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    Locke Lord QuickStudy: California Mandatory Nonresidential Building Energy Use Disclosures

    Locke Lord Publications

    Click here for pdf

    Assembly Bill 32, styled the California Global Warming Solutions Act of 2006, became law in the Fall of 2006. The Act’s goal is to reduce greenhouse gas emissions in California by 2020 to the emission levels of 1990. The draft scoping developed by the California Air Resources Board, tasked by the Legislature in the Act with the responsibility to adopt regulations to require reporting and verification of statewide greenhouse gas emissions, and to monitor and enforce compliance, acknowledged the importance of the “expansion and strengthening of existing energy efficient programs and building and appliance standards.” As noted in the Long Term Energy Efficiency Strategic Plan, issued in September 2008 by the California Public Utilities Commission and the California Energy Commission, California is the second largest greenhouse gas emitting state in the United States, and electricity production is the source of 32 percent of the state’s carbon emissions. The Plan notes that, while California’s building and appliance standards have saved consumers more than $56 billion in electricity and natural gas expenses since 1978, and have averted the need for the construction of 15 large power plants, growing population and increasing energy demands pose significant social and economic risks to Californians.

    The Plan identified five policy tools to achieve the reductions in greenhouse gases mandated by the Global Warming Solutions Act: (1) customer incentives; (2) codes and standards; (3) education and information; (4) technical assistance; and, (5) emerging technologies.

    In a strategy intended to achieve the Energy Commission’s goal of achieving zero net energy in new construction and retrofits by 2030, in October 2009 the California Legislature adopted Section 25402.10 of the Public Resources Code requiring owners and operators of nonresidential buildings to (a) authorize electric and gas utilities serving their buildings to upload energy consumption data for their building to an EPA ENERGY STAR Portfolio Manager, and (b) disclose such benchmarking data and ratings for the most recent 12-month period to prospective purchasers, tenants contemplating a lease of the entire building, and lenders. In February 2013, the California Energy Commission adopted regulations implementing procedures pursuant to Section 25402.10. The disclosure obligations were originally scheduled to be effective July 1, 2013, however, implementation of the disclosures was initially delayed to September 1, 2013, and has been further postponed to January 1, 2014.

    Effective as of January 1, 2014, owners will be required to establish an account for each of their nonresidential buildings with total gross floor areas of more than 10,000 square feet, including parking garages, with the EPA’s ENERGY STAR program Portfolio Manager website. On July 1, 2014 such accounts are required for buildings with gross floor areas of more than 5,000 square feet. The account will include the owner’s name and email address, the building address and year of construction, identification of all sources of energy use data for at least the most recent 12 month period and a description of space use characteristics for the entire building. The owner can manually enter energy use data for periods not less than the most recent 12 months. Alternatively, the owner can request all utility and energy providers serving the building to release such data to the account.

    Once the information regarding the energy use data has been completed, the property owner will complete and submit a compliance report for its building. The process generates three disclosure documents. The Statement of Energy Performance provides information on electricity and natural gas use, and includes the ENERGY STAR Portfolio Manager (ESPM) rating and the Energy Use Intensity (EUI) rating for the building. The ESPM rating compares the building energy metrics with what purports to be a representative national sample of similar buildings. The Energy Use Intensity describes the building’s consumption of energy relative to its size.

    The Data Checklist is another report generated by this process. This checklist is intended to provide a summary of the building’s physical and operating characteristics, enabling the reader to review, among other things, how the space is used and the hours of occupancy. In addition, the checklist includes a summary of conventional and renewable energy being used by the building. Both the Data Checklist and the Statement of Energy Performance can be certified by a licensed professional engineer or registered architect.

    The third report generated is the Facility Summary which briefly reviews the data included in the other two reports, compares the current energy use with the building’s prior performance, provides the Energy Star score and the average national energy use for a building with similar characteristics.

    The reports generated through this process are valid for 30 days, and the Code requires building owners to furnish current reports to (i) a prospective buyer of the building not later than 24 hours before execution of a sales contract; (ii) a prospective tenant for the entire building (including a tenant renewing its occupancy) not later than 24 hours before execution of a lease; and (iii) a prospective lender financing the entire building, not later than submission of the loan application.

    The mandatory disclosures are intended to provide energy performance information to decision makers in connection with the sale, lease or financing of buildings, and to value energy efficiency along with other assets in such transactions.

    Detailed information is available on the California Energy Commission website: http://www.energy.ca.gov/ab1103/.

    For more information on the matters discussed in this Locke Lord QuickStudy, please contact the author:

    Alfred M. Clark | 213-687-6706 | aclark@lockelord.com

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