollution control agency in California and requires the ARB, among other things, to control emissions from a wide array of mobile sources and implement the FCAA. (Health and Safety Code (HSC) §39500 et seq.)
   
2. Establishes Sections 1962.1, 1962.2, and 1962.3 of Title 13 of the California Code of Regulations (Zero-Emission Vehicle (ZEV) Mandate) that requires large volume and intermediate volume vehicle manufacturers that sell cars in California to produce ZEVs, as specified.
   
3. Requires, under the California Global Warming Solutions Act of 2006 (also known as AB 32), the Air Resources Board (ARB) to determine the 1990 statewide greenhouse gas (GHG) emissions level and approve a statewide GHG emissions limit that is equivalent to that level to be achieved by 2020. (Health and Safety Code (HSC) §38500 et seq.)
   
4. Allows the ARB until December 31, 2020, under certain circumstances, to adopt regulations that utilize market-based compliance mechanisms. (HSC §38562)
   
5. Requires ARB to ensure that statewide GHG emissions are reduced to at least 40% below the 1990 level by December 31, 2030. (HSC §38566)
   
6. Establishes the Greenhouse Gas Reduction Fund (GGRF) in the State Treasury, requires all moneys, except for fines and penalties, collected pursuant to a market-based mechanism be deposited in the fund. (Government Code §16428.8)
   
7. Establishes the Air Quality Improvement Program (AQIP), administered by ARB in consultation with local air districts, to fund programs that reduce criteria air pollutants, improve air quality, and provide research for alternative fuels and vehicles, vessels, and equipment technologies. (HSC §44274 et seq.)
   Establishes the Clean Vehicle Rebate Project (CVRP) under the AQIP.
   
8. Establishes, as a part of the Charge Ahead Initiative, the Enhanced Fleet Modernization Program (EFMP)—funded with moneys from the Enhanced Fleet Modernization Subaccount within the High Polluter Repair or Removal Account within the Vehicle Inspection and Repair Fund—to incentivize the voluntary retirement of passenger vehicles and light- and medium-duty trucks. (HSC §44125 et seq.).
   
9. Establishes Sections 1962.1, 1962.2, and 1962.3 of Title 13 of the California Code of Regulations (Zero-Emission Vehicle (ZEV) Mandate) that requires large volume and intermediate volume vehicle manufacturers that sell cars in California to produce ZEVs, as specified.
   
10. Requires, under Governor Brown’s Executive Order B-16-2012, that the state ensure 1.5 million ZEVs are on the road by 2025.

This bill:

1. Makes findings and declarations.
   
2. Requires ARB to report to the Legislature, by January 1, 2019, the funding levels necessary to support continuous, year round operation of each of its zero-e mission vehicle (ZEV) and near-zero emission vehicle incentive programs, as well as any changes necessary to ZEV incentive programs in order to increase the market penetration of ZEVs, as specified.
   
3. Allows ARB to contract with a third party for the preparation of the report.

Background

1. Air quality standards. The Federal Clean Air Act (FCAA) passed in 1963 and has been revised many times thereafter. The FCAA and its implementing regulations are intended to protect public health and environmental quality by limiting and reducing pollution from various sources. Under the FCAA, the United States Environmental Protection Agency (US EPA) establishes National Ambient Air Quality Standards (NAAQS) that apply to outdoor air throughout the country.
   
   In 1969 and 1971, ARB set the first air quality standards for ozone, Particulate Matter (PM), oxides of nitrogen (NOx), oxides of sulfur (SOx), and carbon monoxide due to their negative impacts on public health above specified concentrations.
   
   The federal government followed suit and set NAAQS for six “criteria pollutants.” These included ground-level ozone, PM, NOx, SOx, and carbon monoxide, and added lead. Now, the US EPA reviews each NAAQS at five-year intervals to ensure that the standards are based on the most recent scientific information.
   
   Regions that do not meet the national standards for any one of the standards are designated “nonattainment areas.” The FCAA sets deadlines for attainment based on the severity of nonattainment and requires states to develop comprehensive plans, known as the state implementation plan (SIP), to attain and maintain air-quality standards for each area designated nonattainment for an NAAQS.
   
   The FCAA specifies which entities qualify as major sources of air pollutants, and requires those sources to be permitted and regulated under the requirements in Title V of the FCAA, which is implemented in California by local air districts. Certain sources of air emissions, including combustion facilities and incinerators, are subject to specific Title V requirements regardless of size. A Title V permit authorizes those sources to operate.
   
   In July of 2011, sources not previously subject to Title V requirements became subject to Title V if they had GHG emissions at least 100,000 tons per year (tpy) of carbon dioxide equivalent (CO₂e). For air pollutants besides GHGs, the threshold for determining which sources qualify as Title V changes depending on whether the pollutants are hazardous and whether the source is located in a non-attainment area. The default standard for qualifying as a major source of air pollutants is 100 tpy, although nonattainment areas have lower threshold emission levels for the pollutants that are not in attainment.
   
   Within severe non-attainment areas, sources that emit over 10 tpy of NOx or volatile organic compounds (VOCs) are Title V sources. Common Title V sources include large factories, refineries and power plants. Major source thresholds for hazardous air pollutants (HAPs, in California these are called Toxic Air Contaminants or TACs) are 10 tpy for a single TAC or 25 tpy for any combination of TACs. Examples of TACs include benzene, found in gasoline; perchlorethlyene, emitted from some dry cleaning facilities; and methylene chloride, used as a solvent and paint stripper by a number of industries.
   
   Due to the lower emission thresholds for air pollutants that are in nonattainment air basins, a larger fraction of facilities are required to be permitted under Title V in the South Coast Air Quality Management District and San Joaquin Valley Unified Air Pollution Control District, which are nonattainment areas for ozone and PM.
   
2. Health impacts of air pollution. When not adequately controlled, air pollution has dire consequences on the health and safety of both people and the environment. Poor air quality causes the lungs to constrict, resulting in wheezing, shortness of breath and chest tightness, especially during exercise or physical activity.
   
   It is well known that air pollution causes asthma. According to the Centers for Disease Control and Prevention, nationwide 7.4% of adults and 8.6% of children have been diagnosed with asthma. In California, the numbers are significantly higher: 13.1% of adults and 12.5% of children have been diagnosed with asthma. Lower income and minority groups are disproportionately affected by asthma due to their increased exposure to air pollution.
   
   Depending on exposure, air pollution alone can cause an increased risk of cardiovascular and respiratory illness, lung disease, cancerous tumors, birth defects, premature births, developmental disorders, central nervous system damage, intellectual disability, persistent memory impairments, epilepsy, dementia, and premature death.
   
   A June 2017 study published by Harvard researchers in the New England Journal of Medicine found that there is no safe level of long-term exposure to PM 2.5 (PM that is less than 2.5 micrometers in diameter) and ozone below which there is no risk of premature death. The study followed over 60 million Americans over 65 years old for seven years. Two key findings in the study are that reducing PM 2.5 concentrations by 1 microgram per cubic meter nationwide would save about 12,000 lives each year and that reducing ozone concentrations by 1 part per billion nationwide would save about 1,900 lives each year.
   
3. Vehicles and air pollution. Vehicles are one of the primary sources of air pollution nationally. As such, the FCAA authorizes US EPA to establish and regulate emissions standards for mobile sources.
   
   California, due to its preexisting vehicle-emission standards and severe motor vehicle air pollution problems, is authorized under the FCAA to implement separate mobile emission standards from the federal government. Other states may choose to follow either the national standard or the stricter California standards.
   
   State law assigns the ARB with primary responsibility for control of mobile-source air pollution, including adoption of rules for reducing vehicle emissions, the specification of vehicular fuel composition, emissions control devices, and engine standards.
   
4. Enhanced Fleet Modernization Program (EFMP) and EFMP Plus-Up. EFMP is an incentive program funded through a $1 surcharge on vehicle registration, totaling approximately $30 million annually. EFMP is designed to encourage low-income drivers to retire their older, high-emitting vehicles and replace them with newer, cleaner, more fuel-efficient vehicles. EFMP was established by AB 118 (Núñez, Chapter 750, Statutes of 2007) and comprises two components: retirement-only and retirement and replacement. These are sometimes referred to as the EFMP base program. Under the retirement only component, eligible applicants can receive $1,000 to $1,500, depending on income, for retiring an eligible vehicle through the EFMP portion of the car scrap program administered by the Bureau of Automotive Repair’s Consumer Assistance Program. This element of the program is offered statewide.
   
   The second component of the EFMP base program, the retire and replacement component, is offered only in the South Coast and San Joaquin Valley air districts, and only to low income drivers (income less than 400 percent of the Federal Poverty Line) of eligible vehicles. EFMP retirement and replacement provides up to $4,500 to low-income drivers who purchase a vehicle eight years old or newer. The exact incentive amount varies, depending on household income, and can be used toward the purchase of a new or used clean replacement vehicle or an alternate mode of transportation, such as a transit pass. Each implementing local air district tailors and markets the EFMP retirement and replacement program uniquely. In the South Coast, the program is called Replace Your Ride, and in the San Joaquin Valley, the program is called Valley Clean Air Now.
   
   The Plus-Up pilot project is a complementary incentive program funded with GGRF moneys and augments the EFMP base program by adding up to an additional $5,000 in incentives for the subset of participants living in or near a disadvantaged community census tract and who choose an advanced technology replacement vehicle (e.g. hybrid, plug-in hybrid, and battery electric vehicles), but may not be used for a mobility option like a transit pass. The highest incentive amount is available to the lowest income drivers choosing the cleanest replacement vehicles. For example, a low-income participant who lives in or near a disadvantaged community can receive up to $9,500 toward the purchase of a plug-in hybrid vehicle: $4,500 from the EFMP base program and $5,000 from Plus-Up pilot project. The actual amount of the additional Plus-Up incentive depends on income and choice of replacement vehicle. The following table illustrates how incentives from the EFMP base program and Plus-Up pilot project can be combined or “stacked.” Note that these programs apply for both new and used vehicles up to eight years old. To note, this table does not include additional incentives available under the Clean Vehicle Rebate Project.
   

EFMP and Plus-Up: Stacking of Incentives

1. Clean Vehicle Rebate Project (CVRP). The CVRP is funded by ARB and administered by the Center for Sustainable Energy, in order to promote the production and use of zero-emission vehicles, including electric, plug-in hybrid electric and fuel cell vehicles. CVRP enables the purchaser or lessee of an eligible vehicle to receive a rebate. A consumer can apply for a rebate within 18 months of purchasing or leasing an eligible vehicle. The consumer must retain ownership of the vehicle in California for at least 30 consecutive months after the purchase or lease date or reimburse ARB for part of or the entire rebate amount. Rebates are distributed on a first-come, first-served basis and issued within 90 days of application approval.
   
   CVRP provides a rebate of up to $5,000 for purchasing or leasing a new zero-emission vehicle or plug-in hybrid electric vehicle. Specifically, a consumer may obtain a $5,000 rebate for a hydrogen fuel-cell vehicle; a $2,500 rebate for a zero-emission, battery electric vehicle; a $1,500 voucher for a plug-in hybrid electric vehicle; or, a $900 rebate for a neighborhood electric vehicle or a zero-emission motorcycle. There is no cap on the number of rebates that may be issued, but rebates are subject to funding availability and the program has more than once been forced to stop issuing rebates and create a waiting list due to funds running out.
   
   CVRP was initially designed to achieve 1.5 million ZEVs on the road by 2025 as directed under Governor Brown’s Executive Order B-16-2012.
   
2. Zero-Emission Vehicle (ZEV) Regulation. The Zero-Emission Vehicle (ZEV) Regulation requires large volume and intermediate volume vehicle manufacturers that sell cars in California to produce ZEVs (such as battery electric and fuel-cell vehicles), clean plug-in hybrids, clean hybrids and clean gasoline vehicles with near-zero tail pipe emissions. In general, the ZEV regulation requires that 15% of new car sales be ZEVs by 2025. This target is intended to achieve 1.5 million ZEVs on the road by 2025 as directed under Governor Brown’s Executive Order B-16-2012.

Comments

Substantially amended. This bill was substantially amended by the Senate Appropriations Committee. Most of the provisions of this bill were amended out, making prior votes on this bill not applicable.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

SUPPORT: (Verified 9/6/17)

Large-Scale Solar Association

OPPOSITION: (Verified 9/6/17)

None received

Prepared by:

9/6/17 16:01:29

**** END ****

SENATE COMMITTEE ON

Senator Ricardo Lara, Chair

2017 - 2018 Regular Session

AB 1184 (Ting) - Vehicular air pollution: incentives

Bill Summary:

AB 1184 would establish the California Electric Vehicle Initiative (CEVI), which would be administered by the California Air Resources Board (ARB) to provide market incentives to achieve a statewide deployment of 1.5 million electric vehicles (EVs) by 2025. The bill requires ARB to establish a portfolio of funding resources and to develop a funding plan for the expenditure of up to $3 billion in existing revenues over 12 years for the continuous funding of point-of-sale rebates and other incentives that would decline over time as market penetration targets are met.

*********** ANALYSIS ADDENDUM – SUSPENSE FILE ***********

The following information is revised to reflect amendments

adopted by the committee on September 1, 2017

Fiscal Impact:

• One-time ARB contract costs, likely in the low hundreds of thousands, to prepare the required report on vehicle incentive programs. (Greenhouse Gas Reduction Fund)

Committee Amendments:

Delete Sections 2 and 3 of the bill, which would have established the CEVI and authorized ARB to provide advance payments from Air Quality Improvement Program and GGRF moneys to implement projects. The amendments also require ARB to submit a report to the Legislature by January 1, 2019 on the operation of vehicle incentive programs that include the following:

• Funding levels required to support continuous year-round operation of each of its incentive programs.
• Changes to the zero-emission vehicle incentive programs that are necessary to increase market penetration.

ARB would be authorized to enter into a contract with a third party to prepare the report.

-- END --

SENATE COMMITTEE ON

Senator Ricardo Lara, Chair

2017 - 2018 Regular Session

AB 1184 (Ting) - Vehicular air pollution: electric vehicles: incentives

This bill meets the criteria for referral to the Suspense File.

Bill Summary:

AB 1184 would establish the California Electric Vehicle Initiative (CEVI), which would be administered by the California Air Resources Board (ARB) to provide market incentives to achieve a statewide deployment of 1.5 million electric vehicles (EVs) by 2025. The bill requires ARB to establish a portfolio of funding resources and to develop a funding plan for the expenditure of up to $3 billion in existing revenues over 12 years for the continuous funding of point-of-sale rebates and other incentives that would decline over time as market penetration targets are met.

Fiscal Impact:

• CEVI program costs of up to $3 billion over 12 years to provide EV point-of-sale rebates and other incentives. Since the bill specifies that funding would come from a portfolio of existing sources, staff assumes that funding for this initiative would supplant funding provided to existing programs for EV incentives, and redirect funding from other clean vehicle programs. (Greenhouse Gas Reduction Fund [GGRF], Enhanced Fleet Modernization Subaccount, and potentially other special funds)
  
• Unknown, major cost pressures to supplement current funding levels to support low-carbon transportation projects. (GGRF, and potential General Fund cost pressures)
  
• ARB administrative costs of approximately $785,000 annually for 5 new positions, and additional contract funding of $350,000 in 2017-18 and 2018-19, and $100,000 ongoing thereafter. (GGRF)
  
• California Public Utilities Commission (CPUC) administrative costs of approximately $150,000 annually, and unknown costs to the State Energy Resources Conservation and Development Commission (CEC) to coordinate with ARB on the establishment and implementation of the CEVI. (Public Utilities Commission Utilities Reimbursement Account and the Energy Resources Programs Account, respectively).

Background:

With transportation accounting for approximately 37 percent of California’s greenhouse gas (GHG) emissions, transforming California’s transportation system away from gasoline to ZEVs is a fundamental part of the state’s efforts to reduce GHG emissions 40 percent below 1990 levels by 2030. In 2012, Governor Brown issued Executive Order B-16-12 directing state government to help accelerate the market for ZEVs in California, calling for 1.5 million ZEVs in California by 2025, and establishing specified milestones towards the achievement of this target. The Administration’s ZEV Action Plan identifies specific actions state government can take to meet the milestones of the Executive Order. The Legislature has also supported these efforts with passage of the California Charge Ahead Initiative via SB 1275 (De León, Chapter 530, Statutes of 2014) which sets a goal and policies to achieve one million zero and near-zero emission vehicles by 2023.

Existing law establishes the Air Quality Improvement Program (AQIP), which is administered by ARB in consultation with local air districts, to provide competitive grants to fund projects to reduce criteria air pollutants, improve air quality, and support research to improve the air quality impacts of alternative fuels and vehicles, vessels, and equipment technologies. AQIP encompasses several programs and is partially funded through surcharges on vehicle registration fees and a portion of the Smog Abatement Fee (paid to register vehicles less than six model years old and therefore exempt from smog check), as well as GGRF monies.

Existing law establishes the Clean Vehicle Rebate Program (CVRP), within the AQIP, to promote accelerated widespread commercialization of zero-emission vehicles by providing rebates of up to $5,000 for the purchase or lease of an eligible light-duty vehicle. This program was not created through statute, but developed and initiated by ARB pursuant to its existing statutory authority through AQIP. Specified income limits apply for applicants purchasing a vehicle after November 1, 2016. As of June 1, 2017, 193,186 CVRP rebates had been issued since March 2010, at a cost of approximately $420 million. There is no cap on the number of rebates that may be issued, but rebates are subject to funding availability and the program has been oversubscribed in recent years. When funding is exhausted, applicants are placed on a wait list, and issued rebates in the order that they applied when funding is allocated in the next funding cycle.

Existing law establishes the Enhanced Fleet Modernization Subaccount within the HPRRA to implement the Enhanced Fleet Modernization Program (EFMP), which was developed by ARB in consultation with BAR, and allows for the voluntary retirement of high-polluting passenger vehicles and light-duty and medium-duty trucks. EFMP is funded by an additional $1 surcharge on vehicle registrations, and has both a local and state administered component.

Under the statewide component, BAR administers a “retirement-only” program as part of its Consumer Assistance Program (CAP) that provides $1,500 vouchers to low-income vehicle owners, or a $1,000 voucher to other owners, to retire a high-polluting vehicle. CAP is funded by $6 of the Smog Abatement Fee and citation fees imposed by BAR on smog stations.

Under the local component, ARB administers a program, authorized in the San Joaquin Valley and South Coast air districts, to replace high-polluting vehicles. In addition to the “retirement” vouchers described above, the local EFMP program offers a $2,500 “replacement” voucher to low-income vehicle owners to replace a high-polluting vehicle by either purchasing a vehicle eight years old or newer, or using the voucher towards specified alternative transportation mobility options.

ARB also administers the EFMP Plus-Up Program in the San Joaquin and South Coast air districts. Plus-Up provides additional incentives above and beyond EFMP base incentives for individuals in disadvantaged communities who retire high-polluting vehicles and replace them with used or new hybrid, plug-in hybrid, or zero-emission vehicles. Eligible participants can receive additional incentives ranging from $1,500 to $5,000, depending on the vehicle type that is purchased and the applicant’s income level. The EFMP, Plus-Up, and CVRP rebates can be “stacked” for a maximum of $14,000 in total incentives. The ARB is currently working with local air districts to expand EFMP Plus-Up to disadvantaged communities in Sacramento, San Diego, and the San Francisco Bay Area.

Proposed Law:

AB 1184 would establish the CEVI, to be administered by ARB, in coordination with CEC and CPUC, and require ARB to do the following:

• Authorize changes to the CVRP from September 1, 2018 until December 31, 2030 to establish the initiative and provide market incentives to achieve the statewide deployment of 1.5 million Electric Vehicles (EVs) by 2025.
• Establish a portfolio of funding resources for CEVI, excluding funds recovered from electric utility ratepayers, in order to deliver continuous funding of point-of-sale rebates and other incentives that decline in value as the 1.5 million EV target is met.
• Promote electrical transmission and distribution grid benefits to electric customers, as specified.
• Promote a self-sustaining market for EVs as a viable mainstream option to increase access for low- and moderate-income communities and consumers, and to provide specified benefits for those communities and consumers.

The bill requires ARB, in consultation with the CEC and CPUC, and by September 1, 2018, to do the following:

• Develop a plan for continuous funding of the CEVI from a portfolio of up to $3 billion in existing funding sources, excluding funds recovered from electric utility ratepayers.
• Establish a declining rebate plan that includes an initial rebate amount to EV purchasers in an amount that establishes, as a benchmark for all vehicle classes, a net purchase price for a compact electric vehicle, after incentives and tax credits, that approximates the cost of the most frequently sold compact car in the state, and gradually declines over time to zero as the 1.5 million EV target is accomplished, as specified.
• Require the funding plan to establish a rebate segment for each rebate step to further increase access and direct benefits from EVs for to low- and moderate-income consumers, as specified.
• Require financing mechanisms to include a loan or loan-loss reserve credit enhancement program and prequalification or point-of-sale rebates, as specified.
• Establish a lower rebate level for plug-in hybrid EVs until December 31, 2023 that reflects the battery storage capacity in each eligible vehicle compared to the battery capacity of the most commonly sold EV that has a range of at least 200 miles.
• Establish rebate eligibility, dollar level, and dollar volume by rebate step and vehicle type, and require the CEVI administrator to track rebate disbursements by income and vehicle segments.
• Direct the CEVI administrator, as authorized, to share rebate applicant and recipient contact information with applicable electrical corporation or utility that encourages the efficient use of EVs as resources for the electrical grid.

The bill also requires ARB, as part of the CVRP, and by February 1, 2018, to initiate a review to adopt revisions to all other vehicle electrification programs to ensure they consider benefits for disadvantaged and low-income persons for all eligible vehicle types. ARB would be required to annually develop and approve a low-carbon transportation funding plan.

The bill states legislative intent to supplement ARB’s current funding levels, upon appropriation, to support low-carbon transportation projects, including the following:

• Car sharing programs in disadvantaged communities that utilize EVs.
• Additional incentives for existing EV programs, including EFMP and those that provide incentives for access to used EVs, as specified.
• Light-duty equity projects; incentives for low- and zero-emission heavy-duty vehicles, schoolbuses, transit buses, and offroad equipment; and sustainable freight projects
  

The bill also requires any programs implemented pursuant to the bill to provide outreach to disadvantaged communities, low- and moderate-income communities and consumers, and to partner with community based organizations. ARB would be authorized to provide advance payment from AQIP and GGRF moneys to implement programs if it finds that doing so will improve air quality, as specified.

Staff Comments:

This bill requires ARB to develop a plan for continuous funding of the CEVI from a portfolio of up to $3 billion in existing funding sources, and specifies legislative intent to provide additional supplemental funding for low-carbon transportation projects. This represents a substantial increase in the amount of funding currently available for expenditure on EV incentives and other clean vehicle programs. As such, this bill will likely not only redirect funding from other clean vehicle incentive programs for an expanded and modified CVRP rebate program, but could also redirect GGRF expenditures from other programs that may have a higher GHG emission reduction potential. Rather than creating a new incentive program and redirecting resources from other programs, the Committee may wish to consider whether it would be more beneficial to direct additional resources, as they become available, to existing programs to meet the 1.5 million EV target.

-- END --

SENATE COMMITTEE ON ENVIRONMENTAL QUALITY

Senator Wieckowski, Chair

2017 - 2018 Regular

Bill No: AB 1184

SUBJECT: Electric vehicles.

ANALYSIS:

Existing federal law:

1. The Federal Clean Air Act (FCAA) and its implementing regulations set National Ambient Air Quality Standards (NAAQS) for six criteria pollutants, designate air basins that do not achieve NAAQS as nonattainment, allow only California to set vehicular emissions standards stricter than the federal government, and allow other states to adopt either the federal or California vehicular emissions standards. (42 U.S.C. §7401 et seq.)
   

Existing state law:

1. Establishes the Air Resources Board (ARB) as the air pollution control agency in California and requires the ARB, among other things, to control emissions from a wide array of mobile sources and implement the FCAA. (Health and Safety Code (HSC) §39500 et seq.)
   
2. Establishes Sections 1962.1, 1962.2, and 1962.3 of Title 13 of the California Code of Regulations (Zero-Emission Vehicle (ZEV) Mandate) that requires large volume and intermediate volume vehicle manufacturers that sell cars in California to produce ZEVs, as specified.
   
3. Requires, under the California Global Warming Solutions Act of 2006 (also known as AB 32), the Air Resources Board (ARB) to determine the 1990 statewide greenhouse gas (GHG) emissions level and approve a statewide GHG emissions limit that is equivalent to that level to be achieved by 2020. (Health and Safety Code (HSC) §38500 et seq.)
   
4. Allows the ARB until December 31, 2020, under certain circumstances, to adopt regulations that utilize market-based compliance mechanisms. (HSC §38562)
   
5. Requires ARB to ensure that statewide GHG emissions are reduced to at least 40% below the 1990 level by December 31, 2030. (HSC §38566)
   
6. Establishes the Greenhouse Gas Reduction Fund (GGRF) in the State Treasury, requires all moneys, except for fines and penalties, collected pursuant to a market-based mechanism be deposited in the fund. (Government Code §16428.8)
   
7. Establishes the Air Quality Improvement Program (AQIP), administered by ARB in consultation with local air districts, to fund programs that reduce criteria air pollutants, improve air quality, and provide research for alternative fuels and vehicles, vessels, and equipment technologies. (HSC §44274 et seq.)
   
   1. Establishes the Clean Vehicle Rebate Project (CVRP) under the AQIP.
      
8. Establishes the Motor Vehicle Inspection Program, commonly known as the smog check program, to, among other things, help the state meet federal air quality standards and requires administrative fines to be deposited into the High Polluter Repair or Removal Account within the Vehicle Inspection and Repair Fund. (HSC §44000 et seq.)
   
9. Establishes the Automotive Repair Act to, among other things, protect the public in regards to automobile repair and requires the Department of Consumer Affairs to deposit fees collected under the Act into the Vehicle Inspection and Repair Fund. (Business and Professions Code §9880 et seq.)
   
10. Establishes, as a part of the Charge Ahead Initiative, the Enhanced Fleet Modernization Program (EFMP)—funded with moneys from the Enhanced Fleet Modernization Subaccount within the High Polluter Repair or Removal Account within the Vehicle Inspection and Repair Fund—to incentivize the voluntary retirement of passenger vehicles and light- and medium-duty trucks. (HSC §44125 et seq.).
    
11. Establishes Sections 1962.1, 1962.2, and 1962.3 of Title 13 of the California Code of Regulations (Zero-Emission Vehicle (ZEV) Mandate) that requires large volume and intermediate volume vehicle manufacturers that sell cars in California to produce ZEVs, as specified.
    
12. Requires, under Governor Brown’s Executive Order B-16-2012, that the state ensure 1.5 million ZEVs are on the road by 2025.
    

This bill:

1. Makes findings and declarations.
   
2. Defines:
   
   1. “Battery” means an electrochemical energy storage system powered directly by electrical current.
      
   2. “Initiative” means the California Electric Vehicle Initiative established by the bill.
      
   3. “Electric vehicle charging station” means one or more publicly available parking spaces served by electric vehicle service equipment.
      
   4. “Electric vehicle” means a vehicle that uses a plug-in battery to provide all the motive power of the vehicle.
      
   5. “Plug-in hybrid electric vehicle” means a vehicle that uses a plug-in battery to provide at least 25 miles of driving range.
      
   6. “Smart charging” means the potential to charge flexibly to respond to the electrical transmission and distribution grid’s market conditions, particularly for integrating wind and solar generation.
      
3. Establishes the California Electric Vehicle Initiative (CEVI) to be administered by ARB in coordination with the California Energy Commission (CEC) and the California Public Utilities Commission (CPUC), to do all of the following:
   
   1. Authorize on or before September 1, 2018 until December 31, 2025, changes to CVRP in order to ensure 1.5 million Electric Vehicles (EVs) are deployed in California by 2025.
      
   2. Establish a portfolio of funding resources in order to deliver point-of-sale rebates for various types of EVs that decline in value as the 1.5 million EV target is met.
      
   3. Promote widely available, but unexploited, electrical transmissions and distribution grid benefits to electric customers, as specified.
      
   4. Promote a self-sustaining market for EVs, as specified, that provides benefits to consumers and communities, as specified.
      
4. Requires the ARB, in consultation with the CEC and CPUC, to establish up to a $3 billion funding portfolio and funding plan to implement CEVI by September 1, 2018 from existing funding sources.
   
5. Requires the initial rebate amount for an EV to be equal to the net purchase price of a compact car, and that the rebate declines over time to zero as the 1.5 million EV target is accomplished, as specified.
   
6. Requires the funding plan to, among other things, take into account access and direct benefits from EVs to low- and moderate-income consumers, as specified.
   
7. Requires the rebate for plug-in hybrid EVs to be lower than fully electric EVs and based on the storage capacity of their batteries, as specified, including the establishment of a loan or loan-loss reserve program.
   
8. Requires, among other things, rebate eligibility to be publicly tracked by CEVI’s contracted administrator based on income and vehicle segments.
   
9. Requires CEVI’s contracted administrator to share rebate applicant and recipient information with their electricity provider to encourage efficient use of EVs as a resource for electrical transmission and distribution.
   
10. Requires, by February 1, 2018, as a part of the Clean Vehicle Rebate Program [sic] to review and revise all vehicle electrification programs to benefit disadvantaged- and low-income individuals.
    
11. Requires ARB to develop a low-carbon transportation funding plan.
    
12. Continuously appropriates $500 million from GGRF to:
    
    1. Car sharing programs in disadvantaged communities that utilize EVs.
       
    2. Increase the budget for existing EV programs, as specified.
       
    3. Light-duty equity projects; incentives for low- and zero-emission heavy-duty vehicles, schoolbuses, transit buses, and offroad equipment; and sustainable freight projects.
       
13. Requires any programs implemented pursuant to the bill to provide outreach to disadvantaged communities, low- and moderate-income communities and consumers, and to partner with community based organizations.
    
14. Allows the ARB to provide advance payment from AQIP and GGRF moneys to implement programs if it finds that doing so will improve air quality.
    

Background

1. Health Impacts of Air Pollution. When not adequately controlled, air pollution has dire consequences on the health and safety of both people and the environment. Poor air quality causes the lungs to constrict, resulting in wheezing, shortness of breath and chest tightness, especially during exercise or physical activity.
   
   It is well known that air pollution causes asthma. According to the Centers for Disease Control and Prevention, nationwide 7.4% of adults and 8.6% of children have been diagnosed with asthma. In California, the numbers are significantly higher: 13.1% of adults and 12.5% of children have been diagnosed with asthma. Lower income and minority groups are disproportionately affected by asthma due to their increased exposure to air pollution.
   
   Depending on exposure, air pollution alone can cause an increased risk of cardiovascular and respiratory illness, lung disease, cancerous tumors, birth defects, premature births, developmental disorders, central nervous system damage, intellectual disability, persistent memory impairments, epilepsy, dementia, and premature death.
   
2. Air Quality Standards. The Federal Clean Air Act (FCAA) passed in 1963 and has been revised many times thereafter. The FCAA and its implementing regulations are intended to protect public health and environmental quality by limiting and reducing pollution from various sources. Under the FCAA, the United States Environmental Protection Agency (US EPA) establishes National Ambient Air Quality Standards (NAAQS) that apply to outdoor air throughout the country.
   
   In 1969 and 1971, ARB set the first air quality standards for ozone, Particulate Matter (PM), oxides of nitrogen (NOx), oxides of sulfur (SOx), and carbon monoxide due to their negative impacts on public health above specified concentrations.
   
   The federal government followed suit and set NAAQS for six “criteria pollutants.” These included ground-level ozone, PM, NOx, SOx, and carbon monoxide, and added lead. Now, the US EPA reviews each NAAQS at five-year intervals to ensure that the standards are based on the most recent scientific information.
   
   Regions that do not meet the national standards for any one of the standards are designated “nonattainment areas.” The FCAA sets deadlines for attainment based on the severity of nonattainment and requires states to develop comprehensive plans, known as the state implementation plan (SIP), to attain and maintain air-quality standards for each area designated nonattainment for an NAAQS.
   
3. Vehicles and Air Pollution. Vehicles are one of the primary sources of air pollution nationally. As such, the FCAA authorizes US EPA to establish and regulate emissions standards for mobile sources.
   
   California, due to its preexisting vehicle-emission standards and severe motor vehicle air pollution problems, is authorized under the FCAA to implement separate mobile emission standards from the federal government. Other states may choose to follow either the national standard or the stricter California standards.
   
   State law assigns the ARB with primary responsibility for control of mobile-source air pollution, including adoption of rules for reducing vehicle emissions, the specification of vehicular fuel composition, emissions control devices, and engine standards.
   
4. Enhanced Fleet Modernization Program (EFMP) and EMFP Plus-Up. EFMP is an incentive program funded through a $1 surcharge on vehicle registration, totaling approximately $30 million annually. EFMP is designed to encourage low-income drivers to retire their older, high emitting vehicles and replace them with newer, cleaner, more fuel efficient vehicles. EFMP was established by AB 118 (Núñez, Chapter 750, Statutes of 2007) and comprises two components: retirement-only and retirement and replacement. These are sometimes referred to as the EFMP base program. Under the retirement only component, eligible applicants can receive $1,000 to $1,500, depending on income, for retiring an eligible vehicle through the EFMP portion of the car scrap program administered by the Bureau of Automotive Repair’s Consumer Assistance Program. This element of the program is offered statewide.
   
   The second component of the EFMP base program, the retire and replacement component, is offered only in the South Coast and San Joaquin Valley air districts, and only to low-income drivers (income less than 400% of the Federal Poverty Line) of eligible vehicles. EFMP retirement and replacement provides up to $4,500 to low-income drivers who purchase a vehicle eight years old or newer. The exact incentive amount varies, depending on household income, and can be used toward the purchase of a new or used clean replacement vehicle or an alternate mode of transportation, such as a transit pass. Each implementing local air district tailors and markets the EFMP retirement and replacement program uniquely. In the South Coast, the program is called Replace Your Ride, and in the San Joaquin Valley, the program is called Valley Clean Air Now.
   
   The Plus-Up pilot project is a complementary incentive program funded with GGRF moneys and augments the EFMP base program by adding up to an additional $5,000 in incentives for the subset of participants living in or near a disadvantaged community census tract and who choose an advanced technology replacement vehicle (e.g. hybrid, plug-in hybrid, and battery electric vehicles), but may not be used for a mobility option like a transit pass. The highest incentive amount is available to the lowest income drivers choosing the cleanest replacement vehicles. For example, a low-income participant who lives in or near a disadvantaged community can receive up to $9,500 toward to the purchase of a plug-in hybrid vehicle: $4,500 from the EFMP base program and $5,000 from Plus-Up pilot project. The actual amount of the additional Plus Up incentive depends on income and choice of replacement vehicle. The following table illustrates how incentives from the EFMP base program and Plus-Up pilot project can be combined or “stacked.” Note that these programs apply for both new and used vehicles up to eight years old. To note, this table does not include additional incentives available under the Clean Vehicle Rebate Project (CVRP, see background #5).
   

EFMP and Plus-Up: Stacking of Incentives

ARB is currently working with local air districts to expand EFMP Plus-Up to disadvantaged communities in Sacramento, San Diego, and the bay area.

1. Clean Vehicle Rebate Project (CVRP). The CVRP is funded by ARB and administered by the Center for Sustainable Energy, in order to promote the production and use of zero-emission vehicles, including electric, plug-in hybrid electric and fuel-cell vehicles. CVRP enables the purchaser or lessee of an eligible vehicle to receive a rebate. A consumer can apply for a rebate within 18 months of purchasing or leasing an eligible vehicle. The consumer must retain ownership of the vehicle in California for at least 30 consecutive months after the purchase or lease date or reimburse ARB for part of or the entire rebate amount. Rebates are distributed on a first-come, first-served basis and issued within 90 days of application approval.
   
   CVRP provides a rebate of up to $5,000 for purchasing or leasing a new zero-emission vehicle or plug-in hybrid electric vehicle. Specifically, a consumer may obtain a $5,000 rebate for a hydrogen fuel-cell vehicle; a $2,500 rebate for a zero-emission, battery electric vehicle; a $1,500 voucher for a plug-in hybrid electric vehicle; or, a $900 rebate for a neighborhood electric vehicle or a zero-emission motorcycle. There is no cap on the number of rebates that may be issued, but rebates are subject to funding availability and the program has more than once been forced to stop issuing rebates and create a waiting list due to funds running out.
   
   CVRP was initially designed to achieve 1.5 million ZEVs on the road by 2025 as directed under Governor Brown’s Executive Order B-16-2012.
   
2. Zero-Emission Vehicle (ZEV) Regulation. The Zero-Emission Vehicle (ZEV) Regulation requires large volume and intermediate volume vehicle manufacturers that sell cars in California to produce ZEVs (such as battery electric and fuel-cell vehicles), clean plug-in hybrids, clean hybrids and clean gasoline vehicles with near-zero tail pipe emissions. In general, the ZEV regulation requires that 15% of new car sales be ZEVs by 2025. This target is intended to achieve 1.5 million ZEVs on the road by 2025 as directed under Governor Brown’s Executive Order B-16-2012.
   
   Under the FCAA, other states may choose to adopt California’s air quality standards. Currently, 10 states (including California) follow California’s rules, which include the ZEV regulation.
   
3. California’s 2016 ZEV Action Plan Update. According to the 2016 update to California’s ZEV Action Plan, California is one of the world’s largest markets for light-duty ZEVs, with Plug-In Electric Vehicle (PEV) ownership in the state exceeding 230,000 vehicles. As of last year, Californians drive 47% of all ZEVs on the road in the United States; the United States as a whole accounts for approximately one-third of the world ZEV market. Battery Electric Vehicles (BEV) and Plug-in Hybrid Electric Vehicles (PHEV) comprise the majority of ZEVs on California’s roads today.
   
   The metropolitan regions of Los Angeles, San Diego and the San Francisco Bay Area lead the state in PEV sales. ZEV adoption has been greatest in Los Angeles County and Santa Clara County, followed by Alameda, Orange, and San Diego Counties. Statewide, nearly 60% of issued rebates have been for BEVs, while 40% have been for PHEVs.
   
4. Use of Cap-and-Trade Auction Revenue. Since November 2012, ARB has conducted eight California-only and 11 joint California-Québec cap-and-trade auctions. To date, $3.4 billion has been appropriated by the Legislature to 12 state agencies that have distributed $1.2 billion to projects that have been completed or are under way.
   

State law specifies that the auction revenues must be used to facilitate the achievement of measurable GHG emissions reductions and outlines various categories of allowable expenditures. Statute further requires the Department of Finance, in consultation with ARB and any other relevant state agency, to develop a three-year investment plan for the auction proceeds, which are deposited in the GGRF. ARB is required to develop guidance for administering agencies on reporting and quantifying methodologies for programs and projects funded through the GGRF to ensure the investments further the regulatory purposes of AB 32.

Proceeds from cap-and-trade auctions provide an opportunity for the state to invest in projects that help California achieve its climate goals and provide benefits to disadvantaged communities. Several bills in 2012, one in 2014, and one in 2016 provide legislative direction for the expenditure of auction proceeds including SB 535 (de León, Chapter 830, Statutes of 2012), AB 1532 (J. Pérez, Chapter 807, Statutes of 2012), SB 1018 (Committee on Budget and Fiscal Review, Chapter 39, Statutes of 2012), SB 862 (Committee on Budget and Fiscal Review, Chapter 36, Statutes of 2014), and AB 1550 (Gomez, Chapter 369, Statutes of 2016).

SB 535 (de León, Chapter 830, Statutes of 2012) requires that 25% of auction revenue be used to benefit disadvantaged communities and requires that 10% of auction revenue be invested in disadvantaged communities.

AB 1532 (J. Pérez, Chapter 807, Statutes of 2012) directs the Department of Finance to develop and periodically update a three-year investment plan that identifies feasible and cost-effective GHG emission reduction investments to be funded with cap-and-trade auction revenues and specifies that reduction of GHG emissions through strategic planning and development of sustainable infrastructure projects, are eligible investments of GGRF.

SB 1018 (Committee on Budget and Fiscal Review, Chapter 39, Statutes of 2012) created the GGRF, into which all auction revenue is to be deposited. The legislation requires that before departments can spend moneys from the GGRF, they must prepare a record specifying: (1) how the expenditures will be used, (2) how the expenditures will further the purposes of AB 32 (Núñez and Pavley, Chapter 488, Statutes of 2006), (3) how the expenditures will achieve GHG emission reductions, (4) how the department considered other non-GHG-related objectives, and (5) how the department will document the results of the expenditures.

SB 862 (Committee on Budget and Fiscal Review, Chapter 36, Statutes of 2014) established a long-term cap-and-trade expenditure plan by continuously appropriating portions of the funds for designated programs or purposes. The legislation appropriates 25% for the state’s high-speed rail project, 20% for affordable housing and sustainable communities grants, 10% to the Transit and Intercity Rail Capital Program, and 5% for low-carbon transit operations. The remaining 40% is available for annual appropriation by the Legislature.

AB 1550 (Gomez, Chapter 369, Statutes of 2016) requires a minimum of 25% of GGRF moneys be spent on projects located within and benefiting disadvantaged communities and an additional minimum of 10% of GGRF moneys be spent on projects that benefit low-income households or are within, and benefit low-income communities.

These statutes also require a state agency, prior to expending any money appropriated to it by the Legislature from the fund, to prepare a description of 1) proposed expenditures, 2) how they will further the regulatory purposes of AB 32, 3) how they will achieve specified greenhouse gas emission reductions, 4) how the agency considered other objectives of that act, and 5) how the agency will document expenditure results.

1. Fees versus Taxes: Legal Consideration of Cap-and-Trade Auction Revenues. Regulatory fees established prior to 2010 (due to Proposition 26) are subject to the Sinclair Paint test, which helps determine whether a levy is a fee or a tax.
   
   Sinclair Paint Co. v. State Board of Equalization, 15 Cal. 4th 866 (1997) considered the legitimacy of a fee levied to support the implementation of the Childhood Lead Poisoning Prevention Act, which provided evaluation, screening, and medical follow-up services to children at risk of lead poisoning. The program was entirely supported by fees imposed on former and current manufacturers of lead or products containing lead, based on the manufacturers “market share” responsibility for the contamination. The California Supreme Court in Sinclair Paint found that a levy is a legitimate fee as long as the revenue of the levy does not exceed the costs of the regulatory activity and the levy is not imposed for an unrelated revenue purpose, and the levy allocated to the payer bears a fair or reasonable relationship to the payer’s burdens on or benefits from the regulatory activity. The Sinclair Paint test is a two-part test: 1) nexus and 2) proportionality.
   
   Nexus. The Sinclair Paint nexus test, which is derived from the case above, requires that a clear nexus must exist between an activity for which a fee is used and the adverse effects related to the activity on which that fee is levied. In order to use a fee imposed to pay for remediation of the harm created by the release of GHGs, it appears that the funds should be used only to decrease the emissions or the harms directly caused by those activities that releases GHGs.
   
   Proportionality. The Sinclair Paint test also has a proportionality component, which requires those burdened with the fee proportionally benefit from the fee – if assessing a fee to reduce GHG emissions on industry, then 100% of those funds are from industry. However, not all of the revenue from the fee is used to fund industrial projects. Some of those funds are used to pay for reducing emissions from other sources, such as wetlands restoration and stationary agriculture equipment, which are not assessed the fee.
   
   The 2012-13 Budget analysis of cap-and-trade auction revenue by the Legislative Analyst’s Office (LAO) noted that, based on an opinion from the Office of Legislative Counsel, the auction revenues should be considered “mitigation” fee revenues, subject to the Sinclair Paint test. The LAO concluded, based on the opinion, that in order for their use to be valid as mitigation fees, revenues from the cap-and-trade auction must be used to mitigate GHG emissions or the harms caused by GHG emissions.
   
   In 2012, the California Chamber of Commerce filed a lawsuit against the ARB claiming that cap-and-trade auction revenues constitute illegal tax revenue. In November 2013, the superior court ruling declined to hold the auction a tax, concluding that it is more akin to a regulatory fee. In February of 2014, the plaintiffs filed an appeal with the 3rd District Court of Appeal in Sacramento. Arguments were heard before the Appellate Court in January of 2017.
   

On April 6, 2017, the appellate court issued a ruling that again declined to hold that the cap-and-trade auctions are a tax.

1. Third Appellate Court District Ruling. The appellate court ruled that ARB did not exceed its authority in creating the cap-and-trade program, stating that “the Legislature gave broad discretion to the Board to design a distribution system, and a system including the auction of some allowances did not exceed the scope of legislative delegation. Further, the Legislature later ratified the auction system by specifying how to use the proceeds derived therefrom.”
   
   The appellate court also stated clearly “that the auction sales do not equate to a tax” explaining that “the hallmarks of a tax are: 1) that it is compulsory; and 2) that the payor receives nothing of particular value for payment of the tax, that is, the payor receives nothing of specific value for the tax itself. Contrary to plaintiffs’ view, the purchase of allowances is a voluntary decision driven by business judgments as to whether it is more beneficial to the company to make the purchase than to reduce emissions …these twin aspects of the auction system, voluntary participation and purchase of a specific thing of value, preclude a finding that the auction system has the hallmarks of a tax.”
   
   Going further than the superior court, the appellate court also found that “the purchase of emissions allowances, whether directly from the Board at auction or on the secondary market, is a business driven decision, not a governmentally compelled decision [and] unlike any other tax … the purchase of an emissions allowance conveys a valuable property interest—the privilege to pollute California’s air—that may be freely sold or traded on the secondary market.”
   
   As a result, the appellate court found that “the Sinclair Paint test is not applicable [to the cap-and-trade program], because the auction system is unlike other governmental charges that may raise the “tax or fee” question resolved thereby. The system is the voluntary purchase of a valuable commodity and not a tax under any test.”
   
2. Budget Allocations. SB 862 (Committee on Budget and Fiscal Review, Chapter 36, Statutes of 2014) established a long-term cap-and-trade expenditure plan by continuously appropriating portions of the funds for designated programs or purposes. The legislation appropriates 25% for the state’s high-speed rail project, 20% for affordable housing and sustainable communities grants, 10% to the Transit and Intercity Rail Capital Program, and 5% for low-carbon transit operations. The remaining 40% is available for annual appropriation by the Legislature.
   
   The Governor’s 2017-18 proposed budget proposes the following $2.2 billion expenditure plan: (1) $900 million continuously appropriated for state transit assistance ($75 million), transit and intercity rail ($150 million), the Sustainable Communities Strategy ($300 million), and the state’s high-speed rail project ($375 million), and; (2) $1.3 billion in discretionary funding for a variety of projects. This includes $500 million for public transit and active transportation projects and $363 million for clean transportation and petroleum use reduction, as well as $392 million for a variety of other greenhouse gas reducing programs.
   
   The Governor’s 2017-18 proposed budget makes the aforementioned funding for discretionary spending contingent on the Legislature reauthorizing ARB to utilize a market-based compliance mechanism to reduce GHG emissions (specifically, referencing a cap-and-trade program) beyond 2020 with a two-thirds vote. The budget approved by the legislature on June 15, 2017 did not include any discretionary GGRF expenditures since the Legislature did not reauthorizing ARB to utilize a market-based compliance mechanism to reduce GHG emissions.

Comments

1. Purpose of Bill. According to the author, “transportation accounts for 37% of California’s GHG emissions, the single largest sector in the state. While California has set ambitious goals to reduce GHG emissions and incentivize Electric Vehicles (EV) purchases, the state must do more to accelerate its path towards transportation electrification. If the state is to achieve the Governor’s goals of putting 1.5 million EVs on the streets by 2025, greater incentives to all drivers, including low-income populations, must be achieved.
   
   “Currently, the state issues rebates to consumers for new EV purchases ranging anywhere from $1,500 - $5,000. In spite of these rebates, an EV purchase for most is not an affordable or attractive option for drivers, especially for those car buyers who are concerned about not having access to convenient charging. For low-income households, having the ability to purchase a new vehicle, let alone a more expensive EV, is simply not an option. Fleets of affordable and refurbished EVs could be a better option for many households.
   
   “Over a decade ago, California transformed the solar market when it enacted the California Solar Initiative. This bill creates the California Electric Vehicle Initiative (CEVI), modeled after the CSI, in order to transform the EV market. This program would build off the success of existing programs, such as the Clean Vehicle Rebate Program, administered by the Air Resources Board and ensure that the rebate program is sustainable and continually funded so that more Californians have the opportunity to benefit and invest in EVs.”
   
2. Continuous appropriation. AB 1184 would make a continuous appropriation of $500 million dollars from GGRF to support, among other things, car sharing programs in disadvantaged communities that utilize EVs and light-duty equity projects. As noted in the background, all GGRF moneys must be spent to reduce GHG emissions. It is not clear that all of the GGRF expenditures proposed AB 1184 meet that requirement, which would be an unlawful use of GGRF moneys.
   
   Moreover, all of the continuous appropriations of GGRF are located in Health and Safety Code §39719, making the statutory placement of this continuous appropriation inappropriate. Additionally, because the revenue generated by the cap-and-trade program is not guaranteed, those continuous appropriations in HSC §39719 are made as a percentage and total 60% of the revenue generated (the remaining 40% is available for annual appropriation by the Legislature). Allocating a specific amount, as AB 1184 would do, is problematic, which can best be illustrated by the following simple thought experiment:
   
   In 2016, the cap-and-trade auctions generated approximately $850 million in revenue. The current continuous appropriations would allocate approximately $510 million to the state’s high-speed rail project, affordable housing and sustainable communities grants, the Transit and Intercity Rail Capital Program, and low-carbon transit operations. This would leave approximately $340 million left in GGRF funds. Were AB 1184 law and CEVI required $500 million to go to the programs it specifies, what would happen? Would CEVI receive less than statute required? Would another continuous appropriation receive less than is required by statute?
   
3. Unsupported claims. Several of the findings and declarations made in AB 1184 cannot be substantiated:
   
   1. Low-income communities and climate change. AB 1184 claims that low-income communities are affected first, most frequently, and disproportionately by the adverse impacts of climate change. According to the ARB:
      
      “Climate change itself is already affecting the health of our communities and is exacerbating existing health inequities. Those facing the greatest health burdens include low-income individuals and households, the very young and the very old, communities of color, and those who have been marginalized or discriminated against based on gender or race/ethnicity. Economic factors, such as income, poverty, and wealth, are among the strongest determinants of health. Addressing climate change presents a significant opportunity to improve public health for all of California’s residents and to further our work toward making our State the healthiest in the nation.”
      
      It may seem like mincing words, but saying low-income individuals and households face “the greatest health burdens” from climate change is not equivalent to saying the same people are impacted “first, and most frequently” by climate change. The same frequency, severity, and timing of climate change impacts may burden low-income individuals and households more because they do not have the financial resources to respond adequately.
      
   2. Curtailment. AB 1184 claims that CEVI will reduce the curtailment and improve integration of renewable energy sources. That is possible; one can imagine that if people only charge their EVs when solar energy is being generated that would be the case. It is more likely, however, that people will immediately plug their EVs in when they get home from work and start charging during peak demand. This will not reduce curtailment and improve renewable energy integration. Rather, it will increase the use of peak power, the dirtiest energy produced.
      
   3. Reducing rates. AB 1184 claims that EVs provide more demand for electricity, which will reduce rates for all customers. It is unclear how increased demand will lower prices.
      
   4. Cost parity. AB 1184 claims that EVs will reach cost parity with conventional alternatives by the mid-2020s. This is a hope of the industry and EV advocates, but it is not certain.
      
4. Duplication of efforts. Overall, AB 1184 seems to want to address Governor Brown’s Executive Order B-16-2012, which envisions 1.5 million ZEVs on the road by 2025, and the interim target set by SB 1275 (de León, Chapter 530, Statutes of 2014) of at least one million ZEVs and near-ZEVs on the road by 2023. CVRP was designed to achieve 1.5 million ZEVs on the road by 2025, so it is unclear what a brand new, entirely duplicative initiative would add. Rather, increasing the budget for CVRP would be a simpler, more cost-effective way to support the Governor’s Executive Order and SB 1275.
   
   Additionally, AB 1184 misses the mark in supporting the goals of Governor Brown’s Executive Order and SB 1275. These two goals are technology neutral, speaking only of ZEVs and near-ZEVs. AB 1184, on the other hand, specifically targets only EVs, to the exclusion of other ZEV options.
   
   Also of note in AB 1184 is the requirement that ARB update the Clean Vehicle Rebate Program (which doesn’t exist, it’s called the Clean Vehicle Rebate Project) in order to accomplish the goal of getting 1.5 million EVs on the road by 2025. Once again, CVRP was designed to meet the Governor’s Executive Order, so the only change AB 1184 seems to make is the elimination of rebates for certain ZEVs that currently qualify for a rebate.
   
   ARB also has two other incentive programs aimed at low-income individuals to help get them into cleaner cars: EFMP and EFMP Plus-Up. AB 1184 falsely identifies EFMP as an EV program (it is a ZEV and near-ZEV program) and creates a brand new program that duplicates the efforts of EFMP and EFMP Plus-Up, while simultaneously pushing more funding to these programs. Surely a better approach would be to increase funding for these programs rather than create an unnecessary and duplicative program.
   
   One sentence in AB 1184 requires the establishment of a loan or loan-loss reserve program for low- and moderate-income consumers to purchase EVs. AB 964 (Calderon), which is set for hearing on July 5, 2017 in the Senate Environmental Quality Committee, would create a new program to help low-income and high financial risk individuals buy low-emission vehicles using qualified loans. The recent amendments to AB 1184 seem to incorporate, without detail, the goals of AB 964.
   
   Another provision in AB 1184 requires ARB review its vehicle electrification programs. No such programs exist because all of the programs AB 1184 presumably means for ARB to review are technology neutral, targeting all ZEVs. SB 498 (Skinner) was heard in the Senate Environmental Quality Committee on April 19, 2017. That measure, among other things, directs ARB to do a comprehensive review of its ZEV programs and report to the Legislature any statutory and policy changes necessary to improve air quality and ZEV adoption. The recent amendments to AB 1184 seem to incorporate, without detail, the goals of SB 498.
   
5. Unanswered questions. Several questions are raised by AB 1184 and the bill does not provide answers. First, why does the bill define “electric vehicle charging station” and then never use the term in the bill?
   
   AB 1184 requires the establishment of a “portfolio of funding resources” and separately requires a funding plan to be developed from a “portfolio of existing funding sources,” with the latter not to exceed three billion dollars. What is a portfolio of funding sources/resources? Where is this money coming from? What programs are so flush with money that up to three billion could be repurposed without consequence? Alternately, what programs should be cut in order to fund up to three billion in EV rebates?
   
   AB 1184 twice makes reference to a “contracted administrator” for CEVI. Who is this contracted administrator? Why should the administration of such a large initiative not solely be the responsibility of the state?
   
   In one mention of the contracted administrator, the person is required to share rebate applicant and recipient contact information with their electricity provider for the purpose of encouraging the efficient use of EVs as a resource for the electrical transmission and distribution gird. A concern about privacy arises from this requirement. Additionally concerning are the consequences for a vehicle warranty relating to misusing an EV battery as a grid storage device, or transmission and distribution infrastructure.
   
   Given all of the problems and questions arising from AB 1184 and the fact that this is the first year of a two-year session, the committee may wish to hold the bill and give the author time to address concerns with the bill.
   
6. Committee process. At the time of the publication of this analysis, the Senate Energy, Utilities and Communications Committee was set to hear this bill on July 3, 2017. Due to the one-legislative-day turnaround for a July 5, 2017 hearing in the Senate Environmental Quality Committee, this analysis does not reflect any changes that the Senate Energy, Utilities and Communications Committee may have made to the bill.
   

Related/Prior Legislation

SB 498 (Skinner) requires ARB to study its programs relating to light-duty ZEVs and report to the Legislature on its findings. SB 498 is pending hearing in the Assembly Transportation Committee.

SB 79 (Allen) would have exempted from the state share of the sales and use tax purchases of used low- or zero-emission vehicles when the purchaser trades in an older vehicle. SB 79 was held on suspense in the Senate Appropriations Committee.

AB 33 (Quirk) would require the Public Utilities Commission by March 30, 2018, to authorize investor-owned utilities (IOUs) to offer programs and investments in residential electric vehicle service equipment. AB 33 is pending hearing in the Senate Energy, Utilities and Communications Committee.

AB 188 (Salas) would require ARB to update the EFMP guidelines to allow participants to replace their vehicles with a light-duty truck so long as they are retiring a pickup truck and the replacement truck meets fuel efficiency standard set for minivans. AB 188 is set for hearing on July 5, 2017 in the Senate Environmental Quality Committee.

AB 193 (Cervantes) would create the Clean Reused Vehicle Rebate Project to provide a CRVP-like rebate for qualifying used vehicles. AB 193 is set for hearing on July 5, 2017 in the Senate Environmental Quality Committee.

AB 544 (Bloom) would amend the current high-occupancy vehicle lane sticker program for EVs. AB 544 is pending hearing in the Senate Transportation and Housing Committee.

AB 615 (Cooper) is an urgency measure that would make permanent the current income restrictions in the CVRP program that were imposed by last year’s budget. AB 615 is set for hearing on July 5, 2017 in the Senate Environmental Quality Committee.

AB 630 (Cooper) would codify the EFMP Plus-Up program as the Clean Cars 4 All program. AB 630 is set for hearing on July 5, 2017 in the Senate Environmental Quality Committee.

AB 964 (Calderon) would create a new program to help low-income and high financial risk individuals buy low-emission vehicles using qualified loans. AB 964 is set for hearing on July 5, 2017 in the Senate Environmental Quality Committee.

AB 1081 (Burke) would exempt from state sales tax the value of a vehicle traded in to purchase a cleaner car. AB 1081 was held on Suspense in the Assembly Appropriations Committee.

AB 1082 (Burke) would require IOUs to develop a program for the installation of vehicle charging stations at school facilities for use by faculty, students, and parents with electricity provided at time-of-use rates. AB 1082 is pending hearing in the Senate Energy, Utilities and Communications Committee.

AB 1083 (Burke) would require IOUs to create a charging network at all state parks and beaches by July 31, 2018, with electricity provided at time-of-use rates. AB 1082 is pending hearing in the Senate Energy, Utilities and Communications Committee.

SB 32 (Pavley, Chapter 249, Statutes of 2016) requires ARB to ensure that statewide GHG emissions are reduced to at least 40% below the 1990 level by December 31, 2030.

AB 904 (Perea, 2015) would have created the Clean Reused Vehicle Rebate Project to provide a CRVP-like rebate for qualifying used vehicles. AB 904 was held on Suspense in the Senate Appropriations Committee.

SB 1275 (de León, Chapter 530, Statutes of 2014) established the Charge Ahead California Initiative to place in service at least 1 million zero-emission and near-zero-emission vehicles by January 1, 2023, with a focus on disadvantaged and low-and-moderate-income communities.

AB 118 (Núñez, Chapter 750, Statutes of 2007) established the EFMP, ARFVTP, and the AQIP.

AB 32 (Núñez, Pavley, Chapter 488, Statutes of 2006) establishes the California Global Warming Solutions Act of 2006, which requires ARB to monitor and regulate sources of GHG emissions that cause global warming in order to reduce emissions of GHG, as specified.

DOUBLE REFERRAL:

This measure was heard in the Senate Energy, Utilities and Communications Committee on July 3, 2017. If this measure is approved by the Senate Environmental Quality Committee, the do pass motion must include the action to re-refer the bill to the Senate Rules Committee.

SOURCE:

Advanced Energy Economy

NextGen Climate America, Inc.

SUPPORT:

Advanced Energy Economy

A. Philip Randolph Institute

Asian Neighborhood Design

Brightline Defense

Community Youth Center

Emerald Cities SF Bay Area

Luminalt

Mission Hiring Hall

Renaissance Entrepreneurship Center

OPPOSITION:

Clean Energy

Howard Jarvis Taxpayers Association

-- END --

SENATE COMMITTEE ON ENERGY, UTILITIES AND COMMUNICATIONS

Senator Ben Hueso, Chair

2017 - 2018 Regular

Bill No: AB 1184 Hearing Date: 7/3/2017

SUBJECT: Vehicular air pollution: electric vehicles: incentives

DIGEST: This bill would establish the California Electric Vehicle Initiative, administered by the California Air Resources Board (CARB), to provide incentives to the market to achieve a statewide deployment of 1.5 million electricity vehicles by 2025, including development of a plan for the continuous funding from a portfolio of existing funding sources in an amount not to exceed $3 billion. This bill would require CARB to begin a review to adopt revisions to all other specified vehicle electrification programs and continuously appropriate $500 million annually from the greenhouse gas reduction fund (GGRF), and advance payment for projects funded by CARB.

ANALYSIS:

Existing law:

1. Establishes the California Public Utilities Commission (CPUC) with regulatory authority over public utilities, including electrical corporations and gas corporations. (Public Utilities Code §216)
2. Requires the CPUC, in consultation with the CEC, and CARB, to direct electrical corporations to file applications for programs and investments to accelerate widespread transportation electrification to reduce dependence on petroleum, meet air quality standards, achieve the goals set forth in the Charge Ahead California Initiative, and reduce emissions of greenhouse gas (GHG) to 40 percent below 1990 levels by 2030 and to 80 percent below 1990 levels by 2050. Requires the CPUC to approve, or modify and approve, programs and investments that deploy charging infrastructure, through a reasonable cost recovery mechanism, if they are consistent with purposes of this section, do not unfairly compete with nonutility enterprises, include performance accountability measures, and are in the interests of ratepayers. (Public Utilities Code §740.12)
3. Defines “interests” of ratepayers in Public Utilities Code Sections 740.3 and 740.12 to mean direct benefits that are specific to ratepayers, consistent with both safer and more reliable service or less costly gas or electrical service including due to either improved use of the electric system or improved integration of renewable energy generation and any one five other benefits, as specified. (Public Utilities Code §740.8)
4. Requires the CPUC to establish rates using cost allocation principles that fairly and reasonably assign to different customer classes the costs of providing service to those customer classes, consistent with the policies of affordability and conservation. (Public Utilities Code §739.6)
5. Establishes the Air Quality Improvement Program (AQIP) that is administered by the CARB for the purposes of funding projects related to the reduction of criteria air pollutants and improvement of air quality and establishes the Clean Vehicle Rebate Project (CRVP) to promote the production and use of zero-emission vehicles (ZEVs) by providing rebates for the purchase of new zero-emission vehicles (NZEVs). (Health and Safety Code §44274 et seq.)
6. Designates CARB as the state agency charged with monitoring and regulating sources of emissions of GHG and requires all moneys collected by CARB as part of a market-based compliance mechanism to be deposited in the GGRF and to be available upon appropriation. (Health and Safety Code §§38500 et seq. and 39710 et seq.)

This bill:

1. Makes numerous findings and declarations relative to the state’s goals to reduce GHG emissions and effects of climate change on low-income communities, states it is the goal of the Legislature to support transportation electrification and the widespread deployment of ZEVs and the potential to benefit integration of renewable resources on the electric grid.
2. Establishes the California Electric Vehicle Initiative, administered by CARB, in coordination with the California Energy Commission (CEC) and CPUC, and requires CARB to:
   1. Authorize changes to the CVRP to provide incentives to the market to achieve a statewide deployment of 1.5 million electric vehicles (EVs) by 2025.
   2. Establish a portfolio of funding resources for the initiative to deliver the continuous funding of point-of-sale rebates that decline upon the achievement of market penetration targets by vehicle and income segment.
   3. Promote, in coordination with CEC and CPUC, widely available but unexploited electrical transmission and distribution grid benefits to electric customers, including: smart charging, integration of renewable resources, maximization of grid assets, avoidance of curtailment of eligible renewables portfolio standard resources.
   4. Promote a self-sustaining state market for EVs in which those vehicles are a viable mainstream option of individual vehicle purchasers and to increase access for low- and moderate-income communities and consumers.
3. Requires CARB, by September 1, 2018, in coordination with CEC and CPUC to develop a plan for the continuous funding for the initiative from a portfolio of existing funding sources in an amount not to exceed $3 billion.
4. Establish a declining rebate plan for the initiative that includes an initial rebate to purchasers of a compact EV in an amount that establishes a net purchase price, after incentives and tax credits, that approximates the cost of the most frequently sold compact car in the state and gradually reduces the rebate to zero as the program moves to each subsequent rebate step.
5. Authorizes the income segments to include higher incentives for critical areas of the electrical transmission and distribution grid support, as determined by the CPUC and financing mechanisms. Directs the initiative’s contracted administrator to share each rebate applicant’s and recipient’s contact information with the corresponding electrical utility that encourage the efficient use of EVs as resources for the electrical transmission and distribution grid.
6. Requires no later than February 1, 2018, as part of the CVRP, CARB to begin a review to adopt revisions to all other vehicle electrification programs authorized pursuant to this division to ensure programs consider funding benefits for disadvantaged individuals, low-income individuals, or both for all eligible vehicle types. Requires CARB to annually develop and approve a low-carbon transportation funding plan.
7. Requires $500 million to be continuously appropriated each year from the GGRF to support low-carbon transportation projects.

Background

Zero Emission Vehicles. ZEVs run on electricity stored in batteries instead of fossil fuels. ZEV technologies include hydrogen fuel cell electric vehicles (FCEVs) and plug-in electric vehicles (PEVs), which include both pure battery electric vehicles (BEVs) and plug-in hybrid electric vehicles (PHEVs).

ZEV Adoption. Based on the CEC’s most recent Tracking Progress report on zero-emission vehicle infrastructure, as of April 2016, 331 hydrogen FCEVs were registered with the California Department of Motor Vehicles and the state’s FCEVs population is expected to grow to 13,500 vehicles in 2019 and 43,500 vehicles in 2022. As of July 2016, more than 152,000 PHEV and 250 FCEV owners received rebates through CARB’s CVRP. The availability of new vehicle models; greater driving range provided by FCEVs and improved battery technology; increased availability of electric charging and hydrogen refueling infrastructure; and incentives such as carpool lane access stickers, federal tax credits, and state and air district rebates have all contributed to an expanding ZEV market.

ZEV Climate Goals. With transportation accounting for about 37 percent of California’s GHG emissions, transforming California’s transportation system away from gasoline to ZEVs is a fundamental part of the state’s efforts to reduce GHG emissions and help meet the state’s goals to reduce GHG emissions 40 percent below 1990 levels by 2030. In 2012, Governor Brown issued Executive Order B-16-12 directing state government to help accelerate the market for ZEVs in California. This Executive Order calls for 1.5 million ZEVs in California by 2025 and establishes several milestones on the pathway toward this target. The Administration’s 2013 ZEV Action Plan then identified specific actions state government would take to meet the milestones of the Executive Order. The Legislature has also supported these efforts with passage of the California Charge Ahead Initiative via SB 1275 (De León, Chapter 530, Statutes of 2014) which sets a goal and policies to achieve one million zero and near-zero emission vehicles by 2023.

Existing Incentives. As noted above, the state currently provides incentives to support the widespread adoption of ZEVs, along with those provided by the federal government, as well as, non-monetary incentives, such as carpool lane access. AB 118 (Núñez, Chapter 750, Statutes of 2007), established the Alternative and Renewable Fuels and Vehicle Technology (ARFVT) program, the Enhanced Fleet Modernization Program (EFMP), and the AQIP to promote vehicle and fuel technology to reduce air pollution and GHG emissions. Pursuant to its authority under AQIP, CARB developed CVRP. CVRP, which is administered by CARB’s contractor, the California Center for Sustainable Energy, is intended to encourage and accelerate the purchase and use of ZEVs and NZEVs to help improve air quality and reduce GHG emissions. Since CVRP was launched in 2010, 163,000 rebates have been issued at a cost of $349 million. As the author of this bill notes, the program is oversubscribed with demand outpacing funding nearly every year. When the funding is exhausted, applicants are "waitlisted" and are issued rebates in the order they applied when monies are allocated in the next funding cycle. The Charge Ahead Initiative, administered by CARB operates pursuant to the goal of placing at least one million ZEVs and NZEVs into service on California roadways by January 1, 2023, and increasing accessibility to these vehicles for disadvantaged, low-income, and moderate-income individuals and those living in disadvantaged communities.

Below is a table summarizing some, but not all, of the existing funding programs supporting deployment of zero and near-zero emission vehicles. This bill proposes to authorize CARB, in coordination with CEC and CPUC, to utilize some, if not all, of the funding from these programs to support this initiative (up to $3 billion). While there are many questions as to the implications, consequences and whether there would be improved effectiveness of the outcomes, these questions are better suited to be addressed in other legislative committees, in so far as ratepayer funding is not affected. (More on the need for ratepayer protections below.)

Impacts to the Electric Grid. While the electrification of our transportation system is a policy that the state is actively pursuing, it’s important to acknowledge that the increasing use of plug in EVs will result in greater electricity load and demands of the electric grid. If EVs are charged at peak times, then each one added to a neighborhood is about the equivalent of an additional household worth of load added to that neighborhood. Achieving the governor’s target with an equal number of BEV and PHEV would represent an additional load of 7,000 megawatts on the grid, roughly 16 percent of the summer peak load. Such increases in electric demand could require distribution upgrades, as well as additional stress on distribution equipment, and the construction of additional generation capacity. On the other hand, if EV owners can be induced to charge during off-peak times, then the stress and risk on the distribution system will be much less. The encouraging news for now is most EV owners are charging at night, due to pricing signals, driving patterns and work schedules^[1]. Time variant pricing, where pricing is adjusted, potentially hourly, based on the relative demand to supply of generation as is proposed in this bill may also help. Although it remains to be seen how effective such efforts would be with widespread deployment of EVs during daytimes when most people may not have the vehicle charging on their own property and, therefore, they may have less control to account for the changing price signals.

Vehicle Grid Integration. As EVs begin to proliferate, California regulators are attempting to support harnessing the usage characteristics of and technologies within PEVs to allow them to serve as a grid asset that would reduce operating costs for facility and vehicle owners, the utilities’ distribution maintenance requirements, and energy prices in the wholesale market. Certainly, there is hope that the demand of EVs could reduce curtailment of generation resources in times of over-generation. However, the efforts in this area are very nascent and still in pilot stage. While some studies are promising regarding what the future may hold, it is premature to assume that it is a given that the addition of large volumes of EVs to the system will be a benefit to ratepayers and the electric grid. Due to the primary purpose for EVs as personal mobility, therefore, ownership is distributed, and their size is small relative to other resources, EVs pose some unique challenges that must be overcome, in order for them to be a grid asset. California regulators are actively preparing and initiating pilots in an attempt to mitigate the potential impacts, but, again, these are early efforts. This bill includes references and statements regarding the use of EVs for vehicle [electric] grid integration, however, those statements would be more accurately couched as the potential of EVs, and should not be assumed to be a given. The author and committee may wish to amend this bill to account for this important nuance.

Why $3 Billion? Three billion dollars is definitely a bold level of investment to support EV deployment. Of course, the question must be raised as to whether, in light of all the current efforts to support and fund the deployment of EVs, the approach proposed in this bill would yield different or better results from the outcomes today. However, here again, those questions are better suited for other legislative committees.

Effects on Ratepayers. The author has stated he does not intend to use ratepayer funds as a source of funding for the proposed initiative and the language in the bill, generally, reflects the use of other sources of funding. However, this bill requires CARB to coordinate with CPUC and makes vague mention to existing funding sources. In order to better protect ratepayers, the committee may wish to ensure this bill explicitly prohibits the use of ratepayer funds for the purposes in the bill.

Another Source of Funding Low Carbon Fuel Standard (LCFS) Credits. The LCFS encourages the use of vehicles using clean fuels by allowing providers of clean fuels to generate and sell credits to fuel suppliers that cannot meet the State’s clean fuel standards.  The investor-owned electric utilities generate LCFS credits by providing low-carbon transportation fuels to customers.  In the case of the electric investor-owned utilities (IOUs), the fuel provided is electricity to customers that own EVs. The IOUs sell the credits and return the revenue back to customers driving electric or natural gas vehicles in the form of rebates.

Consent Needed. Additionally, this bill requires notification to the electric utility of all applicants’ and recipients’ of EV rebates. While such knowledge would be useful to the local utility, it should require the applicant’s and recipient’s consent to notify their utility. Therefore, the committee may wish to amend this bill to require the applicant’s and recipient’s consent before their utility is notified.

Prior/Related Legislation

SB 1275 (De León, Chapter 530, Statutes of 2014) establishes the Charge Ahead California Initiative to be administered by the state board, in consultation with the CEC, air pollution control and air quality management districts, and the public. The bill would state that the goals of the initiative are to, among other things, place in service at least 1,000,000 zero-emission and near-zero-emission vehicles by January 1, 2023, and to increase access for disadvantaged, low-income, and moderate-income communities and consumers to zero-emission and near-zero-emission vehicles.

SB 350 (De León, Chapter 547, Statutes of 2015) among the many provisions of the bill included provisions related to supporting electrification of the transportation system and established requirements of the CPUC in adopting EV charging proposals from the electric utilities.

SB 1204 (Lara and Pavley, Chapter 524, Statutes of 2014) created a new program to be administered by CARB and funded with cap and trade revenues to develop zero- and near-zero-emission truck, bus, and off-road vehicle and equipment technologies and related projects.

SB 359 (Corbett, Chapter 415, Statutes of 2013) provided $48 million in additional funding in the current fiscal year to CARB to support CVRP, HVIP, the Truck Loan Assistance Program, and EFMP.

SB 459 (Pavley, Chapter 437, Statutes of 2013) required CARB, in consultation with BAR, to update the EFMP guidelines as specified by June 30, 2015.

AB 8 (Perea, Chapter 401, Statutes of 2013) extended until January 1, 2024, extra fees on vehicle registrations, boat registrations, and tire sales in order to fund EFMP, AQIP, ARFVTP, and specified other CARB programs that support the production, distribution, and sale of alternative fuels and vehicle technologies, as well as air emissions reduction efforts. It also suspends until 2024 CARB’s authority to require through regulation any fuel supplier to provide hydrogen fueling stations and instead allocates up to $220 million of these fee funds to construct and operate retail hydrogen fueling stations. AB 8 also extended the authority of local air districts to impose vehicle registration surcharges in their areas to achieve air emission reductions from vehicles and off-road engines.

FISCAL EFFECT: Appropriation: Yes Fiscal Com.: Yes Local: No

SUPPORT:

Advanced Energy Economy (Co-sponsor)

NextGen Climate America, Inc. (Co-sponsor)

A.Philip Randolph Institute

Asian Neighborhood Design

Brightline Defense

Emerald Cities SF Bay Area

Luminalt

Mission Hiring Hall

Plug In America

Renaissance Entrepreneurship Center

The Utility Reform Network

OPPOSITION:

Alliance of Automobile Manufacturers

Clean Energy

ARGUMENTS IN SUPPORT: According to the author:

Over a decade ago, California transformed the solar market when it enacted the California Solar Initiative. This bill creates the California Electric Vehicle Initiative, modeled after the California Solar Initiative, in order to transform the EV market. This program would build off the success of existing programs, such as the CVRP, administered by the CARB and ensure that the rebate program is sustainable and continually funded so that more Californians have the opportunity to benefit and invest in EVs.”

ARGUMENTS IN OPPOSITION: Clean Energy expresses opposition to this bill’s proposal to dedicate $500 million annually in continuous appropriation from the state’s GGRF which would limit funding for other low-carbon sources, especially trucks and buses that may use natural gas as a low-carbon fuel.

-- END --

1. Vehicle Grid Integration: A Vision for Zero-Emission Transportation Interconnected throughout California’s Electricity System. CPUC Energy Division. March 2014. ↑

ASSEMBLY THIRD READING

ATR Bill Id:AB 1184

Author:(Ting)

As Amended Ver:May 30, 2017

Majority vote

SUMMARY: Requires the California Public Utilities Commission (CPUC) to establish a California Electric Vehicle Initiative to incentivize the purchase of electric vehicles in the state. Specifically, this bill:

1. Requires CPUC to establish a California Electric Vehicle Initiative, to be administered by electrical corporations, subject to CPUC's supervision, and funded by credits earned by electrical corporations pursuant to the Low-Carbon Fuel Standard (LCFS) regulations, as specified.
2. Requires the program to incentivize the purchase of electric vehicles in the state, including incentives to low-income households and incentives for electrical corporations for the deployment of electric vehicle charging infrastructure.

FISCAL EFFECT: According to the Assembly Appropriations Committee, this bill would have increased ongoing annual CPUC costs of approximately $580,000 to create a new rebate program, draft and open a new rulemaking, or issue a ruling in an existing rulemaking. The incentive program would be funded with utilities' low-carbon fuel standard program credits.

COMMENTS:

1. Authors Statement: According to the author, "While California has set ambitious goals to reduce GHG emissions and incentivize Electric Vehicles (EV) purchases, the state must do more to accelerate its path towards transportation electrification [...] Currently, the state issues rebates to consumers for new EV purchases ranging anywhere from $1,500-$5,000. In spite of these rebates, an EV purchase for most is not an affordable or attractive option for drivers, especially for those car buyers who are concerned about not having access to convenient charging. For low-income households, having the ability to purchase a new vehicle, let alone a more expensive EV, is simply not an option. Fleets of affordable and refurbished EVs could be a better option for many households […] This bill creates the California Electric Vehicle Initiative […] in order to transform the EV market."
2. Background: AB 32 (Nunez) Chaptered 488, Statutes of 2006, required the California Air Resources Board (CARB) to adopt rules and regulations that would reduce greenhouse gas (GHG) emissions in the state to 1990 levels by 2020. Transportation emissions represent approximately 37% of the states GHG emission, 83% of its NOx emissions, and 95% of its diesel emissions. In implementing AB 32, CARB found that efficient, ZEVs using low carbon fuels are a vital component of the state's effort to reach its GHG emission reduction goals. CARB estimates that by mid-century, 87% of cars on the road will need to be full ZEVs, putting California on the path to reducing GHG emission by 80% by 2050.

Under AB 32, CARB identified the LCFS as an early action measure to reduce California's GHG emissions. The LCFS is administered by CARB to encourage the use of cleaner low-carbon fuels through a market-based cap and trade approach to lowering GHG emission from petroleum based transportation fuels. The LCFS requires petroleum-based fuel producers to reduce the carbon intensity of their produces by 10% by 2020. Petroleum importers, refiners and wholesalers can either develop their own low carbon fuel products or buy LCFS credits from other companies that develop and sell low carbon alternative fuels to reach the LCFS requirements.

In addition, in 2012, Governor Brown signed Executive Order B-16-12 which directed CPUC and other state agencies to help accelerate the market for ZEVs to support the adoption of 1.5 million ZEVs on California roads by 2025 and the integration of plug-in electric vehicle charging into the state's electricity grid by 2020.

1. Barriers to ZEV Adoption: Since 2012, California's ZEV market has grown significantly through the expansion of rebates and incentives. The average California drives less than 40 miles per day, well within the range of available ZEV models. Because ZEVs require longer charge times, range anxiety caused by the lack of infrastructure continues to impede the adoption of ZEVs in rural areas or for drivers seeking to make longer trips.

As battery and charging technology continue to advance, greater access to charging infrastructure will promote greater adoption of ZEVs. Locating ZEVs in areas where drivers park for long durations can help mitigate some concerns associated with ZEV adoption. The development of level 2 chargers can now allow drivers to charge ZEVs from 12 to 20 miles per hour. The continue development of faster chargers combined with grid-integrated rates, can provide drivers with more flexibility in determining when to charge their vehicles, and at times that best support conditions of the state's electricity grid throughout the day.

This bill requires CPUC to establish the California Electric Vehicle Initiative, to incentivize the purchase of electric vehicles in the state, including incentives to low-income households and incentives for electrical corporations for the deployment of electric vehicle charging infrastructure. The incentive program would be funded with utilities' LCFS program credits.

Analysis Prepared by: Edmond Cheung / C. & C. / (916) 319-2637 FN: 0000765

Date of Hearing: May 17, 2017

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Lorena Gonzalez Fletcher, Chair

ABPCA Bill Id:AB 1184

Author:(Ting) – As Amended Ver:March 30, 2017

Urgency: No State Mandated Local Program: Yes Reimbursable: No

SUMMARY:

This bill requires the California Public Utilities Commission (PUC) to establish a California Electric Vehicle Initiative to incentivize the purchase of electric vehicles in the state. Specifically, this bill:

1. Requires the PUC to establish a California Electric Vehicle Initiative, to be administered by electrical corporations, subject to the CPUC’s supervision.
2. Requires the program to incentivize the purchase of electric vehicles in the state, including incentives to low-income households and incentives for electrical corporations for the deployment of electric vehicle charging infrastructure

FISCAL EFFECT:

Increased ongoing annual PUC costs of approximately $580,000 (Public Utilities Reimbursement Account) to create a new rebate program, draft and open a new rulemaking, or issue a ruling in an existing rulemaking. Additionally, the PUC would have to process proposals and approve incentives for each utility.

COMMENTS:

1. Purpose. According to the author, “While California has set ambitious goals to reduce GHG emissions and incentivize Electric Vehicles (EV) purchases, the state must do more to accelerate its path towards transportation electrification. Currently, the state issues rebates to consumers for new EV purchases ranging anywhere from $1,500-$5,000. In spite of these rebates, an EV purchase for most is not an affordable or attractive option for drivers, especially for those car buyers who are concerned about not having access to convenient charging. For low-income households, having the ability to purchase a new vehicle, let alone a more expensive EV, is simply not an option. Fleets of affordable and refurbished EVs could be a better option for many households. This bill creates the California Electric Vehicle Initiative to transform the EV market.”
2. Background: Zero Emissions Vehicles (ZEVs) run on electricity stored in batteries instead of fossil fuels, such as pure battery plug-in electric vehicles, plug in hybrid vehicles and hydrogen fuel cell electric vehicles. In 2006, the Legislature enacted AB 32 (Nunez) Chaptered 488, Statutes of 2006, which required ARB to adopt rules and regulations to reduce greenhouse gas (GHG) emissions in the state to 1990 levels by 2020. In 2015, the Legislature enacted SB 350 (de Leon) Chapter 547, Statutes of 2015, to establish new energy efficiency and renewable electricity targets to support the state’s climate goals.
3. Other incentives. AB 118 (Núñez), Chapter 750, Statutes of 2007, established the Alternative and Renewable Fuels and Vehicle Technology (ARFVT) program, the EFMP, and the AQIP to promote vehicle and fuel technology to reduce air pollution and GHG emissions. Pursuant to its authority under AQIP, the Air Resources Board (ARB) developed CVRP. CVRP, which is administered by ARB’s contractor, the California Center for Sustainable Energy (CSE), is intended to encourage and accelerate the purchase and use of ZEVs and NZEVs to help improve air quality and reduce GHG emissions.

Since CVRP was launched in 2010, 163,000 rebates have been issued at a cost of $349 million. The program is oversubscribed with demand outpacing funding nearly every year. When the funding is exhausted, applicants are "waitlisted" and are issued rebates in the order they applied when monies are allocated in the next funding cycle.

The Charge Ahead Initiative, administered by ARB operates pursuant to the goal of placing at least one million ZEVs and NZEVs into service on California roadways by January 1, 2023, and increasing accessibility to these vehicles for disadvantaged, low-income, and moderate-income individuals and those living in disadvantaged communities.

Since 2012, California’s ZEV market has grown significantly through the expansion of rebates and incentives. California’s three investor-owned-utilities (IOUs) provide rebates to plug-in electric vehicle drivers, including Pacific Gas & Electric’s Clean Fuel Rebate, San Diego Gas & Electric’s Electric Vehicle Climate Credit, and Southern California Edison’s Clean Fuel Rewards. In addition, the IOUs are currently implementing pilot programs to install 12,500 electric vehicle charging stations in multi-unit dwellings, workplaces, and public interest destinations at a cost of $197 million, with a certain number of charging stations designated in disadvantaged communities.

1. Barriers to ZEV Adoption: The average Californian drives less than 40 miles per day, well within the range of available ZEV models. However, achieving the states climate goals requires multiple approaches toward transportation electrification. Because ZEVs require longer charge times, range anxiety caused by the lack of infrastructure impedes the adoption of ZEVs in rural areas or for drivers seeking to make longer trips.

This bill requires the PUC to establish the California Electric Vehicle Initiative, to incentivize the purchase of electric vehicles in the state, including incentives to low-income households and incentives for electrical corporations for the deployment of electric vehicle charging infrastructure.

1. Related Legislation. There are currently ten bills pending before this Committee, including this bill, to provide clean vehicle incentives as follows:

AB 33 (Quirk) requires the California Public Utilities Commission (PUC) by March 30, 2018, to authorize IOUs to offer programs and investments in residential electric vehicle service equipment. AB 33 requires rates to be given at a grid-integrated rate levels.

AB 188 (Salas) requires ARB to update the Enhanced Fleet Modernization Program (EFMP) guidelines to allow participants to replace their vehicle with light-duty trucks so long as they are retiring a pickup truck and the replacement truck meets the fuel efficiency standards for minivans.

AB 193 (Cervantes) establishes a Clean Vehicle Rebate Program (CVRP) program for used vehicles. Incentives may also be used for the replacement or refurbishment of a battery or an extended service warranty to cover repair costs associated with “unique problems” in eligible used vehicles. Eligibility is restricted to low- and moderate-income customers in disadvantaged communities and who live in either a nonattainment air basin or has received minimal amounts from the CVRP program in the past.

AB 544 (Bloom) creates a new program (upon expiration of the existing program) to allow super ultra-low emission vehicles and transitional zero-emission vehicles access to high-occupancy vehicle lanes for an approximately four-year period, regardless of vehicle occupancy level.

AB 964 (Gomez) creates the California Affordable Clean Vehicle Program (loan guarantee program) at the California Pollution Control Financing Authority to assist low-income or high risk individuals in the purchase of low-emission vehicles.

AB 1081 (Burke) provides a sales tax exemption for the value of a vehicle traded in to purchase a clean vehicle.

AB 1082 (Burke) requires investor-owned utilities (IOUs) to develop a program for the installation of vehicle charging stations at school facilities for the use by faculty, students, and parents. Electricity will be provided at time-of-use rates.

AB 1083 (Burke) requires investor-owned utilities (IOUs) to create a charging network at all state parks and beaches by July 31, 2018. Electricity will be provided at time-of-use rates.

AB 1259 (Calderon) creates a Capital Access Loan Program at the Pollution Control Financing Authority to assist low- and middle-income families with the purchase or lease of electric vehicles.

AB 1341 (Calderon) excludes up to $40,000 from state sales tax on the purchase of used near-zero emission or zero-emission vehicles for low-income purchasers.  Allows a personal income tax credit (ranging $1,500-$5,000) for the purchase of certain plug-in hybrid vehicles and all battery electric and hydrogen fuel cell vehicles, with an additional $500 credit allowed for low-income purchasers.  The tax credit may be assigned to a financing entity.

Analysis Prepared by: Jennifer Galehouse / APPR. / (916) 319-2081

Date of Hearing: April 26, 2017

ASSEMBLY COMMITTEE ON COMMUNICATIONS AND CONVEYANCE

Miguel Santiago, Chair

ABPCA Bill Id:AB 1184 (

Author:Ting) – As Amended Ver:March 30, 2017

SUBJECT: Electric vehicles

SUMMARY: Requires the California Public Utilities Commission (CPUC) to establish a California Electric Vehicle Initiative to incentivize the purchase of electric vehicles in the state. Specifically, this bill:

1. Requires the CPUC to establish a California Electric Vehicle Initiative, to be administered by electrical corporations, subject to the CPUC’s supervision.
2. Requires the program to incentivize the purchase of electric vehicles in the state, including incentives to low-income households and incentives for electrical corporations for the deployment of electric vehicle charging infrastructure.

EXISTING LAW:

1. Requires California Air Resources Board (CARB) to adopt rules and regulations that would reduce the states greenhouse gas (GHG) emission levels to 1990 levels by 2020. (Health and Safety Code (HSC) Section 38500 et seq.)
2. Establishes the California Renewables Portfolio Standard Program which requires retail sellers of electricity to procure 33 percent of retails sales of electricity by 2013, and 50 percent by 2030, from eligible renewable energy resources. (Public Utilities Code (PUC) Section 399.11, et seq.)
3. Requires each electrical corporation to propose a cost recovery plan to the CPUC for the recovery of the uneconomic costs of an electrical corporation’s generation-related assets and obligations, as specified. (PUC Section 368)
4. Requires the CPUC to establish rates using cost allocation principles that fairly and reasonably assign to different customer classes the costs of providing service to those customer classes, consistent with the policies of affordability and conservation.  (PUC Section 739.6)
5. Provides CARB with primary responsibility for control of mobile source air pollution, including adoption of rules for reducing vehicle emissions and the specification of vehicular fuel composition. (HSC Section 39000, et seq., and Section 39500, et seq.)
6. Requires CARB to adopt and implement motor vehicle emission standards, in-use performance standards, and motor vehicle fuel specifications for the control of air contaminants and sources of air pollution which CARB has found to be necessary, cost effective, and technologically feasible, to carry out specified purposes. (HSC Section 43013, et seq.)
7. Requires CARB, in consultation with CPUC and with input from relevant state agencies and the public, to develop and publish a study on barriers for low-income customers to zero-emission and near-zero-emission transportation options, including those in disadvantaged communities, as well as recommendations on how to increase access to zero-emission and near-zero-emission transportation options to low-income customers, including those in disadvantaged communities, by January 1, 2017. (Public Resources Code Section 25327)

FISCAL EFFECT: Unknown. This bill is keyed fiscal by the Legislative Counsel.

COMMENTS:

1. Authors Statement: According to the author, “While California has set ambitious goals to reduce GHG emissions and incentivize Electric Vehicles (EV) purchases, the state must do more to accelerate its path towards transportation electrification [...] Currently, the state issues rebates to consumers for new EV purchases ranging anywhere from $1,500-$5,000. In spite of these rebates, an EV purchase for most is not an affordable or attractive option for drivers, especially for those car buyers who are concerned about not having access to convenient charging. For low-income households, having the ability to purchase a new vehicle, let alone a more expensive EV, is simply not an option. Fleets of affordable and refurbished EVs could be a better option for many households […] This bill creates the California Electric Vehicle Initiative […] in order to transform the EV market.”
2. Background: Zero Emissions Vehicles (ZEVs) run on electricity stored in batteries instead of fossil fuels, such as pure battery plug-in electric vehicles, plug in hybrid vehicles and hydrogen fuel cell electric vehicles. In 2006, the Legislature enacted AB 32 (Nunez) Chaptered 488, Statutes of 2006, which required CARB to adopt rules and regulations that would reduce GHG emissions in the state to 1990 levels by 2020. In addition, in 2015, the Legislature enacted SB 350 (De Leon) Chapter 547, Statutes of 2015, which established new energy efficiency and renewable electricity targets to support the state’s climate goals. Transportation emissions represent approximately 37 percent of the states GHG emission, 83 percent of its NOx emissions, and 95 percent of its diesel emissions. In implementing AB 32, CARB found that efficient, ZEVs using low carbon fuels are a vital component of the state’s effort to reach its GHG emission reduction goals. CARB estimates that by mid-century, 87% of cars on the road will need to be full ZEVs, putting California on the path to reducing GHG emission by 80% by 2050.
3. California’s ZEV Action Plan: In 2012, Governor Brown signed Executive Order B-16-12 which directed the CPUC and other state agencies to help accelerate the market for ZEVs to support the adoption of 1.5 million ZEVs on California roads by 2025 and the integration of plug-in electric vehicle charging into the state’s electricity grid by 2020. As of the summer of 2016, Californians drive 47% of all ZEVs on the road in the United States with Los Angeles and Santa Clara County being the largest ZEV metropolitan adoption regions in the state. In October 2016, the Governor’s Interagency Working Group on ZEVs released its 2016 ZEV Action Plan, which provides an updated roadmap towards reaching the states ZEV goals. The plan highlighted certain priorities for ZEV development and adoption including, raising consumer awareness and education about ZEVs; ensuring ZEVs are accessible to a broad range of Californians, making ZEV technologies commercially viable in targeted sectors, and aiding ZEV market growth beyond California.
4. Investments in ZEV Infrastructure: Since 2012, California’s ZEV market has grown significantly through the expansion of rebates and incentives. California’s three investor owned utilities provide rebates to plug-in electric vehicle drivers, including Pacific Gas & Electric’s Clean Fuel Rebate, San Diego Gas & Electric’s Electric Vehicle Climate Credit, and Southern California Edison’s Clean Fuel Rewards. In addition, the IOUs are currently implementing pilot programs to install 12,500 electric vehicle charging stations in multi-unit dwellings, workplaces, and public interest destinations at a cost of $197 million, with a certain number of charging stations designated in disadvantaged communities.
5. Barriers to ZEV Adoption: The average California drives less than 40 miles per day, well within the range of available ZEV models. However, achieving the states climate goals requires multiple approaches toward transportation electrification. Because ZEVs require longer charge times, range anxiety caused by the lack of infrastructure impedes the adoption of ZEVs in rural areas or for drivers seeking to make longer trips.

To further promote the adoption of ZEVs, California has several programs including the Low Carbon Transportation Investments and Air Quality Improvement Program which funds clean vehicle and equipment projects and research biofuels production. In addition customers who purchase electric vehicles may also be eligible for rebates up to $7,000 through the states Clean Vehicle Rebate Project, which has issued nearly $350 million in rebates since 2009. However, according to the author, California’s incentive program suffers from inadequate and inconsistent funding, as it relies on the wildly fluctuating proceeds from Cap and Trade Auctions. The author argues that without a reliable, long-term incentive program, manufacturers are reluctant to commit the time and money required to build a range of affordable EVs, dealers are uncertain that rebates will be available to their customers, and consumer are hesitant to buy.

This bill requires the CPUC to establish the California Electric Vehicle Initiative, to incentivize the purchase of electric vehicles in the state, including incentives to low-income households and incentives for electrical corporations for the deployment of electric vehicle charging infrastructure.

1. Arguments in Support: According to NextGen California, a co-sponsor of the bill, “The transportation sector is the largest source of California’s [GHG] emissions and a primary contributor to air pollution. As a result, increasing the number of ZEVs on California’s roads is critical to achieving our state’s landmark GHG reduction targets […] Recent uncertainty about the availability of California’s [EV] rebates may be deterring prospective buyers from considering [EVs]. By establishing a continuously-funded electric vehicle rebate program, AB 1184 will provide the market certainty needed to achieve this critical target. Moreover, by building on existing EV infrastructure programs and encouraging smart charging, AB 1184 will provide benefits to all California electricity customers.”
2. Related Legislation: AB 33 (Quirk) of 2017 requires the CPUC, in consultation with CARB, and the California Energy Commission to authorize electrical corporations to offer programs and investments in electric vehicle service equipment installed in residential garages. Status: Pending in the Assembly Committee on Communications and Conveyance.

AB 1082 (Burke) of 2017 requires an electrical corporation to file with, and the CPUC to approve, a program proposal for the installation of electric charging stations at school facilities. Status: Pending in the Assembly Committee on Education.

AB 1083 (Burke) of 2017 requires an electrical corporation to file with, and the CPUC to approve, a program proposal for the installation of electric charging stations at state parks and beaches. Status: Pending in the Assembly Committee on Water, Parks and Wildlife.

REGISTERED SUPPORT / OPPOSITION:

Support

Advanced Energy Economy (co-sponsor)

NextGen California (co-sponsor)

Opposition

None on file.

Analysis Prepared by: Edmond Cheung / C. & C. / (916) 319-2637