On May 23, the Pennsylvania House of Representatives approved Senate Bill 234, which creates the Property Assessed Clean Energy (PACE) Program. SB 234, which was approved by the Senate in January of this year, would help owners of agricultural, commercial and industrial properties obtain low-cost, long-term financing for energy efficiency, water conservation and renewable energy projects. The program would not include multifamily housing or other residential property.

SB 234 specifies that the project to be funded must be affixed to real property and be a “clean energy project,” “water conservation project,” or “alternative energy system,” each of which is a defined term under SB 234. All projects must generate measurable energy savings or reductions in water usage, and be installed by contractors with the necessary technical experience, in good standing under all applicable federal, state and local licensing and other laws, and up to date on all taxes owned to the municipality. Applicable bonding requirements must also be met.

A “clean energy project” is broadly defined to include any project that replaces or supplements an existing, nonrenewable energy system with a renewable system, as well as retrofitting projects and energy conservation measures.

A “water conservation project” is defined to mean a project that reduces the usage of water, or increases the efficiency of water usage.

An “alternative energy system” is defined to include energy generated from “alternative energy sources” as defined in the Alternative Energy Portfolio Standards Act, which includes, among other things, solar, wind, hydro, geothermal, and biomass sources. SB 234 would also permit other alternative energy sources if so desired by the municipality implementing a program.

SB 234 would be implemented at the county and local level, and be funded through local assessments on the properties designated for participation in the program. Municipalities and other local governmental entities would be authorized to issue bonds to finance the cost of improvements upfront, with such bonds secured by the revenues from the assessments. SB 234 specifically prohibits as a funding mechanism the issuance of general obligation bonds or other indebtedness secured by a governmental entity’s full faith, credit and taxing power. Funding could also be secured through private loans and power purchase contracts.

Regardless of the source, proceeds of the funding could only be used for certain specified purposes, including: (i) the payment of the costs of the qualified project, (ii) the payment of costs of related and necessary infrastructure, and (iii) costs of issuance. Proceeds could also be used to pre-fund expected normal and customary administrative and operating costs related to the project.

SB 234 now goes to the executive branch for approval. Governor Wolf is expected to sign the legislation. It will go into effect 60 days thereafter.

For more information, visit www.mcneeslaw.com