HB-5397, As Passed Senate, December 16, 2014

SUBSTITUTE FOR

HOUSE BILL NO. 5397

A bill to authorize certain municipalities to adopt

residential clean energy programs to promote the use of renewable

energy systems and energy efficiency improvements by owners of

certain real property in certain districts; to provide for the

financing of those programs through commercial lending, loans by a

nonprofit corporation, utility bill charges, and other means; to

authorize municipalities to issue bonds, notes, and other evidences

of indebtedness and to pay the cost of renewable energy systems and

energy efficiency improvements; to provide for the repayment of

bonds, notes, and other evidences of indebtedness; to authorize

fees; to prescribe the powers and duties of certain governmental

officers and entities; and to provide for remedies.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

Sec. 1. This act shall be known and may be cited as the

"municipal utility residential clean energy program act".

Sec. 3. As used in this act:

(a) "District" means a district created under a clean energy

program by a municipality.

(b) "Energy efficiency improvement" means equipment, devices,

or materials intended to decrease energy consumption, including,

but not limited to, all of the following:

(i) Insulation in walls, roofs, floors, foundations, or heating

and cooling distribution systems.

(ii) Storm windows and doors; multi-glazed windows and doors;

heat-absorbing or heat-reflective glazed and coated window and door

systems; and additional glazing, reductions in glass area, and

other window and door system modifications that reduce energy

consumption.

(iii) Automated energy control systems.

(iv) Heating, ventilating, or air-conditioning and distribution

system modifications or replacements.

(v) Air sealing, caulking, and weather-stripping.

(vi) Lighting fixtures that reduce the energy use of the

lighting system.

(vii) Energy recovery systems.

(viii) Day lighting systems.

(ix) Electrical wiring or outlets to charge a motor vehicle

that is fully or partially powered by electricity.

(x) Measures to reduce the usage of water or increase the

efficiency of water usage.

(xi) Any other installation or modification of equipment,

devices, or materials approved as a utility cost-savings measure by

the governing body.

an energy efficiency improvement or the acquisition, installation,

or improvement of a renewable energy system.

(d) "Governing body" means the township board of a township or

the council or other similar elected legislative body of a city or

village.

(e) "Home energy audit" means an evaluation of the energy

performance of a residential structure, by a qualified person using

building-performance diagnostic equipment and complying with

American national standards institute approved home energy audit

standards, that meets both of the following requirements:

(i) Determines how best to optimize energy performance while

maintaining or improving human comfort, health, and safety and the

durability of the structure.

(ii) Includes a baseline energy model and cost-benefit analysis

for recommended energy efficiency improvements.

(f) "Municipality" means a city, village, or township, all or

some of whose residents are served by a municipal electric utility.

(g) "Person" means an individual, firm, partnership,

association, corporation, unincorporated joint venture, or trust,

organized, permitted, or existing under the laws of this state or

any other state, including a federal corporation, or a combination

thereof. However, person does not include a local unit of

government.

(h) "Property" means privately owned residential real property

located within the municipality.

(i) "Record owner" means the person or persons possessed of

the most recent fee title or land contract vendee's interest in

property as shown by the records of the county register of deeds.

(j) "Renewable energy resource" means a resource that

naturally replenishes over a human, not a geological, time frame

and that is ultimately derived from solar power, water power, or

wind power. Renewable energy resource does not include petroleum,

nuclear, natural gas, or coal. A renewable energy resource comes

from the sun or from thermal inertia of the earth and minimizes the

output of toxic material in the conversion of the energy and

includes, but is not limited to, all of the following:

(i) Biomass.

(ii) Solar and solar thermal energy.

(iii) Wind energy.

(iv) Geothermal energy.

(v) Methane gas captured from a landfill.

(k) "Renewable energy system" means a fixture, product,

device, or interacting group of fixtures, products, or devices on

the customer's side of the meter that use 1 or more renewable

energy resources. Renewable energy system includes a biomass stove

but does not include an incinerator or digester.

(l) "Residential clean energy program" or "program" means a

program as described in section 5(2).

Sec. 5. (1) Pursuant to section 7, a municipality may do all

of the following:

(a) Establish a residential clean energy program.

(b) From time to time, designate a district or districts

within its territorial jurisdiction where residents are served by a

municipal electric utility. Districts may be separate, overlapping,

or coterminous.

(2) Under a residential clean energy program, the municipality

may enter into a contract with a record owner of property within a

district to finance or refinance 1 or more energy projects on the

property. The financing or refinancing may include the cost of

materials and labor necessary for installation, home energy audit

costs, permit fees, inspection fees, application and administrative

fees, bank fees, and all other fees that may be incurred by the

record owner for the installation on a specific or pro rata basis,

as determined by the municipality.

Sec. 7. (1) To establish a residential clean energy program,

the governing body of a municipality shall take the following

actions in the following order:

(a) Adopt a resolution of intent that includes all of the

following:

(i) A finding that the financing of energy projects is a valid

public purpose.

(ii) A statement of intent to provide funds for financing

energy projects, which may be repaid by charges on the electric

utility bills for the properties benefited, with the agreement of

the record owners.

(iii) A description of the proposed arrangements for financing

the program.

(iv) The types of energy projects that may be financed.

(v) Reference to a report on the proposed program as described

in section 11(1) and the internet address and office location where

the report is available under section 11(2).

(vi) The time and place for a public hearing on the proposed

program.

(b) Hold a public hearing on the proposed program, including

the report described under section 11.

and setting forth its terms and conditions, including all of the

following:

(i) Matters required by section 11 to be included in the

report. For this purpose, the resolution may incorporate the report

or an amended version thereof by reference.

(ii) If the program is established by a resolution, a

description of which aspects of the program may be amended without

a new public hearing and which aspects may be amended only after a

new public hearing is held.

(2) A residential clean energy program established by

resolution or ordinance may be amended by resolution of the

governing body or ordinance, respectively. Before the governing

body adopts an amendment by resolution, the governing body shall

conduct a public hearing if required pursuant to subsection

(1)(c)(ii).

Sec. 9. (1) A residential clean energy program may be

administered by a nonprofit corporation, including, but not limited

to, a nonprofit corporation formed under section 4o of the home

rule city act, 1909 PA 279, MCL 117.4o. The nonprofit corporation's

administration of the program may be funded by money appropriated

by the municipality, transferred from the municipality's electric

utility, if any, or provided by private sources.

(2) A residential clean energy program may provide for

financing energy projects through loans made to property owners by

the municipal electric utility, by a nonprofit corporation

described in subsection (1), or by commercial lenders. Loans by

commercial lenders may be facilitated by the nonprofit corporation.

(3) If a nonprofit corporation makes loans to owners of

property under subsection (2), all of the following apply:

(a) Interest shall be charged on the unpaid balance at a rate

of not more than the adjusted prime rate as determined under

section 23 of 1941 PA 122, MCL 205.23, plus 4%.

(b) A loan shall be repaid in monthly installments, subject to

section 11(1)(i).

applicable to the extension of credit for home improvements.

(4) The program may provide for billing customers of the

municipal electric utility any fees under section 11(1)(h)(ii) and

the monthly installment payments as a per-meter charge on the bill

for electric services. The payment shall be considered part of the

charges for electric services to the property for purposes of

enforcement as provided under section 21 of the revenue bond act of

1933, 1933 PA 94, MCL 141.121.

(5) Electric service may be shut off for nonpayment of the

per-meter charge under subsection (4) in the same manner and

pursuant to the same procedures as used to enforce nonpayment of

other charges for electric service. If notice of a loan under the

program is recorded with the register of deeds for the county in

which the property is located, the obligation to pay the per-meter

charge shall run with the land and be binding on future customers

contracting for electric service to the property.

Sec. 11. (1) The report on the proposed residential clean

energy program required under section 7 shall include all of the

following:

(a) A form of contract between the municipality and record

owner governing the terms and conditions of financing under the

program.

(b) Identification of an official authorized to enter into a

program contract on behalf of the municipality.

to be provided by the municipality under the program.

(d) An application process and eligibility requirements for

financing energy projects under the program, including the classes

of property eligible.

(e) Subject to section 9(3), a method for determining interest

rates on loan installments, repayment periods, and the maximum

amount of a loan.

(f) An explanation of how monthly installment payments on

loans will be billed and collected under section 9(4) or otherwise.

(g) A plan for raising capital to finance improvements under

the program. The plan may include any of the following:

(i) The sale of bonds or notes, subject to the revised

municipal finance act, 2001 PA 34, MCL 141.2101 to 141.2821.

(ii) Amounts to be advanced by the municipality through funds

available to it from any other source.

(iii) Owner-arranged financing from a commercial lender whether

or not facilitated by a nonprofit corporation under section 9(2).

Under owner-arranged financing, a municipal electric utility may

collect monthly installment payments on the electric utility bills

pursuant to section 9(4) and forward payments to the commercial

lender or the record owner may pay the commercial lender directly.

(h) Information regarding all of the following, to the extent

known, or procedures to determine the following in the future:

(i) Any reserve fund or funds to be used as security for bonds

or notes described in subdivision (g).

(ii) Any application, administration, or other program fees to

be charged to a record owner participating in the program. The fees

shall be used to finance costs incurred by the municipality as a

result of the record owner's participation.

(i) A requirement that the term for repayment of a loan to a

property owner as described in section 9(2) not exceed the

anticipated useful life of the energy project paid for by the loan

or 180 months, whichever is less.

(j) Provisions for marketing and participant education.

(k) Provisions for adequate debt service reserve fund.

(l) Quality assurance and antifraud measures.

(m) A requirement that a baseline home energy audit be

conducted before an energy project is undertaken. After the energy

project is completed, the municipality shall obtain verification

that the renewable energy system or energy efficiency improvement

was properly installed

and is operating as intended.

(2) The municipality shall post the report under subsection

(1) on the municipality's website, if any, and make the report

available for review at the office of the clerk or the official

authorized to enter contracts on behalf of the municipality under

the residential clean energy program.