Bill Summary – FastDemocracy

HB 379
                      Department of Legislative Services
                              Maryland General Assembly
                                    2021 Session
                           FISCAL AND POLICY NOTE
                                  First Reader
House Bill 379                  (Delegate Charkoudian)
Economic Matters
        Public Utilities – Low–Income Housing – Energy Performance Targets
This bill requires the Public Service Commission (PSC) to require the Department of
Housing and Community Development (DHCD) to procure or provide energy efficiency
and conservation (EE&C) programs and services for electricity customers for the
2021-2023 EmPOWER Maryland Program cycle, subject to specified requirements. The
EE&C programs and services must be designed to achieve a target annual incremental
gross energy savings of at least 1.0% per year, compared to 2019, starting in 2022.
Specified gas company merger proceeds must be used exclusively by DHCD beginning in
fiscal 2022 to provide low-income residential weatherization. By December 31, 2021,
DHCD must develop a plan on related program funding and coordination. The Green and
Healthy Task Force, staffed by DHCD, is established (permanently), with an annual
reporting requirement beginning July 2022. The bill takes effect July 1, 2021.
                                    Fiscal Summary
State Effect: Special fund revenues for DHCD increase by $26.3 million in FY 2022 from
the transfer, as discussed below. Overall special fund expenditures from the Strategic
Energy Investment Fund (SEIF) are not affected, but funds are diverted from their original
purpose. Special fund expenditures for DHCD increase significantly beginning in FY 2022
to meet the bill’s enhanced energy savings requirements – DHCD estimates by
$91.0 million annually. In future years, special fund revenues increase by an amount
necessary to cover DHCD’s annual programmatic costs, net of special funds made
available through the bill’s required transfer. The effect on electricity prices is discussed
separately below.
Small Business Effect: Meaningful.
                                         Analysis
Bill Summary:
Green and Healthy Task Force
The Green and Healthy Task Force must:
      beginning July 1, 2021, meet quarterly for a period of three years;
      advance the alignment, branding, and coordination of resources to more effectively
       deliver green and healthy housing for low-income households in the State;
      examine the public and private resources needed to address the housing needs of
       low-income communities;
      develop policy and statutory recommendations to eliminate barriers from
       low-income households achieving healthy, energy-efficient, and affordable
       housing; and
      engage with interested parties and collaborate with other entities that can help
       advance the goals of the task force, including experts in the field of healthy and
       energy efficient housing.
By July 1, 2022, and each July 1 thereafter, the task force must report its findings and
recommendations to the Secretary of Health, the Secretary of the Environment, PSC, the
Governor, and the General Assembly.
Funding Coordination Plan
DHCD must develop a plan to coordinate funding sources and leverage the greatest funding
possible to support health and safety upgrades, weatherization, energy efficiency, and other
general maintenance for low-income housing. The plan must coordinate funding among
various State and federal programs, as specified. DHCD must coordinate with the
Green and Healthy Task Force and identify other interested stakeholders to develop the
plan. By December 31, 2021, DHCD must submit the plan to the Governor and the
General Assembly.
Current Law:
EmPOWER Maryland
In 2008, the General Assembly passed the EmPOWER Maryland Energy Efficiency Act,
which set target reductions of 15% in per capita electricity consumption and peak demand,
respectively, by 2015 from a 2007 baseline. Legislation in 2017 extended the program
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through its 2018-2020 and 2021-2023 program cycles and established a new annual energy
savings goal of 2.0% per year, based on each electric company’s 2016 sales.
DHCD also participates in EmPOWER through two special fund programs: the
Low Income Energy Efficiency Program (LIEEP) and the Multifamily Energy Efficiency
and Housing Affordability (MEEHA) Program. LIEEP helps low-income households
undertake energy conservation projects in their homes at no charge, while MEEHA
promotes energy efficiency and affordability in the State’s multifamily rental housing
developments for low- and moderate-income households. Approved program costs are
recovered by electric companies on customer bills.
AltaGas and Washington Gas Merger
PSC approved the merger between AltaGas and Washington Gas in 2018. The order
approving the merger required AltaGas to deposit $30.2 million into the Maryland Gas
Expansion Fund to be administered by the Maryland Energy Administration (MEA). MEA
is required to use the funds in its discretion for the purpose of promoting the expansion of
natural gas infrastructure to service businesses, residents, industry, and utility generation
facilities. The funds are administratively held in SEIF in MEA.
PSC included several requirements for the uses of the fund to ensure that the ratepayers
being impacted by the merger receive a majority of the benefits. The requirements include
that a majority of the funds be spent in Washington Gas’s service territory, that efforts be
made to engage with affected counties and municipalities on the disbursement of the
projects and funds, and that at least $4.6 million of the funds be deployed in Calvert,
Charles, Frederick, and St. Mary’s counties. The fund represents approximately 35% the
total benefits anticipated to go to ratepayers as part of the merger.
State Fiscal Effect:
AltaGas and Washington Gas Merger
The fiscal 2022 opening balance of the Maryland Gas Expansion Fund is estimated to be
$26.3 million; the Governor’s proposed fiscal 2022 budget includes the entirety of the
funding for authorized uses by MEA. Therefore, overall special fund expenditures for SEIF
are not affected, but funds are diverted from their original purpose. Special fund revenues
for DHCD increase correspondingly by $26.3 million in fiscal 2022.
DHCD Energy Efficiency Programs
This analysis assumes that DHCD expands its existing energy efficiency programs in order
to meet the bill’s enhanced energy savings requirements. Further, as EmPOWER must
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continue beyond the 2021-2023 planning cycle under current law, the bill’s costs are
assumed to be ongoing in nature.
DHCD’s MEEHA Program funds an average of 15 projects annually, while LIEEP funds
an average of 3,600 projects annually. In order for DHCD to meet the bill’s proposed
energy savings targets, DHCD estimates that MEEHA will need to complete an average of
75 projects annually, while LIEEP will need to complete 18,000 projects annually.
DHCD’s estimate of the cost associated with expanding its programs five-fold to meet the
bill’s enhanced energy savings requirements is approximately $91 million annually,
comprised mostly of contractual services ($55 million) for energy efficiency upgrades and
related costs, plus about $22 million for MEEHA grants, $10 million for local
weatherization agencies, and about $4 million in direct staff and other costs. The
Department of Legislative Services cannot independently verify these costs at this time;
ultimately, costs will depend on how DHCD chooses to implement the bill going forward,
and the department could choose to do so in a more cost-efficient manner (DHCD’s
programs are an expensive component of EmPOWER). Regardless, costs are likely
substantial – in the multiple tens of millions range.
DHCD’s costs are assumed to be paid for by a combination of newly available
AltaGas/Washington Gas merger funds ($26.3 million in total) and EmPOWER surcharge
revenues. As discussed above, DHCD’s costs are collected by electric companies through
the EmPOWER Maryland surcharge – any approved costs in excess of available merger
funding are assumed to be recovered through the surcharge. Accordingly, special fund
revenues increase significantly – potentially by $91 million or more annually – from
additional EmPOWER surcharge revenue to the extent necessary to cover additional costs.
The amount and timing will depend on the amount and timing of approved cost collection
by PSC. For context, utility revenue requirements for the EmPOWER EE&C programs
totaled about $226 million in 2019.
This estimate assumes that DHCD can provide staff for the Green and Healthy Task Force
and develop required plans with existing budgeted resources and/or those resources
transferred under the bill. It further assumes that costs for other agencies related to the bill
are minimal and absorbable within existing budgeted resources.
Local Fiscal Effect: Local weatherization agencies may benefit from funds received from
DHCD under the bill; conversely, some local governments do not receive funding or
assistance from the Maryland Gas Expansion Fund – mostly those affected by the
AltaGas/Washington Gas merger. The effect on a particular local government is unknown
but could be meaningful.
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Small Business Effect: Small businesses engaged in weatherization projects for DHCD
benefit from a significant increase in program expenditures; conversely, small businesses
engaged in natural gas expansion projects no longer receive funding from the
Maryland Gas Expansion Fund. Other small businesses are also affected by the outcome
of the bill – increased weatherization and less availability of natural gas infrastructure.
Additional Comments: The EmPOWER surcharge is assessed on utility customers to pay
for the program. State and local governments, as electricity customers, and small
businesses, will ultimately pay for additional expenditures by DHCD under the bill when
those costs are recovered by electric companies through rates. The timing and amount of
rate recovery is unknown.
                               Additional Information
Prior Introductions: SB 740 of 2020, a similar bill, received a hearing from the Senate
Finance Committee, but no further action was taken. Its cross file, HB 982, received a
hearing from the House Economic Matters Committee, but no further action was taken.
Designated Cross File: SB 462 (Senator Feldman) - Finance.
Information Source(s): Department of Housing and Community Development; Public
Service Commission; Department of Budget and Management; Maryland Department of
the Environment; Department of Human Services; Maryland Energy Administration;
Department of Legislative Services
Fiscal Note History:      First Reader - February 2, 2021
rh/lgc
Analysis by: Stephen M. Ross                           Direct Inquiries to:
                                                       (410) 946-5510
                                                       (301) 970-5510
HB 379/ Page 5
Statutes affected: 
Text - First - Public Utilities – Low–Income Housing – Energy Performance Targets: 7-211.1 Public Utilities, 2-022 Public Utilities, 7-211.2 Public Utilities, 7-207.2 State Government