October 12, 2006
ENERGY CONSERVATION LOAN FUND
By: Kevin E. McCarthy, Principal Analyst
You asked for a legislative history of the Energy Conservation Loan Fund (ECLF). You also asked for a discussion of the relationship between CGS § 32-317 and § 16a-40b.
PA 79-509 (codified at CGS § 16a-40 et seq.) required the Department of Economic Development (DED) to establish the ECLF. The original legislation authorized the fund to make low interest loans to Connecticut residents for the purchase and installation of approved insulation, energy conservation, and alternative energy devices. Later that year, the legislature made the Department of Housing (DOH), rather than DED, responsible for administering the program.
The legislature has amended the laws governing the program repeatedly since 1979. Among other things, it has expanded the program to cover larger buildings and increased loan limits and bond authorizations funding. Most recently, the legislature reduced the interest rate payable on certain ECLF loans.
PA 92-208, which transferred responsibility for making new loans from DOH back to DED, is codified at CGS § 32-317. The DOH commissioner continued to be responsible for loans made before July 1, 1992. The two agencies were subsequently merged into the Department of Economic and Community Development (DECD). The program is currently administered by the Connecticut Housing Investment Fund, a nonprofit organization, on behalf of DECD. The program provides loans for such things as replacement heating systems and windows, insulation, and solar energy systems. The program provides loans for single and multi-family housing. Owners of one-to four-unit buildings may borrow up to $15,000 and owners of larger buildings and projects may borrow up to $2,000 per unit, up to $60,000 per building, for a period of 10 years for eligible improvements. Further information about the program is available online at http: //www. chif. org/owner_borrowers/index. shtml#.
LEGISLATIVE HISTORY OF ENERGY CONSERVATION LOAN FUND
PA 79-509 required the DED commissioner to establish the ECLF financed by state-backed bonds. Under the original legislation, the fund was to make low cost loans of between $400 and $3,000 to Connecticut residents for the purchase and installation of approved insulation, energy conservation, and alternative energy devices. The act made buildings with up to four residential units eligible for loans. The interest rate could not be more than 1% above that paid on the most recently issued state bonds. Loan repayments went into the General Fund. The act authorized the issuance of up to $3 million in bonds for the fund. The act required the DED commissioner to adopt regulations on loan eligibility and terms and conditions, repayment requirements, and other measures needed to operate the fund. The act required the secretary of Policy and Management to adopt regulations for determining which materials and devices qualified for the loans.
PA 79-10, October Special Session, transferred responsibility for administering the program from DED to DOH. It also: (1) increased the bond authorization to $6 million, (2) limited the program to households earning up to $30,000, and (3) broadened the definition of alternative energy systems.
PA 80-453 increased the bond authorization to $8 million. PA 81-306 increased the authorization to $13 million. It also made ECLF a revolving fund by authorizing the use of repayments to make new loans, although interest payments continued to go into the General Fund. The act increased, from $30,000 to $33,000, the maximum income households could have and be eligible for loans.
PA 82-348 increased the bond authorization to $17 million and made many substantive changes to the program, including:
1. increased the income limit to $45,000;
2. required DOH to establish a schedule of interest rates based on the borrower's income, ranging from 0% to 1% above the interest rate on state bonds;
3. allowed part of the ECLF funding to be used to make loans for buildings with more than four units, with higher loan limits and no income limits for the building owners (although the act required that the Housing commissioner give preference to buildings with low and moderate income occupants);
4. required electric and gas companies to subsidize the difference between the interest charged on the loans and the interest payable on the bonds funding the program, subject to a cap and adjusted annually; and
5. required DOH to amend the program's regulations.
PA 83-427 increased the loan limits for buildings with two or more units and made more money available for buildings with more than four units.
PA 85-601, among other things:
1. merged an existing low-interest loan program to convert electric home heating systems into the ECLF program;
2. eliminated the limit on the share of the ECLF funding that could be used for buildings with more than 10 units; and
3. increased the maximum loan amounts for these larger buildings;
4. allowed, within specified limits, ECLF funds to be used to replace furnaces and boilers.
PA 86-189 extended for one year the limit on the share of ECLF funding available for buildings with more than four units, but eliminated the limit on the share of funding that could be used for boiler and furnace replacements in smaller buildings.
PA 87-578 changed the program's income limits. Rather than being statewide, the act based the limits on where the applicant lives and the size of his household. It also:
1. increased the maximum loan amount to $6,000 for one- to four-unit buildings,
2. changed the utility subsidy formula, and
3. gave the state a lien on the properties that receive ECLF loans or loan guarantees.
PA 89-312 further modified the utility subsidy loan formula.
PA 92-166 authorized the Department of Housing to issue deferred loans as well as conventional loans under the Energy Conservation Loan Program and other DOH programs.
PA 92-208 transferred responsibility for making new loans from the Department of Housing (DOH) to DED. It authorizes $6 million in bonds for the new DED program. The money is to be placed in an energy conservation revolving loan account. The DOH commissioner continues to be responsible for loans made before July 1, 1992. The act requires him, within 60 days after the close of FY 1991-92 and each fiscal year thereafter, to transfer any balance remaining in the Housing Repayment and Revolving Loan Fund to the new energy conservation revolving loan account.
The act continues the DOH commissioner's annual responsibilities to calculate the utility companies' interest rate subsidy and report on the program to the General Assembly (for loans made before July 1, 1992). It gives the same responsibilities to the DED commissioner for loans made after that date.
PA 92-7, May Special Session, required the DOH commissioner, between the close of each fiscal year and before August 1, to transfer any balance from loan repayments under the Energy Conservation Loan Program to the new Energy Conservation Revolving Loan Account administered by the Department of Economic Development.
PA 95-217 allowed the ECLF to be used for certain electric heating and cooling technologies. The act additionally allowed the fund to be used for:
1. purchase of secondary heating systems using electric technologies other than electrical resistance,
2. installation of these systems,
3. conversion of electric resistance primary heating to another electric technology, and
4. purchase and installation of combined heating-cooling systems.
The act required that any technology be highly efficient to be eligible for the program.
PA 97-173 allowed DECD to make deferred loans, in addition to its current loans, available for (1) installing and purchasing housing insulation, alternative energy devices, energy conservation materials, and replacement furnaces and (2) installing energy efficient heat in electrically heated housing built before 1980. The interest payment on a deferred loan is due and payable, but payment on principal may be deferred to a time certain.
The act increased, from $6,000 to $15,000, the maximum amount for loans or deferred loans for installation of the items in a residential structure with four or fewer dwelling units. It increased the maximum amount for loans or deferred loans available for residential structures with more than four dwelling units from $1,000 to $2,000 per unit and increased the maximum loan amount allowed per structure from $30,000 to $60,000. It increased the maximum amount allowed for loan guarantees in structures with five to 30 units from $1,500 to $3,000 for each dwelling unit benefiting from the loan.
PA 05-2, October 25, 2005 Special Session, decreased the maximum interest on such loans for households whose income is between 115% and 150% of area median income from 1% above the interest rate on the state's most recent general obligation bonds to a flat 3%. The interest rate reduction does not apply to loans for heat pumps, solar systems, passive solar additions, aluminum and vinyl siding, replacement central air conditioning, and replacement roofs. The act authorized an additional $5 million in general obligation bonding for the ECLF.