BEFORE THE
PUBLIC UTILITIES COMMISSION
OF THE STATE OF CALIFORNIA
Order Instituting Rulemaking Regarding Policies,
Procedures and Rules for the California Solar Initiative,
The Self Generation Incentive Program and Other
Distributed Generation Issues
Rulemaking 12-11-005
(Filed November 8, 2012)
PETITION OF
SHOREBREAK ENERGY DEVELOPERS, LLC
FOR MODIFICATION OF DECISION 15-01-027
Kevin R. McSpadden
Attorney for
Shorebreak Energy Developers, LLC
2801 Belden Dr.
Los Angeles, CA 90068
323-356-5793
[email protected]
February 27, 2014
SUBJECT INDEX
Page
Subject Index .........................................................................................................................i
I. Introduction................................................................................................................1
II. Overview…………………………………………………………….………………2
III. The Decision Should Be Modified to Adopt a Form of Deed Restriction…………..4
IV. The Decision Must Be Modified to Eliminate the Requirement that Deed Restrictions
Be Filed 180 Days in Advance ………………………………………………………8
a. The Decision is Arbitrary, Capricious and an Abuse of the Commission’s
Discretionary Authority……………………………………………………….8
b. The Commission’s Requirement Discriminates Against a Large Segment
of the Low Income Community………………………………………………10
V. Request for Stay ……………………………………………………………………...11
VI. CONCLUSION.............................................................................................................12
BEFORE THE
PUBLIC UTILITIES COMMISSION
OF THE STATE OF CALIFORNIA
Order Instituting Rulemaking Regarding Policies,
Procedures and Rules for the California Solar Initiative,
The Self Generation Incentive Program and Other
Distributed Generation Issues
Rulemaking 12-11-005
(Filed November 8, 2012)
PETITION OF
SHOREBREAK ENERGY DEVELOPERS, LLC
FOR MODIFICATION OF DECISION 15-01-027
I.
INTRODUCTION
Pursuant to Rule 16.4 of the California Public Utilities Commission’s (“Commission”)
Rules of Practice and Procedure, Shorebreak Energy Developers, LLC (“Shorebreak”), hereby
files this Petition for Modification of Decision 15-01-027 (the “Decision”).
In this Petition, Shorebreak requests that the Decision be modified to:

adopt a Form of Deed Restriction to eliminate any uncertainty or confusion on the
part of applicants as to whether their deed restriction meets Commission
requirements.

In addition, Shorebreak submits that there is no basis in law or fact to require that a
deed restriction be recorded 180 days in advance of a MASH Application, and that
the Decision be modified to eliminate this requirement.
As explained in more detail below, adopting a pre-approved form of Deed Restriction
will eliminate any uncertainty and provide guidance to applicants. Shorebreak requests that the
Form of Deed Restriction adopted by the Commission be incorporated into the CSI Handbook.
The requirement that a deed restriction be recorded 180 days in advance of a MASH Application
is arbitrary and has the effect of removing a significant portion of the low income community
from the waitlist and must be deleted from the Decision.
II. OVERVIEW
The deed restriction or affordability covenant contained in Section 2852(a)(3)(B) of the
Pub. Util. Code is a promise that at least 20% of the units will be rented to Lower Income
Households and the rental housing units targeted for Lower Income Households are subject to a
Deed Restriction that ensures that the units will be available at an affordable rent for a period of
at least 30 years. As the Decision makes clear, “[a]ny multifamily property that appropriately
demonstrates eligibility under the standards in Section 2852 that apply to multifamily properties
shall meet the MASH low-income documentation eligibility requirement.”1
Other than requiring a 30 year term and that the counterparty to the deed restriction be a
public entity or nonprofit housing provider organized under Section 501(c)(3) of the Internal
Revenue Code, Section 2852 is fairly open ended on what constitutes an acceptable deed
restriction. That led Renewable Energy Partners, on behalf of those Shorebreak customers who
had no recorded deed restriction in place, to look for guidance from the CSI Program
Administrators and the Commission’s Energy Division. The deed restriction given to the
Program Administrators was determined, after review by the Energy Division, to be
1
Decision, mimeo page 56.
2 | P a g e “reasonable.”2 Making the deed restrictions conditioned upon receipt of MASH funds was also
deemed acceptable.3 Our customers were further advised by a Commission staff attorney that
“[t]he eligibility requirement for the MASH program is strictly based on statute and not a CPUC
ruling.”4 Shorebreak recognizes that none of this advice was carved in stone, but it has
reasonably relied on these interpretations in its attempt to meet the Section 2852 documentation
requirements.
The Section 2852 documentation requirements were thereafter modified in the August
2014 version of the CSI Handbook, after a process of public input and participation. Shorebreak
felt the documentation it filed on behalf of its waitlisted customers met the additional
requirements, and no further action would be necessary. The only uncertainty was the deed
restriction, which it requested clarification from the Commission’s Energy Division but, to date,
no response has been received. 5
The Peevey PD, issued for public comment on December 15, 2014, added the further
requirement that “the documentation presented under Section 2852(a)(3)(B) be independently
enforceable and verifiable and not contingent upon participating in the CSI Low Income
programs.”6 Again, Shorebreak felt the documentation it filed on behalf of its waitlisted
customers met the additional requirements, and no further action would be necessary, other than
to advise its customers to remove any conditional language from their deed restriction.
2
See Attachment A.
3
Id.
4
Id.
5
Id.
6
Peevey PD, mimeo page 58.
3 | P a g e The Peevey PD was then replaced by the Picker PD which added the requirement that the
documentation presented under Section 2852(a)(3)(B) “must have been recorded at least 180
days prior to the date of the MASH application, or if recorded within 180 days of MASH
application, replace a similarly complying pre-existing restriction or covenant.”7 The effect of
this modification will be to eliminate most of Shorebreak’s customers on the waitlist, who
happen to be 12,699 otherwise eligible families living in mobile home park communities. No
basis or rationale was offered for this additional requirement other than the Commission was
adopting a “clarification” offered by Everyday Energy/MASH Coalition. The Picker PD was
adopted by the Commission, without modification or discussion, or an opportunity for public
comment, as the Final Decision for this matter. Significantly, as of January 27, 2015 there had
been no indication that a deed restriction must be recorded in advance of the filing of a MASH
Application, certainly not 180 days in advance.8
III.
THE DECISION SHOULD BE MODIFIED TO ADOPT A FORM OF DEED
RESTRICTION
Understanding what form of deed restriction meets the Commission’s requirements has
been challenging at best. Shorebreak’s customers have sought guidance from the Program
Administrators and the Commission’s Energy Division. The most recent request for guidance
from the Energy Division has been ignored. To make matters more confusing, with three
different Program Administrators, one often has to reconcile conflicting advice.
The Commission can fix this confusing labyrinth by simply pre-approving a form of deed
restriction that can be used for meeting the documentation requirements under Section
7
Picker PD, mimeo pages 56, 73.
8
See Multifamily Affordable Solar Housing (MASH) Program Documentation Cover Sheet (October version).
4 | P a g e 2852(a)(3)(B). Adopting a form of deed restriction will eliminate any need for review and will
create certainty that the policies of the MASH program are being met. The presumption would
be that if an applicant uses the pre-approved form adopted by the Commission, that the deed
restriction satisfies the Section 2852(a)(3)(B) requirements.
Attached hereto as Attachment B is a form of deed restriction which Shorebreak submits
will satisfy the Commission’s requirements for proper documentation and can be adopted by the
Commission as a form document. The following is a summary of the Commission’s
requirements thus far, and where in the deed restriction that requirement is found:
Commission Requirements
Form of Deed Restriction
Definitions of “Affordable Housing Costs”,
“Affordable Rent”, and “Lower Income
Households”.
See Section 1(a), incorporates by reference the
definitions contained in Chapter 2
(commencing with Section 50050) of part 1 of
Division 31 of the Health and Safety Code.
Definition of “Low-income residential
housing”
See Section 1(d): “Low-income residential
housing” means the a multifamily residential
complex in which at least 20 percent of the
total housing units are rented to or held out for
rental to Lower Income Households and the
rental housing units targeted for Lower Income
Households are subject to a Deed Restriction
that ensures that the units will be available at
an affordable rent for a period of at least 30
years.” This language in this definition is
taken verbatim from Section 2852(a)(3)(B).
Commitment to affordable Housing.
The commitment is that “at least 20 percent of
the total units (mobile home spaces) are sold or
rented to or held out for rent to Lower Income
Households, in compliance with Section 2852
of the California Public Utilities Code” [See
paragraph B, taken verbatim from Section
2852(a)(3)(B)] and “[t]he maximum rental rate
shall be determined in a manner consistent
5 | P a g e with Section 50053 of the California Health
and Safety Code.” [See paragraph C, taken
verbatim from Section 2852(a)(3)(B)].
The documentation presented under Section
2852(a)(3)(B) be independently enforceable
and verifiable. Decision, page 56.
See recital paragraph D and paragraph 8: “The
Counterparty to the deed restriction must meet
the following criteria: a public entity or
nonprofit housing provider organized under
Section 501(c)(3) of the Internal Revenue Code
that has as its stated purpose in its articles of
incorporation on file with the office of the
Secretary of State to provide affordable
housing to Lower Income Households.” This
language is taken verbatim from Section
2852(a)(3)(B).
See also Paragraph 8: “Notwithstanding
anything contained herein to the contrary, the
parties agree and represent that the rental
housing units targeted for low income
occupants are subject to a Deed Restriction
with the Counterparty non-profit provider
listed below.”
See also Paragraph 10: “Property Owner has
30 days upon receipt of written notification of
default to take and complete remedial action.
If Property Owner fails to take and complete
remedial action within the 30-day period
described above, Counterparty may pursue all
legal and equitable remedies Counterparty may
have at law or in equity, and Counterparty shall
be entitled to specific performance and
enforcement of each and every term, condition
and covenant set forth herein.”
The deed restriction must remain in place for a
period of at least 30 years. See Section
2852(a)(3)(B).
See Paragraph 13: “The term of this DR shall
be for a period of 30 years from the date of this
DR.”
Binding Effect
See Paragraph 8: “The burdens and the
benefits of the DR shall constitute covenants
that shall run with the Real Property for the
6 | P a g e term of this DR and shall be binding upon and
inure to the benefit of the successors in interest
to the Real Property.”
Additional oversight to Commission and
Program Administrators
Although not listed as a requirement, the Deed
Restriction offers the Commission and
Program Administrators the right, but not the
obligation, to oversee the property owner’s
compliance with the deed restriction. See
Paragraph D.
The deed restriction may not be contingent
upon participating in the CSI Low-Income
programs. Decision, mimeo page 56.
The form of deed restriction contains no such
condition.
As demonstrated above, the attached form of Deed Restriction complies with Section
2852 and the Commission’s requirements implementing Section 2852. Adoption by the
Commission of this form of Deed Restriction, and including it in the CSI Handbook as an
attachment, will provide guidance to applicants and give them the certainty of knowing that the
deed restriction they record will be accepted by the Program Administrator and eliminate any
need for review. By adopting a form deed restriction, the Commission can eliminate confusion,
provide certainty, and the Commission can be assured that applicants and the Program
Administrators are complying with the requirements of Section 2852 and are properly
implementing the MASH program.
7 | P a g e IV
THE DECISION MUST BE MODIFIED TO ELIMINATE THE REQUIREMENT
THAT DEED RESTRICTIONS BE FILED 180 DAYS IN ADVANCE
A. The Requirement Is Arbitrary, Capricious and an Abuse of the Commission’s
Discretion.
There is no basis in law or fact for requiring that a deed restriction be filed 180 days in
advance of filing a MASH application. In fact, the Commission offers none. It simply accepts
the self-serving “clarification” from a for-profit competitor of Shorebreak. The effect, though, is
to eliminate a large segment of the low income community from the waitlist that would
otherwise be eligible.
Filing a deed restriction 180 days in advance serves no legitimate government interest.
Whether a deed restriction is filed 180 days in advance, filed at the time the application is filed,
or filed within 30 days after notification that a project qualifies for an incentive payment has the
same effect—a property owner has irrevocably and unconditionally encumbered its property for
a 30 year period with a commitment to provide low-cost affordable housing for a low income
segment of our community.
Not only does the Commission’s order contravene California’s goal of bringing solar
power to low income communities, but it also misses an opportunity to guarantee affordable
housing for low income households for a 30 year period of time. Affordable housing in
California is a serious concern of California’s Department of Housing and Community
Development:
In California, there are approximately 149,000 units of privately-owned, federallyassisted multifamily rental housing plus additional tax credit and mortgage revenue bond
properties, many with project-based rental assistance. These at-risk units are occupied by
elderly persons and families with lower-incomes who cannot afford to pay market rate
rents and who could be displaced if the projects convert. A large percentage of these units
8 | P a g e may convert to market rate as subsidy contracts or regulatory agreements expire.
Potential conversion of affordable units to market rate units is an ongoing and critical
statewide problem. 9
Moreover, it is unlikely that the deed restrictions recorded on government subsidized
housing meet all of the requirements that the Commission laid out; yet the Commission has
arbitrarily and discriminatorily given those applicants a period of time to file conforming deed
restrictions. In this regard, Shorebreak is not aware of any government program requiring that a
deed restriction be in place any longer than the governmental subsidized loans to construct low
income housing, certainly not 30 years.10 In short, why are those applicants that have deed
restrictions in place allowed to file conforming deed restrictions, while those that have no deed
restriction in place are left out in the cold?
Shorebreak and its customers have no issue with filing a deed restriction in a form that
satisfies the Section 2852 requirements; the issue is timing. Shorebreak submits that the process
should be as follows:
Step 1: A deed restriction is filed with the MASH application, executed by the parties.
Step 2: The deed restriction is reviewed by the Program Administrator to confirm
conformity with the Commission’s form of deed restriction and compliance with the MASH
program requirements.
Step 3: Once the deed restriction has been approved, the deed restriction would be
recorded with the county. Otherwise, it makes no sense to record a restriction on the property
9
See http://hcd.ca.gov/hpd/hrc/tech/presrv/ . See also Affordable Rental Housing at Risk of Conversion (Adobe
PDF), an excerpt from the Statewide Housing Plan, provides an overview of this issue in California.
10
Shorebreak only takes issue with the arbitrariness of allowing some applicants an ability to file conforming deed
restriction, but not allow other applicants to file a new deed restriction, but has no desire to challenge the deed
restrictions of other applicants.
9 | P a g e that could be rejected by a Program Administrator, resulting in a waste of time and resources for
all.
B. The Commission’s Requirement discriminates against a Large Segment of the
Low Income Community
Reading between the lines, Shorebreak submits that the Commission has bought into
Everyday Energy/MASH Coalition’s argument that mobile home parks are not the intended
beneficiaries of the MASH program11 or that Mobile Home Park owners are somehow pocketing
the proceeds.12 None of this is supported by the record and was, in fact, the subject of
Shorebreak’s Motion to Strike. In any event, even if their arguments are given some weight by
the Commission, nothing could be further from the truth.
Yet the effect of the Commission’s “clarification” is to disenfranchise a whole segment
of the low income community from participation in the MASH program. This is true because
mobile home parks generally do not have an existing deed restriction in place and, by requiring
that the deed restriction be recorded 180 days in advance of the deed restriction, it is probable
11
For mobile home parks, tenants are receiving the benefit of California’s Solar Initiative. Unlike some low income
housing, space in a mobile home park is at a premium. It is not always feasible to locate a ground mount system,
and roof top space is limited. The alternative is a carport mounted structure. However, as compared to rooftop
systems, car port structures are up to 50% more expensive. Over 90% of the installed capacity and planned new
capacity on the waitlist at mobile home parks is represented by carport systems. In addition, carport systems offer
protected parking areas and shaded common area; i.e., direct tenant benefits.
12
Owners of mobile home parks are not pocketing windfalls from the MASH rebates as alleged by Everyday
Energy/MASH Coalition. These owners are able to reinvest funds back into their parks to improve electrical
infrastructure, offer new amenities and, most importantly, allow owners to financially sustain the park for future
years as an important affordable housing option for low income residents of California. As the Commission itself
noted, a significant number of mobile home parks were constructed in the 1950’s and have aging electrical
infrastructure. Installing a solar system has allowed this aging infrastructure to be replaced with a more reliable
electrical system. Shorebreak takes particular exception with Everyday Energy’s characterization of mobile home
park owners as “gaming” and “manipulation” of the system by filing “fraudulent” deed restrictions. As noted above,
Shorebreak, on behalf of its customers, has made every effort to comply with the Commission’s requirement,
including seeking advice from the Program Administrators and the Commission’s Energy Division.
10 | P a g e that these applications will be rejected. By the time a deed restriction can be recorded and 180
days have passed, it is likely that the MASH program will be fully subscribed.
In this regard, there is no basis for such discrimination. Section 453 of the Public
Utilities Code prohibits undue discrimination, which has been interpreted to mean discrimination
among those who are similarly situated without an adequate basis. California Portland Cement
Company v. Public Utilities Commission (1957) 49 Cal.2d 171, 175 (Any unreasonable
difference is thus prohibited by section 453 and necessarily constitutes undue discrimination).
Low income families are not confined to government subsidized housing, but clearly live in
other types of multifamily communities, including mobile home parks. Any multifamily
community which has met the Section 2852 requirements should have the right to participate in
the MASH program. The artificial barrier of requiring that a deed restriction be already
recorded must be removed.
In sum, the requirement in the Decision requiring that deed restrictions be recorded 180
in advance of an application has the direct effect of removing all those applicants on the waitlist
that do not have a pre-recorded deed restriction and disenfranchising otherwise eligible
communities from participating in the MASH program. Accordingly, this requirement in the
Decision must be deleted.
V.
REQUEST FOR STAY
In its Application for Rehearing, Shorebreak requested a stay of the Commission’s
implementation of the Decision, which the Commission has not yet acted upon. Shorebreak
reiterates its request that the Commission stay the implementation of the Decision pending the
Commission’s resolution of this Petition for Modification. Specifically, Shorebreak requests
that:
11 | P a g e 1. The waitlist be frozen and that no new MASH applications be accepted by the Program
Administrators; and
2. That the Program Administrators be directed not to contact applicants on the waitlist
regarding the applicant’s compliance with the MASH program requirements until the
Commission has resolved this Petition for Modification and Shorebreak’s Application for
Rehearing.
VI.
CONCLUSION
Accordingly, Shorebreak requests, for the reasons stated hereinabove, that the Decision
be modified as follows:
1. The Commission must adopt a form deed restriction to provide certainty for MASH
applicants and eliminate the need for review;
2. The requirement that deed restrictions be filed 180 days in advance of a MASH
application be found to be arbitrary, capricious and an abuse of the Commission’s
discretion and discriminates against a large class of low income families and MUST
be deleted.
3. A stay of the Commission’s implementation of the Decision be granted pending
resolution of this Petition and Shorebreak’s Application for Rehearing.
Respectfully submitted,
/s/ Kevin R. McSpadden
Kevin R. McSpadden
Attorney for
Shorebreak Energy Developers, LLC
2801 Belden Dr.
Los Angeles, CA 90068
323-356-5793
[email protected]
12 | P a g e