California Regulations Require Disclosure of Energy Use in Buildings

On March 7, 2018, the California Energy Commission (CEC) adopted regulations to implement California Assembly Bill 802 (AB 802) (codified at California Public Resource Code Section 25402.10), which requires owners of commercial and nonresidential building(s) 50,000 square feet or larger to submit energy data starting with the year 2017 to the CEC using the United States Environmental Protection Agency (EPA) ENERGY STAR® Portfolio Manager, subject to certain exceptions.

Through ENERGY STAR, the EPA offers a 1–100 ENERGY STAR score, which is available for more than 20 different types of buildings and plants. An ENERGY STAR score enables the building owner and prospective purchasers and tenants to compare a facility’s actual energy performance to similar facilities nationwide. A score of 50 represents typical performance, while a score of 75 indicates that the facility performs better than 75 percent of all similar facilities nationwide. Certification is given on an annual basis, so a building must maintain its high performance to be certified year to year.

Background

Although the ENERGY STAR is a voluntary program, California Assembly Bill 1103 (AB 1103) (formerly codified at California Public Resource Code Section 25402.10), which was enacted in 2007, mandated that owners of certain nonresidential property disclose specified ENERGY STAR Portfolio Manager benchmarking data and ratings for their buildings for the most recent 12-month period to a prospective buyer, lender or tenant in connection with any sale, financing or leasing of at least 10,000 square feet.

AB 1103, however, was plagued with implementation problems. In particular, although AB 1103 required utility and energy providers to release the data necessary to allow building owners to comply with the disclosure requirements, many utility providers would not release such information without written authorization from building tenants, who were the utility customers.

The problems with AB 1103

In many cases, property owners were unable to obtain tenants’ consent to the release of their energy usage data, particularly where the tenants had no obligation under their leases to do so. Consequently, many property owners were unable to comply with the disclosure requirements of AB 1103.

In response to these problems with AB 1103, California enacted AB 802 in 2015, which created a new energy-use disclosure program for the State of California. AB 802 repealed and replaced AB 1103’s energy disclosure requirements in connection with a sale, financing or leasing with a new Public Resource Code Section 25402.10, which requires owners of certain buildings of at least 50,000 square feet to provide ENERGY STAR benchmarking data to the CEC, instead of potential buyers, lenders and tenants.

Five cities in California (San Francisco, Los Angeles, Berkeley, San Jose and San Diego) already have adopted building energy benchmarking disclosure requirements known as an Existing Building Energy and Water Efficiency Ordinance (EBEWE) for their property owners.

When did AB 802 take effect?

The energy benchmark reporting requirement for "disclosable buildings" began June 1, 2018 and is required annually thereafter for buildings with no residential utility accounts (commercial buildings). Compliance reporting is due by June 1st of every year starting 2018 to the CEC or local EBEWE.

A disclosable building is a commercial building (or group of buildings served by one electrical meter) over 50,000 square feet or a residential building (or group of buildings served by one electrical meter) over 50,000 gross square feet and having 17 or more utility accounts. For residential buildings, the first required due date was June 1, 2019 and annually thereafter.

Penalties for non-compliance

Building owners who do not comply (as well as those submitting incorrect or incomplete data) may be subject to civil penalties. Under California Public Resources Code Section 25321(a)(1), the civil penalty shall not be less than $500 nor more than $2,000 for each category of data the person did not provide and for each day the violation has existed and continues to exist. The CEC will notify the offending party of the violation and provide 30 days to correct the violation.

Content credit: Robert J. Sykes, partner of Cox, Castle & Nicholson LLP.