STATE OF CALIFORNIA HEALTH AND HUMAN SERVICES AGENCY

EDMUND G. BROWN JR., GOVERNOR

DEPARTMENT OF COMMUNITY SERVICES AND DEVELOPMENT

P.O. Box 1947 Sacramento, CA 95812-1947 (916) 576-7109 (916) 263-1406 (FAX) (916) 263-1402 (TDD)

July 8, 2011

Robert C. Adams, Supervisor, WAP U.S. Department of Energy Office of Weatherization & Intergovernmental Programs 950 LEnfant Plaza Washington, DC 20585 Dear Mr. Adams: The Department of Community Services and Development (CSD) remains committed to ensuring maximum resources are available to low-income Californians during these challenging times. Our partnership with you, your staff at the U.S. Department of Energy (DOE), and our network of providers have produced some significant accomplishments in meeting the energy needs of Californias vulnerable population. Like many other states, California has faced some significant challenges that have delayed our ability to meet our American Reinvestment and Recovery Act (ARRA) Weatherization Assistance Program (WAP) production goals within the existing federal timeframe. These include federal requirements in connection with prevailing wage rates for weatherization workers and the implementation of the energy audit, which was rarely used in California before ARRA. Staff at CSD has successfully worked with your office to address those challenges, though valuable time was lost in the process. In preparation for our July 18th conference call, I want to bring to your attention a number of recent actions or guidance by DOE that present significant barriers and further impede our ability to meet production projections. Multi-Unit Development (MUD) 66% Rule: As was detailed in the draft letter provided for your review on July 5th, CSDs network of weatherization service providers has struggled with DOEs guidance as it relates to MUD whole building weatherization. Before the advent of ARRA, weatherization of entire buildings was not feasible because the small size of the grant made local funding inadequate for large projects. Consequently, weatherization providers have traditionally targeted the neediest households, whether they resided in a single-family dwelling or in a single unit within a larger building, California providers simply lacked the necessary experience to tackle large projects. Based on our legal analysis, the single unit approach historically followed by CSD is tenable, though CSD supports DOEs objective of weatherizing entire buildings

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whenever possible. Affording CSD the flexibility in establishing standards for single units would enhance provider productivity. This approach would also enable California providers to serve the neediest families when the ARRA program is over and funding returns to much lower levels. Where CSDs larger providers can readily meet the requirements for whole MUD weatherization and the local housing stock provides an opportunity to perform weatherization on high-rise, multifamily buildings, several other federal restrictions are problematic. Leveraging with Other Federal Fund Sources: Currently, the installation cost of a measure may be reduced by using non-WAP funds to buy-down the cost of the measure and achieve the required Savings-to-Investment Ratio (SIR) of 1.0. However, no federal funds may be used for this purpose. This is highly problematic because much of the funding that is available during the stimulus period is federal, either directly from ARRA or from other federal programs that were conserved because of the availability of stimulus funding. As the stimulus package was designed to maximally infuse the economy with federal funds to spur growth in the absence of private or local investment, it seems counterproductive to prohibit leveraging with the most readily available source of funds. The net result has been reduced scopes of work in audited properties and lower expenditures per unit from WAP dollars. Energy Audit Restrictions on SIR Calculations: The State of Californias Large Multi-Family Energy Audit Protocol requires not only that, proposed measures meet an individual 1.0 SIR threshold, but also that the entire package of WAP measures must, in the aggregate, meet a 1.0 threshold, absent any additional non-federal funds used for a buy-down of measures. This results in reduced scopes of work even when non-federal sources of funding are available for buy-down. The table below is a simple illustration of this point: Measure DWH Boiler Lighting Heating System Total Cost 10,000 10,000 10,000 $30,000 SIR 1.0 1.0 .5 .83 Funding 10,000 WAP 10,000 WAP 5,000 WAP / $5,000 Other non-fed $25,000 WAP / $5,000 Other non-fed

In this illustration, while the heating system can be individually bought down using other funding, because the SIR of the heating system (without the non-federal funding) lowers the total package SIR below the 1.0 threshold, the heating system has to be eliminated and the WAP allocation for the project is accordingly reduced by $5,000. We understand the objective of WAP is to invest in cost-effective weatherization and that measures that are not cost-effective should be eliminated, but allowing the buy-down measures that meet a .5 SIR and higher would still enable our providers to meet the programs goals while providing for an increased WAP expenditure per unit.

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Mold Disclaimer / Hold Harmless Disclosures: The new requirement for the mold disclaimer/hold harmless disclosure was designed to protect weatherization providers; however, it has created liability issues and legal problems for these same providers. Our network has found that making mold an issue without adequate legal safeguards creates unintended consequences. Putting weatherization workers in the position of making decisions on the presence of mold in a home, with no mold training, and forcing the homes occupants to then choose between holding the service provider harmless and deferring weatherization activity until after mold remediation is conducted, increases the providers liability because weatherization workers lack the expertise to advise on or explain the consequences of these options to customers. Notarization of Income Eligibility Statements: DOEs requirement to have income eligibility statements notarized has delayed production and in some areas brought production to a halt. We believe that the existing procedure of a questionnaire, signed by all adult members of the household meets the intent of the requirement without posing additional barriers. Without notaries on staff, there will be a delay (6 10 weeks for training & licensing) in the intake process and many rural providers that accept applications by mail would have to pass the burden of notarization on to the customer, which prevents some clients from applying. Call-Back Policy: Currently the only method to address call-backs where DOE funds must be used to pay for work to previously completed units, but the provider needs to go back to fix a deficient measure, is to have the entire unit taken out of the DOE reporting system and the costs subtracted from the DOE funds. This is problematic because the providers retain unit level data via standalone systems, which requires the provider to extract all data relevant to that unit as well as extract the same data from the State system. It is a major undertaking to reprogram the local systems to back out all the data and provide the DOE reports. Extracting the information from the State system is further complicated since the provider has received reimbursement. This poses a burden on CSD to manually track call-back work that is removed from the various systems, and re-entered. Due to these challenges, providers are using other funds to cover the cost of any measure correction after the unit has been reported to CSD as complete. CSD is requesting the flexibility to allow call-back expenses to be approved at the State level. I look forward to working with you on a resolution to these issues. Thanks for your ongoing partnership with CSD and the State of California. Sincerely,

JOHN A. WAGNER Interim Director