On July 11, 2017, the Connecticut General Assembly enacted H.B. 7208 (“Revised C-PACE Statute”) to make several minor changes to the existing statute governing the State’s commercial property assessed clean energy (or “C-PACE”) program.[1] All of the changes are favorable.
Specifically, the Revised C-PACE Statute: (1) expands the program to include C-PACE financing for energy efficient new construction; (2) adds leases and power purchase agreements as permitted financing methods for third-party capital providers; (3) establishes the name “benefit assessment liens” for liens arising under the C-PACE program (referred to here as “Program Liens”) and specific provisions governing the operation of Program Liens (described below). The bill repeals and replaces Section 16a-40g of the general statutes (the “Existing Statute”) effective as of October 1, 2017.
The most important change to the Existing Statute appears to be some minor wording changes to a section of the Existing Statute describing certain types of “energy improvements” permitted to be financed under the C-PACE program. This category of qualifying “energy improvements” is described as including any renovation or retrofitting of qualifying property to reduce energy consumption. The Revised C-Pace Statute adds the words “improvement” and “energy efficiency” such that the this category of financeable energy property is now described as “any improvement, renovation, or retrofitting to reduce energy consumption or improve energy efficiency. [2]
Under the Program Lien rules, there is a lien on the property for all amounts due and payable. Noteworthy for creditors is that a property foreclosure to satisfy past payment obligations extinguishes the Property Lien only with respect to the payment obligations assessed through the foreclosure date. The Program Lien continues to apply to the property with respect to any payments due to paid in the future.
According to a report by the Energy and Technology Committee and public comments by Connecticut Green Bank (the “Green Bank”), the addition of the words “or to improve energy efficiency” to the definition of “energy improvements” was important to make it clear that financing under Connecticut’s C-PACE program is available to new construction.[3] The Green Bank brought the bill to the committee’s attention,[4] pointing out that under the Existing Statute Connecticut’s C-PACE program is “solely targeted at retrofit projects for existing buildings since the program’s measure of energy savings requires an existing energy usage benchmark to compare against.”[5] The Green Bank is responsible for administering the C-PACE Program,[6]
The Green Bank now anticipates demand and market opportunities to use C-PACE financing to construct energy efficient new buildings.[7] These buildings would not have would obtained the benefits of the program without revisions to the statute because they are constructed to be energy efficient from the outset and therefore are not expected to need upgrades in the near term to “reduce energy consumption” (i.e., to obtain PACE financing the buildings would need to be constructed with old technology in order to later satisfy a benchmark reduction standard through retrofitted improvements).
Overall, the Revised C-PACE Statute makes relatively minor changes to the program. Nonetheless, the changes are all favorable and designed to expand PACE financing. Hopefully, further expansion will follow in the form of a residential PACE program in Connecticut. The General Assembly is currently considering SB 973, which would establish a new residential PACE program administered by the Green Bank.[8]
[1] For a general discussion of PACE financing programs, see our [prior PACE blog post].
[2] In other words, the bill changed this category of “energy improvements” by adding, (1) “improvements” to the types of financeable property, and (2) the term “improve energy efficiency” as a purpose that will allow such property to qualify for financing under the program.
[3] See Energy and Technology Committee, Joint Favorable Reports: H.B. 7208 “An Act Concerning the Commercial Property Assessed Clean Energy Program” (Mar. 16, 2017) (the “Committee Report”); “Statement of the Connecticut Green Bank on House Bill 7208 (Mar. 7, 2017) (the “Green Bank’s Statement”).
[4] See Committee Report.
[5] See Green Bank’s Statement.
[6] Interestingly, the Green Bank was the first green bank in the United States, established approximately five years ago.
[7] See Green Bank’s Statement.
[8] Presently, Connecticut has a statute permitting residential programs, but no municipalities have signed on.
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