DATE: October 7, 2024
TO: Mayor and Members of the City Council
VIA: Stefan Chatwin, City Manager
Marlene Subhashini, Assistant City Manager
FROM: Sofia Mangalam, Community Development Director
Steve Arnold, Interim CBO, 4LEAF, Inc. Consultant
DEPARTMENT: Community Development
SUBJECT: REPORT ON ENERGY REACH CODES
RECOMMENDATION
It is recommended that the City Council receive the report on Energy Reach Codes and, by Minute Order, provide policy direction to staff regarding local Energy Reach Code adoption.
EXECUTIVE SUMMARY
On March 18, 2024, staff provided an informational report on the Electrical Capacity Study prepared to consider the potential adoption of local Energy Reach Codes and sought policy direction from the City Council regarding Reach Codes adoption.
In the staff report, staff noted three (3) key points for Council’s consideration as noted below:
The Electrical Capacity Study concluded that the existing electric distribution system will not fully support the future development and electrification of Foster City.
The U.S. Court of Appeals for the Ninth Circuit overturned the Berkeley ordinance that prohibited natural gas infrastructure in new buildings, and due to this ruling, several cities and counties were pausing their Reach Code electrification implementation.
The next code cycle, 2025 Title 24, Part 6 Standards, will be released in June 2024 and will include a new set of State minimum regulations.
Staff sought policy direction from the City Council on the following items:
1. Should staff continue to study options for Energy Reach Codes?
2. If staff should engage with PG&E to discuss the study's outcome, distribution capacities, and necessary resources to meet load growth.
After deliberation, the City Council, by Minute Order No. 1977, directed staff to:
1. Engage with PG&E to discuss the outcome of the Electrical Capacity Study, distribution capacities and necessary resources to meet load growth;
2. Explore Zero Emission/Zero NOx Reach Codes option, its validity, and any legal challenges associated with it; and
3. Explore other Reach Code options.
Per the Council’s direction, staff engaged with PG&E and researched Zero Emission/Zero NOx and other Reach Codes options.
BACKGROUND
Senate Bill (SB) 32 requires the California State Air Resources Board (CARB) to ensure the state’s greenhouse gas (GHG) emissions are reduced to 40 percent below the 1990 levels by 2030. Residential and commercial buildings are responsible for roughly 25% of California’s GHG emissions (California Greenhouse Gas Emission Inventory: 2000 – 2017, 2019 Edition, California Air Resources Board). Building electrification is a strategy to decarbonize buildings and achieve GHG emission reduction goals.
Every three (3) years, the State of California adopts and publishes a set of new construction codes referred to as the California Building Standards Code (CBSC) or California Code of Regulations (CCR), Title 24. Through the code adoption process, the CBSC selects and approves a set of model codes, including California Building, Mechanical, Plumbing, Electrical, Existing Buildings, Fire, Energy, Residential Building, Historical Building, and Green Building Codes. Participating State agencies, such as the State Fire Marshal (SFM), Division of the State Architect (DSA), State Housing and Community Development (HCD), and Office of Statewide Health Planning and Development (OSHPD), have an opportunity to amend the code for the occupancy groups under their respective authorities. Without taking any action, the State Model Building Codes become the default codes of the city. Local jurisdictions may choose to adopt local building codes that “reach” above and beyond the State minimums. These are referred to as “Reach Codes.”
Regarding the California Energy Code, a Reach Code can go beyond the state minimum requirements for energy use in building design and construction, creating opportunities for local governments to promote clean air, reduce GHGs, address climate change, and develop renewable energy solutions.
Most cities update local building codes, including Reach Codes, concurrently with state-required adoption of the standards. The most recent code cycle was adopted in 2022, effective January 1, 2023. The following code cycle will become effective on January 1, 2026.
On August 15, 2022, the City Council adopted City Resolution No. 2022-100 authorizing staff to issue an RFP for consultant services for developing and adopting a local Energy Reach Code, including performing an Electrical Capacity Study of the City of Foster City, a cost-effectiveness study and community engagement.
Subsequently, on October 3, 2022, the City Council approved an agreement with Integrated Design 360 LLC (ID360) for developing and adopting a local Energy Reach Code including but not limited to performing an Electrical Capacity Study of the City of Foster City, cost-effectiveness study, energy savings study, and community engagement.
The Electrical Capacity Study took a long time to complete, and the Study concluded that the existing electric distribution system will not fully support Foster City's future development and electrification (See March 18 meeting, Item 6.2, Attachment 2 for the Study).
ANALYSIS
Building Electrification & Energy Reach Codes 2022
During the 2022 code cycle, over 70 California jurisdictions adopted or began the process of adopting a local reach code. Most reach codes adopted for the 2022 code cycle focused on requiring all-electric new construction, either through an amendment to the CALGreen Code or the Health and Safety Code.
On April 17, 2023, the Ninth Circuit filed its decision in California Restaurant Association (“CRA”) v. City of Berkeley, 89 F.4th 1094 (9th Cir. 2024), finding that the City of Berkeley’s Ordinance No. 7672-NS, creating a ban on natural gas infrastructure in newly constructed buildings, is preempted by the federal Energy Policy and Conservation Act (“EPCA”), which authorizes the Department of Energy to set energy efficiency standards for consumer appliances.
The Ninth Circuit panel held that the EPCA preempts the Berkeley ordinance. In the decision, the Ninth Circuit panel took a very expansive reading of the plain text of the EPCA (42 U.S.C. § 6297(c)), which states that it is intended to preempt “State regulation[s] concerning the energy efficiency, energy use, or water use of [a] covered product.” While Berkeley argued that its ordinance did not directly ban any appliances or specifically regulate their use and therefore was not an “energy efficiency standard” subject to preemption under the EPCA, the panel found that Berkeley was regulating the “energy use” of gas appliances via a more circuitous route, by prohibiting natural gas piping into new buildings, rendering the gas appliances useless.
As a result of the CRA decisions, several cities and counties paused their local reach code electrification implementations.
Staff decided to pause to understand the implications of the Berkely ruling. On March 18, 2024, staff provided an informational report on the Electrical Capacity Study prepared for consideration of potential adoption of local Energy Reach Codes 2022.
Subsequently, ID360 provided a memo for the Energy Reach Code and Green Building Code Considerations (See Attachment 3).
Below is a summary of the Council’s direction provided on March 18, 2024.
1. Meeting with PG&E
The City Council directed staff to engage with PG&E to discuss the outcome of the Electrical Capacity Study, distribution capacities, and necessary resources to meet load growth.
Subsequently, on April 22, 2024, staff met with PG&E and discussed the highlights of the Electrical Capacity Study. PG&E noted that, as per California Public Utilities Commission (CPUC) guidelines, PG&E needs to have development applications submitted to plan for any capacity upgrades to transformers and/or feeders. In other words, PG&E cannot make upgrades based on an Electrical Capacity Study or other studies for future electrification efforts.
2. Zero Emission/Zero NOx Reach Code
The City Council directed staff to explore the Zero Emission/Zero NOx Reach Codes option, its validity, and any legal challenges associated with it.
To give context, Nitrogen Oxides (NOx) are toxic, highly reactive gasses that are emitted when fuel is burned, such as when operating cars, trucks, power plants, and household appliances. NOx also reacts with the sun and atmosphere, becoming harmful smog (Ozone) and particulate matter (PM2.5). Most household appliances in California run on gas and emit NOx in and near our homes. Gas appliances in California homes and buildings generate four times as much lung-damaging NOx pollution as the state's gas power plants and roughly two-thirds as much NOx as all of the state’s passenger cars (See link to the SPUR article.)
Staff is aware of three (3) jurisdictions in the Bay Area that amended their reach codes (all-electric provisions) and adopted Zero NOx Reach Codes, including the Town of Los Altos Hills, City of Berkeley and City of Campbell. Zero-NOx means they do not emit harmful NOx pollutants.
The Town of Los Altos Hills amended its regulations to parallel the definition of all-electric and references with that of zero NOx emission buildings. The ordinance targets high-emitting water heating and HVAC systems and requires those appliances to be “zero-emitting." Similar to all-electric ordinances, the proposed ordinance includes specific exceptions for indoor cooking appliances in residential buildings, outdoor cooking appliances, outdoor fireplaces, portable space heaters, generators, and pool and spa heaters. ( See link to Ordinance).
This was the first Zero NOx emission ordinance adopted in California. The City of Berkeley adopted amendments to 2022 California Green Buildings Standards Code (CALGreen) to require Zero NOx Buildings for newly constructed buildings modeled after the Town of Los Altos Hills ordinance (See link). The City of Campbell followed the approach of the Bay Area Air Quality Management District (BAAQMD), focusing on the negative health impacts of air pollution from building appliances (see below). Their ordinance prohibits NOx emissions from equipment being installed in any newly constructed building or substantial rebuild. Their ordinance applies to water heaters, furnaces, ovens/ranges, and clothes driers. It does not apply to outdoor grills or portable heaters (See link to Campbell Staff Report and Ordinance).
BAAQMD and California Air Resources Board (CARB) Zero-NOx emissions standards
BAAQMD adopted amendments to Regulation 9, Rules 4 and 6, to eliminate emissions of NOx from residential and commercial natural gas furnaces and water heaters in the Bay Area by requiring new appliances to be Zero-NOx (Link to BAAQMD).
Appliances, including natural gas-fired furnaces and water heaters that are typically found in residential and commercial buildings, manufactured after the compliance dates (beginning on January 1, 2027), will not be allowed to be sold or installed in the Bay Area if they emit NOx upon operation. The amendments only apply to appliances that would be newly installed; they require no change-out of already existing appliances. It shall be noted that these rules cover only furnaces and water heaters and no other natural gas appliances, including gas stoves.
The timeline for compliance with these amendments.
Ultra-low NOx standard implementation date (applies to appliances manufactured after the noted date):
oJanuary 1, 2024 – For residential fan-type central furnaces. This standard matches existing standards in other large California air districts, and natural gas appliances are currently available to meet this standard. Zero NOx standard implementation dates (applies to appliances manufactured after the noted date):
oJanuary 1, 2027 – Water heaters less than 75,000 BTU/hr (typically residential tank water heaters)
oJanuary 1, 2029 – Residential and commercial furnaces
oJanuary 1, 2031 – Water heaters between 75,000 and 2 million BTU/hr (commercial and multifamily)
In addition, CARB is developing state-wide zero GHG emission standards for space and water heaters to support building-related GHG reduction goals ( Link to CARB). These standards seek to reduce GHG and smog-forming NOx emissions from new space and water heaters sold in the state to help meet California’s climate goals and federal air quality standards.
Source: Bay Area Reach Codes
Staff Comments
Staff is not aware of any reported legal challenges with the Zero-NOx reach codes.
However, information/data on their implementation is limited since only a few cities have adopted these regulations.
In addition, local jurisdictions will need to comply with BAAQMD amendments for furnaces and water heaters according to the specified timeline noted above.
3. Other Reach Code Options
A. High-Performance Efficiency Reach Codes
A few jurisdictions took the next steps to adopt alternative local energy reach code requirements. To date, the cities of San Luis Obispo, San Jose, Santa Cruz, and
Palo Alto, East Palo Alto have adopted high-performance energy efficiency requirements based on the "One Hourly Source Energy" model code.
The California Energy Commission (CEC) introduced additional metrics in the 2022 California Energy Code for buildings to show compliance with the efficiency standards.
One such metric included Source Energy, which represents the energy consumption of a building, including losses incurred during production and delivery to the meter located at the building. Similar to Time Dependent Valuation (TDV), hourly source energy is a metric for both electricity and natural gas. The CEC found that hourly source energy values are proportional to the GHG emissions for each hour of the year and can be considered a good proxy for GHG, encouraging fuel switching, decarbonization, and reducing natural gas use. For future reach codes, the statewide team recommended a new approach called the “Single Hourly Source Margin” model code, also known as the “Single Margin” or “One Margin” code, that uses source energy as the performance metric.
For example, A new single-family residential building must meet or exceed all “Energy Design Ratings (EDR)”. There are three (3) EDR categories:
1. EDR1 (Source Energy) – EDR1 is a score representing a building’s energy efficiency expressed in terms that serve as a proxy for GHG emissions.
2. EDR2 (Efficiency) – EDR2 is a score representing a building’s energy efficiency expressed in terms of the value and cost of energy consumed at different times of the day and year.
3. EDR Total (Total Energy Design Rating) is a score representing the building’s total energy expressed in terms of the value and cost of energy consumed at different times of the day and year while also factoring in solar and energy demand flexibility.
The One Margin approach allows for the installation of both mixed fuel and all-electric construction while imposing requirements that consider the emissions of both types of construction. Mixed-fuel construction would generally require significant investments in energy efficiency, solar, and storage to offset the emissions of natural gas appliances in order to meet these requirements.
The Bay Area Reach Codes Program has published the Energy Performance Part 6 Model Reach Code for local jurisdictions to use (Link to Model Ordinance).
Palo Alto Example: The City of Palo Alto uses the Hourly Source Energy metric established by the CEC. This metric acts as a proxy for carbon emissions. The Ordinance set an Hourly Source Energy Margin for each building occupancy type. The Hourly Source Energy Margin states how far below the “standard” energy budget set by the State Energy Code a proposed building’s energy budget must be, using the Hourly Source Energy metric. The developer must demonstrate this to comply with the code.
Because natural (methane) gas space and water heating has such high carbon emissions compared to electric gas and water heating, buildings using natural (methane) gas for these appliances will need to install significant energy efficiency measures and large amounts of PV and batteries to offset those emissions at significant cost. Newly constructed all-electric buildings will achieve up-front cost savings compared to code-compliant newly constructed mixed-fuel buildings by avoiding the need for additional efficiency, PV, and battery installations to meet the Hourly Source Energy Margin requirements.
A summary of the proposed standards for single-family is provided in the following table. Note that requirements for single-family homes use a metric based on source energy called Energy Design Rating 1 (EDR1), while requirements for other building occupancy types are expressed in terms of Hourly Source Energy Margin.
East Palo Alto Example: The City of East Palo Alto’s Ordinance increases the required EDR1 score for single-family residential buildings and the required Source Energy scores for all other buildings.
Staff Comments
There are 2022 cost-effectiveness analyses that can be leveraged for this approach for Reach Codes (as used by East Palo Alto). This approach would amend the California Energy Code (Title 24, Part 6) and require approval by the CEC before enforcement.
Staff is unaware of any legal challenges with the One Margin “alternative” energy reach code adoptions.
B. EV Charging Infrastructure Model Code
In addition to Energy Reach Codes, local jurisdictions may consider codes that require measures to reduce GHG emissions or make such reductions possible but do not specifically address energy efficiency. These reach codes could include Electric Vehicle readiness, electric pre-wiring or panel requirements, indoor/outdoor water efficiency requirements or water distribution, Energy audits or benchmarking, and others. Staff has included a discussion on EV Charging codes for Council’s considerations.
The City may also consider aligning with regional jurisdictions that adopted the Bay Area Reach Code Initiative’s 2022 EV Charging Infrastructure model code (EVI) 34.
This model code aims to exceed the 2022 CALGreen Intervening Code updates and incorporates the proposed 2025 CALGreen Code updates, minimizing the need for the City to implement future revisions. The EVI model code was updated in March 2024 to align with the 2022 CALGreen Intervening Code Cycle update effective July 1, 2024.
See an example of code for single-family residences and townhomes with private garages:
Staff comments:
Currently, this code only applies to New Construction; however, installing an Automatic Load Management System (ALMS) will allow EV chargers to be installed on many more projects utilizing the existing electric grid in Foster City. If the City Council desires, it could also apply to alterations.
Next Code Cycle
The California Building Standards Code (Title 24) is comprised of several “Parts,” including the Energy Code (Part 6), the Green Building Standards Code, or CALGreen (Part 11), and the Uniform Plumbing Code (Part 5). The entire code is normally updated every three years. The current code is the 2022 Code Cycle, effective January 1, 2023, through December 31, 2025. CALGreen and the Uniform Plumbing Code have both been amended mid-cycle (or intervening cycle), effective July 1, 2024. The State has issued a 15-day regulatory language for 2025 Energy Code Rulemaking in August 2024 (see link). After reviewing the draft, staff noted that there are anticipated amendments
to heat pumps, air conditioning, etc. The draft includes a performance approach for single-family and multi-family buildings. A building complies with the performance approach if the energy consumption calculated for the proposed design building is no greater than the energy budget calculated for the standard design building using Commission-certified compliance software. In simpler words, this is a Single Margin or “One Margin” approach. ICC will publish the 2025 Energy Code by July 2025, and the 2025 Code Cycle will be in effect from January 1, 2026.
Reach Code Timing Considerations (source: bayren.org)
Because local energy codes must be more stringent than the statewide code, each local code needs to be re-approved whenever the statewide code is updated. Thus, oAdopting a local code to take effect early in the code cycle will be most efficient. When adopted late in a code cycle, a local reach code may only be in effect for a few months or be shadowed by the next code cycle.
oIf a jurisdiction has a reach code in effect and would like to continue it into the next code cycle, the local process needs to be completed early enough that it can be approved by the CEC before the start of the new code cycle, usually no later than September in the year before the updated code takes effect.
Source: www.bayren.org
Options for Council’s Consideration
Option 1: Draft an ordinance for Energy Reach Codes based on the Zero NOx approach for the 2022 or 2025 Building Code cycle.
Staff comments: Since the 2025 Energy Code Rulemaking language published in August 2025 proposes Performance and Prescriptive Compliance Approaches for Single-family
and Multi-family buildings, staff recommends not adopting Zero NOx standards. Also, as noted above, local jurisdictions will need to comply with BAAQMD amendments for furnaces and water heaters.
Option 2: Draft an ordinance for Energy Reach Codes based on a One-Margin approach for the 2022 or 2025 Building Code cycle.
Staff comments: The 2025 Energy Code Rulemaking language published in August 2024 proposes Performance and Prescriptive Compliance Approaches for Single-family and Multi-family buildings. This is a One-Margin approach; staff recommends waiting for these regulations to be published in July 2025 and then, depending on Council’s direction, amend the Green, Plumbing, and Energy Codes with desired Reach Codes for the 2025 Building Standards Code cycle adoption in October/November 2025 with a January 1, 2026, effective date.
Option 3: Draft Other Reach Codes - EV Charging for 2022 or 2025 Building Code cycle.
Staff comments: Depending on the Council’s direction, staff will start working on the draft Ordinance and conduct a public outreach. However, considering timelines, staff recommends adopting Reach codes with the 2025 Building Code cycle..
California Environmental Quality Act
Not Applicable
FISCAL IMPACT
On October 3, 2022, the City Council approved an agreement with ID360 for developing and adopting a local Energy Reach Code for $127,774. The fund balance is $33,007.
There is no additional fiscal impact.
CITY COUNCIL VISION, MISSION, AND VALUE/PRIORITY AREA
Smart Planning, Development, and the Local Economy
ATTACHMENTS:
Attachment 1 – 2025 Energy Code Rulemaking
Attachment 2 – Reach Codes Process by BayREN
Attachment 3 – Memo by ID360