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Real Estate Legal Alert
April 27, 2015              

California Energy Commission Considering Changes to Ongoing AB 1103 Energy Benchmarking and Disclosure Requirements

The California Energy Commission ("CEC"), which is charged with overseeing the implementation of the California Nonresidential Building Energy Use Disclosure Program ("AB 1103"), is considering changes to the ongoing program. If ultimately adopted, these changes will have a significant impact on the parameters of the disclosure program.

Current Procedures

AB 1103 currently requires that owners and operators of California buildings benchmark and disclose a building's energy use if a building is 10,000 square feet or larger and the entire nonresidential building is being offered for sale, lease, finance or refinance. To benchmark and disclose energy use, an owner or operator must prepare and provide a Data Verification Checklist ("Checklist") to a prospective buyer, lessee or lender at least 24 hours prior to a signature agreement. The Checklist must also be submitted to the CEC.

To create a Checklist, the owner or operator must visit the Energy Star Portfolio Manager website well in advance of the transaction and create an account for the building at https://portfoliomanager.energystar.gov. After creating an account, the owner or operator must wait up to thirty days for the applicable utilities to upload the energy use data to Portfolio Manager. The energy use data is used to produce the Checklist within the Portfolio Manager program. In the event the actual energy use data is not available at the time the Checklist is prepared, a building owner or operator may use a reasonable approximation to replace the missing data.

Additional information is available on the CEC website, and in the CEC's frequently asked questions.

Proposed Changes

First, the CEC is considering permanently adopting its September 2, 2014 Emergency Rulemaking Action that delayed implementation of AB 1103 for buildings between 5,000 and 10,000 square feet from July 1, 2014 until July 1, 2016. A decision on the proposed action to permanently amend the AB 1103 compliance schedule to exempt buildings under 10,000 square feet is expected later this year. More information can be reviewed at the CEC's AB 1103 Rulemaking page.

Next, and more significantly, the CEC has directed its staff to propose and adopt revised AB 1103 regulations to make the program more effective and achieve greater levels of compliance. CEC staff has developed a set of draft revisions, which may serve as the basis for the proposed regulation changes. Included in staff's draft revisions are the following key modifications to the current program: 

  • Eliminate the need to comply with AB 1103 requirements in the case of a building finance or refinance. 
  • Change the timing of disclosures from no later than 24 hours prior to execution of a sales contract or lease to no later than three days after signing a purchase and sale agreement or lease. 
  • Clarify that a building owner or operator may request energy use data from Portfolio Manager before the start of a transaction to ensure there is enough time to obtain the data, and allow energy use data to be used for disclosure purposes for up to one year from the date of a request (rather than the current 30-day requirement). 
  • State that tenant consent is not required for a utility to provide energy use data to a building owner or operator, and allow a utility to aggregate energy use data into a virtual meter for each fuel type when a building has multiple tenants. 
  • Exempt from disclosure a building that is scheduled to be demolished one year or less from the date a sales contract or lease is signed.

A complete copy of staff's draft proposals can be reviewed at the AB 1103 Rulemaking page. At this time, the CEC has not scheduled any workshops or hearings to consider changes to the AB 1103 regulations. Comments, however, may be submitted using the CEC's new electronic commenting system on the AB 1103 Rulemaking page.

 

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