DAR File No. 43419

Governor, Energy Development (Office of)

Rule R362-5

Commercial Property Assessed Clean Energy (C-PACE) Administrative Rules

Notice of Proposed Rule

(New Rule)

DAR File No.: 43419
Filed: 11/29/2018 02:57:18 PM

RULE ANALYSIS

Purpose of the rule or reason for the change:

The purpose of this filing is to establish an administrative rule for the direction and administration of the C-PACE District, as defined in Section 11-42a-106.

Summary of the rule or change:

This rule explains the procedures for implementing the responsibilities assigned to Office of Energy Development in directing and administering the C-PACE District; and establishing the procedures for designating, levying, assigning, and collecting an energy assessment lien within an energy assessment area.

Statutory or constitutional authorization for this rule:

• Section 11-42a-102
• Section 11-42a-106

Anticipated cost or savings to:

the state budget:

This proposed rule is not expected to have any fiscal impact on state government revenues or expenditures because the C-PACE program is self-funded by legislatively approved fees paid by the borrower. No state costs are incurred.

local governments:

This proposed rule is not expected to have any fiscal impact on local governments' revenues or expenditures because the local governments will generate recording fees paid by the borrower against the number of pages submitted to record and assign the lien.

small businesses:

This proposed rule is a voluntary program that only affects businesses that choose to complete C-PACE projects. An estimated 5.8 C-PACE projects will be completed by small businesses in fiscal year 2019, 19.34 in fiscal year 2020, and 40.614 in fiscal year 2021. With the increased energy cost savings of $999,307 per completed C-PACE project in fiscal year 2019, $942,203 in fiscal year 2020, and $958,519 in fiscal year 2021, these small businesses will see a direct fiscal benefit in revenues of $5,800,000 in fiscal year 2019, $18,000,000 in fiscal year 2020, and $39,000,000 fiscal year 2021. Small businesses will experience an average direct fiscal cost of $500,000 per C-PACE project.

persons other than small businesses, businesses, or local governmental entities:

This proposed rule is not expected to have any fiscal impact on other individuals' revenues or expenditures because participation in the C-PACE program is restricted to commercial businesses.

Compliance costs for affected persons:

This proposed rule is not expected to have any fiscal impact because participation in the C-PACE program is restricted to commercial businesses.

Comments by the department head on the fiscal impact the rule may have on businesses:

The impacts to small businesses were characterized above and the impacts to non-small business are described here. There are 16,112 large businesses in the industries in question in Utah. For a complete listing of NAICS codes used in this analysis, please contact the agency. These businesses account for an estimated 0.198 C-PACE projects in fiscal year 2019, 0.66 in fiscal year 2020, and 1.386 in fiscal year 2021. The average C-PACE project cost of $500,000. These businesses are expected to receive $197,863 in fiscal year 2019, $621,855 in fiscal year 2020, and $1,328,508 in fiscal year 2021.

Laura Nelson, Executive Director

The full text of this rule may be inspected, during regular business hours, at the Office of Administrative Rules, or at:

Governor
Energy Development (Office of)
60 E SOUTH TEMPLE 3RD FLR
Salt Lake City, UT 84111

Direct questions regarding this rule to:

• Shawna Cuan at the above address, by phone at 801-538-8724, by FAX at , or by Internet E-mail at scuan@utah.gov

Interested persons may present their views on this rule by submitting written comments to the address above no later than 5:00 p.m. on:

01/16/2019

This rule may become effective on:

01/23/2019

Authorized by:

Laura Nelson, Executive Director

Appendix 1: Regulatory Impact Summary Table*

Fiscal Costs	FY 2019	FY 2020	FY 2021
State Government	$0	$0	$0
Local Government	$0	$0	$0
Small Businesses	$2,901,000	$9,670,000	$20,307,000
Non-Small Businesses	$99,000	$330,000	$693,000
Other Person	$0	$0	$0
Total Fiscal Costs:	$3,000,000	$10,000,000	$21,000,000
Fiscal Benefits
State Government	$0	$0	$0
Local Government	$0	$0	$0
Small Businesses	$5,797,980	$18,222,224	$38,929,296
Non-Small Businesses	$197,863	$621,855	$1,328,508
Other Persons	$0	$0	$0
Total Fiscal Benefits:	$5,995,843	$18,844,079	$40,257,804
Net Fiscal Benefits:	$2,995,843	$8,844,079	$19,257,804

 

*This table only includes fiscal impacts that could be measured. If there are inestimable fiscal impacts, they will not be included in this table. Inestimable impacts for State Government, Local Government, Small Businesses and Other Persons are described in the narrative. Inestimable impacts for Non - Small Businesses are described in Appendix 2.

 

Appendix 2: Regulatory Impact to Non - Small Businesses

There are 16,112 large businesses in the industries in question in Utah. For a complete listing of NAICS codes used in this analysis, please contact the agency. These businesses account for an estimated 0.198 C-PACE projects in fiscal year 2019, 0.66 in fiscal year 2020, and 1.386 in fiscal year 2021. At the average C-PACE project cost of $500,000, these businesses are expected to receive $197,863 in fiscal year 2019, $621,855 in fiscal year 2020, and $1,328,508 in fiscal year 2021.

 

The head of the Governor's Office of Energy Development, Laura Nelson, has reviewed and approved this fiscal analysis.

 

 

R362. Governor, Energy Development (Office of).

R362-5. Commercial Property Assessed Clean Energy (C-PACE), Administrative Rules.

R362-5-1. Purpose.

(1) This rule is for the purposes of

(a) Implementing the responsibilities assigned to the Governor's Office of Energy Development (OED) in directing and administering the C-PACE District as defined in Section 11-42a-106; and

(b) Establishing the procedures for designating, levying, assigning, and collecting an energy assessment lien within an energy assessment area.

 

R362-5-2. Authority.

(1) This rule is required by Section 11-42a-106.

 

R362-5-3. Definitions.

(1) The terms used in this rule are defined in Section 11-42a-102.

(2) In addition, "contractor" means any person or company who is or may be awarded an original commercial contract for the construction, alteration, or repair of eligible improvements on eligible real property.

(4) In addition, "energy assessment areas" designated by the C-PACE District cannot be made contiguous or located on one or more contiguous or adjacent tracts of land.

(3) In addition, "third party delegate" means a vendor selected by OED that provides program administration support services to the C-PACE District, in accordance with Subsection 11-42a-106(4)(b).

 

R362-5-4. Eligible Improvements and Eligible Commercial and Industrial Real Property.

(1) C-PACE financing may be used to install eligible improvements on eligible commercial and industrial real property, as defined under Section 11-42a-102.

(2) Commercial or industrial real property, located within participating local entities, may be eligible to receive C-PACE financing for an existing building, a building under construction, or a building to be constructed.

(3) The amount to be financed is determined by the property owner and third party lender.

 

R362-5-5. C-PACE District Administration.

(1) OED is authorized to administer C-PACE projects in participating local entities.

(a) Participating local entities must make a written request of the C-PACE District to create the energy assessment area and energy assessment lien.

(b) The written request consists of a resolution passed by the local entity's governing body and a participation agreement executed by the local entity's administration.

(2) OED maintains an agreement with the relevant public electrical utility that establishes the scope of the eligible improvement(s) financed by C-PACE.

 

R362-5-6. Application Procedure.

(1) The property owner or a contractor, serving as the representative of the property owner, must verify the real property is located in a participating local entity.

(a) A map of participating local entities is provided on the C-PACE District website.

(2) The property owner or contractor submits to OED or the third party delegate the address of the real property.

(a) The third party delegate collects and reviews publicly available information on the real property.

(3) The property owner or contractor completes and submits the project application to OED or its third party delegate.

(a) The third party delegate reviews the project application against the eligible improvements and eligible real properties authorized in statute.

(b) The third party delegate notifies OED, the property owner, and contractor of its findings.

(4) OED or its third party delegate shall not be held responsible for any costs or fees incurred to complete the C-PACE project application, including but not limited to, audit costs and engineering fees.

(a) While such costs are typically included in the project financing, in cases where the project does not move forward, the property owner or contractor is responsible for such costs or fees.

 

R362-5-7. Mortgage Holder Consent.

(1) Written consent must be obtained from each person or institution holding a lien on the real property.

(a) Consent must be submitted to OED or its third party delegate to facilitate the levy and assignment of the energy assessment lien.

 

R362-5-8. Underwriting.

(1) The third-party lender and property owner negotiate financing terms and conditions.

(a) Third-party lenders establish their own financial underwriting standards and make their own determination about whether to invest in a project, on a per project basis.

(b) Once the underwriting process is complete, the third-party lender may issue a conditional approval or financial commitment letter outlining the terms of the financing, including any conditions of closing.

 

R362-5-9. Voluntary Energy Assessment Lien Procedures.

(1) The third-party lender prepares documents for closing the financial transaction with the property owner.

(a) The property owner and third-party lender enter into a financing agreement that contains the financing terms and conditions that govern the transaction.

(2) The third-party lender provides the information and documentation required to designate a voluntary energy assessment area, levy an energy assessment, and assign the energy assessment lien, to OED and its third party delegate.

(a) Notices shall include the financing agreement and exhibits, including the energy assessment lien repayment schedule.

(3) OED shall designate to the third-party lender its authority to transmit to the Governing Body Clerk and Recorder, or its equivalent, the documentation required for recording the voluntary energy assessment lien on the real property.

(a) After recording the energy assessment lien, the Governing Body Clerk and Recorder, or its equivalent, files a copy of the energy assessment lien with the Governing Body Assessor and coordinates with the third-party lender to assign the energy assessment lien to the third-party lender.

 

R362-5-10. Associated Fee.

(1) OED's costs of administering and directing the C-PACE District are financed by program fees charged to property owners upon project financial closing.

(a) In accordance with Section 63J-1-504, OED charges a program fee that consists of a one-time charge of three percent (3.0%) of the financed amount per project, provided that the fee does not exceed ninety thousand dollars ($90,000) per project.

(2) On behalf of OED, the thirty party delegate provides an invoice to the third-party lender for the program fee.

(a) The third-party lender remits the fee to the third party delegate within 10 days of financial closing.

(b) Upon receipt of the fee, the third party delegate remits 0.5% of the collected fee, up to $15,000, to OED within 10 days of receipt.

 

R362-5-11. Servicing and Repayment.

(1) The assessment is repaid in installations over a period not to exceed 30 years.

(a) In the event of a default, payments may not be accelerated to the total unpaid balance of the assessment.

(b) The third-party lender is be responsible for, subject to, and in accordance with the terms of the financing agreement, for all billing, collection, enforcement, and administrative duties pertaining to the loan, the assessment payments, and the energy assessment lien.

(c) The state is not liable for the acts or omissions of the C-PACE District or the C-PACE District's directors, administrators, officers, agents, employees, third-party directors or administrators, or third-party lenders, including any obligation, expense, debt, or liability of the C-PACE District.

 

R362-5-12. Release and Discharge of the Energy Assessment Lien.

(1) Upon full payment of the energy assessment lien, the third-party lender files a release and discharge of the energy assessment lien on the real property with the Governing Body Clerk and Recorder, or its equivalent.

 

R362-5-13. Reporting.

(1) According to Subsection 11-42a-106(c), the third party delegate submits to OED monthly reports that describe the following information:

(a) Total project financed amount

(b) Number of voluntary energy assessment liens established

(c) Fees collected

(d) Annual estimated energy savings, including both kilowatt hours and British thermal units (where applicable)

(e) Status of voluntary energy assessment lien repayments

(f) Length of financing

(g) Sales or transfers of properties with outstanding voluntary energy assessment liens

 

KEY: energy, assessment, commercial, financing

Date of Enactment: 2019

Authorizing, Implemented, or Interpreted Law: 11-42a