BILL ANALYSIS C.S.H.B. 1839 By: Hirschi April 18, 1995 Committee Report (Substituted) BACKGROUND In FY 1992, the Legislature authorized higher education institutions to enter into performance contracts to reduce energy consumption and operating costs at institutional facilities. These contracts provide a cost-effective way to fund facilities improvements without increasing the need for state appropriations or relying on limited state-funded loan programs. Energy performance contracts do not require the institutions to cover initial costs; the contractor pays for all project engineering, equipment and construction, and is paid back from annual energy cost savings within a ten year period. Texas law does not guarantee that universities can use the savings resulting from energy efficiencies to pay for these improvements. Many energy performance contracts are promulgated on cost savings with reimbursement derived from the savings. Some contracts contain clauses which obligate the contractor to pay the difference between the estimated savings calculated as a payment and the actual savings obtained. PURPOSE C.S.H.B. 1839 statutorily creates an appropriation formula for energy costs. It provides for the estimated energy costs for the fiscal year, plus 100% of the annualized net savings for universities with a current energy savings contract. SECTION BY SECTION ANALYSIS SECTION 1. Amends Section 51.927, Education Code, by adding Subsection (j) directing the Legislature to base an institution's appropriations for energy costs on the institutions estimated annual energy costs for the fiscal year that a performance contract is in effect, plus the estimated yearly savings resulting from that contract. Amends Section 51.927, Education Code, by adding Subsection (k) directing the Legislative Budget Board to establish guidelines and an approval process for projects under this section. SECTION 2. Effective date and clause limiting effect of this bill to appropriations enacted after September 1, 1995. SECTION 3. Emergency Clause COMPARISON OF ORIGINAL TO SUBSTITUTE HB 1839, as filed, allows the institutions to retain 100% of the estimated savings in energy costs resulting from a contract and allows the institutions to retain 50% of the estimated savings in energy costs after the contract has expired. CSHB 1839 allows the institutions to retain 100% of the estimated savings in energy costs but does not allow the schools to retain any savings after the contract expires. The substitute also adds language requiring the LBB to set up guidelines and an approval process for energy conservation projects. RULEMAKING AUTHORITY It is the committee's opinion that this bill does not expressly grant any additional rulemaking authority to a state officer, department, agency or institution. SUMMARY OF COMMITTEE ACTION H.B. 1839 was taken up in a public hearing on April 5, 1995. The Chair recognized Representative Hirschi to lay out the bill. Representative Delisi laid out a committee substitute to H.B. 1839. The Chair recognized Edward Whalen from the University of Houston to testify on the bill and Joe Kaveski of Johnson Controls, Inc. to testify for the bill. The Chair referred the substitute to subcommittee. C.S.H.B. 1839 was taken up in a public hearing on April 10, 1995 in subcommittee and was amended. The Chair instructed staff to incorporate the amendment into the substitute. The substitute was reported back to the full committee with a vote of 5 ayes, 0 nays, 0 p-n-v, and 0 absent. The Committee substitute was taken up in full committee in a public hearing on April 12, 1995. Representative Heflin moved to adopt the Committee Substitute without objection the substitute was adopted. Representative Heflin moved to send C.S.H.B 1839 be sent to the Committee on Calendars with the recommendation it do pass. The motion prevailed on the record vote of 17 ayes, 0 nays, 0 p-n-v, and 10 absent.