California Code, Public Resources Code - PRC § 25472

(a) The department, in consultation with the commission, shall establish a process by which projects are identified and funding is allocated.

(b) The department shall use money in the fund for projects that will improve long-term energy efficiency and increase energy use savings.

(c) The department shall comply with the requirements of the act and implementing guidelines of the commission, including, but not limited to, performance metrics, data collection, and reporting.  All projects shall be consistent with these requirements and guidelines.

(d) Funding prioritization shall be granted to those projects that are cost effective and will yield immediate and sustainable energy efficiency, energy conservation, energy use cost savings, and cost avoidance.

(e) The department shall fund allowable projects through a loan to the appropriate state agency or agencies occupying the building or facility for which the project will be performed.

(f) The department shall determine a reasonable loan repayment schedule that shall not exceed the life of the energy conservation measure equipment, as determined by the department, or the lease term of the building in which the energy conservation measure is installed.

(g) Maximum loan amounts shall be based on estimated energy cost savings that will allow state agencies to repay loan principal and interest within the maximum repayment term specified in this section.

(h) The department shall periodically set interest rates on the loans based on surveys of existing financial markets and at rates of not less than 1 percent per annum.

(i) Annual loan repayment amounts shall be structured so as to reflect the projected annualized energy cost avoidance estimated from the completed project.  The department may utilize a direct billing methodology to recover loan repayments for completed projects.