CPUC weighs use of billions of dollars in GHG proceeds

The California Public Utilities Commission (CPUC) has issued a proposal on how the state should distribute the money raised from the sale of greenhouse gas (GHG) emission allowances allocated to investor-owned utilities.

The proposed decision was issued by two state administrative law judges. The vote on the proposed decision is currently scheduled for Dec. 20.

When the commission acts on the proposed decision, it may adopt all or part of it as written, amend or modify it, or set it aside and prepare its own decision.

The California Air Resources Board recently launched the much-discussed GHG cap-and-trade program for the state. The electric utilities are required to sell all of their allowances at ARB’s quarterly auctions, the first of which occurred on Nov. 14. The proceeds from the auction are to be used for the benefit of retail ratepayers, consistent with the goals of Assembly Bill 32.

CPUC said its Nov. 16 proposed decision would return about 85% of the allowance value directly to households as a rate reduction and semi-annual “climate dividend.”

The total amount of revenue to be returned to ratepayers between 2013 and 2020 is expected to range from $5.7bn to $22.6bn, CPUC said in a Nov. 16 news release.

For most non-residential customers, the proposed decision would follow the “polluter pays” principle by reflecting the cost of greenhouse gas emission allowances in rates.

To ensure the program does not hurt California industries, the proposed decision directs the investor-owned utilities to return allowance revenues to businesses operating in industries identified by ARB as emissions-intensive and trade-exposed.

The proposal also directs the utilities to use allowance revenue to offset cap-and-trade costs in small business electricity rates. Over the 2013-2020 timeframe, the electricity rates small businesses are subject to will gradually rise to reflect the cost of carbon.

The proposal defines qualifying small businesses as any non-residential customer – including agriculture, nonprofits, and others – that consumes less than 20 KW of power, CPUC said.

All of the remaining allowance revenue would be returned to residential customers, through two mechanisms.

Edison International (NYSE: EIX) subsidiary Southern California Edison (SCE), Sempra Energy (NYSE: SRE) subsidiary San Diego Gas & Electric (SDG&E) and PG&E Corp. (NYSE: PCG) subsidiary Pacific Gas & Electric are among the utilities that must participate in the cap and trade program.

About Wayne Barber 4201 Articles
Wayne Barber, Chief Analyst for the GenerationHub, has been covering power generation, energy and natural resources issues at national publications for more than 20 years. Prior to joining PennWell he was editor of Generation Markets Week at SNL Financial for nine years. He has also worked as a business journalist at both McGraw-Hill and Financial Times Energy. Wayne also worked as a newspaper reporter for several years. During his career has visited nuclear reactors and coal mines as well as coal and natural gas power plants. Wayne can be reached at wayneb@pennwell.com.