Last week, the California Public Utilities Commission's (CPUC) President Michael Peevey issued a proposed decision concerning implementation of California's greenhouse gas emissions legislation, AB 32. The decision recommends a cap and trade program for the electricity sector in California that would impose regulations on owners and operators of generation in California and out-of-state generators delivering electricity to the California electrical grid.
Under AB 32, the California Air Resources Board (CARB) is primarily responsible for adopting the regulations required to reduce California's greenhouse gas emissions to 1990 levels by 2020. The CPUC and the Energy Commission also play a role in implementing AB 32, however, and initiated a joint proceeding to produce recommendations to CARB on how to regulate the electricity and natural gas sectors in California. Once the CPUC and the Energy Commission adopt those recommendations, they will be passed on to CARB for incorporation into CARB's scoping plan. Although all three agencies are working together, and any recommendations provided by the CPUC and Energy Commission will be given careful consideration, CARB is not obligated to follow such recommendations.
President Peevey's proposed decision first recommends that the CPUC and Energy Commission continue to implement energy efficiency improvements and efforts to increase the percentage of renewable generation in California. Currently in California, investor-owned utilities are required to obtain 20 percent of their electricity from renewable sources by 2010. Publicly owned utilities are required to adopt a plan for increasing renewable generation in their portfolios, but are not required to meet any specific standards. The proposed decision recommends that the 20 percent requirement for investor-owned utilities be increased, although it leaves for future proceedings what the increase should be. The proposed decision also recommends that publicly-owned utilities be required to obtain at least 20 percent of their electricity from renewable sources by a date certain.
The proposed decision makes recommendations concerning the allocation of greenhouse gas emissions allowances under the cap and trade program. It recommends that at least some allowances be auctioned rather than allocated administratively, and that at least some of the proceeds from the auction of allowances be used to benefit electricity customers by minimizing the cost of greenhouse gas emissions reductions to consumers.
The CPUC and the Energy Commission will receive comments on the proposed decision and will then vote on it. If approved, the decision will be forwarded to CARB, which will make the final decision on how to implement AB 32.
The proposed decision leaves many open questions on implementation – and fails to cover considerations on transmission – specifically, how the lack of new transmission may impact the State’s ability to achieve not only GHG reduction goals, but also how investor-owned utilities will secure the 20 percent electricity requirement from renewable sources by 2010.
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