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California’s power sector and natural gas distributors--along with other major industries--must pay new greenhouse gas fees under a rule the California Air Resources Board adopted unanimously September 25. The Air Board is set to start collecting the annual fee for fiscal 2010-2011 next fall and expects to raise $63 million in the first year of the program. Each megawatt of net power delivered into the state grid is subject to payment. The Air Board estimated that the electricity sector is expected to pay $13.2 million in emissions fees next year based on the 2006 inventory. That amounts to 8.5 cents/MWh. The emissions fee is set to fund the Air Board’s work to carry out AB 32, the state’s Global Warming Solutions Act. “If you’re going to start a new program, I think it makes a lot of sense to be asking that it is a pay-as-you-go program, and that’s what we’re doing here,” said Mary Nichols, Air Board chair. The fee covers about 350 companies that work “upstream” in the energy cycle and applies to about 85 percent of California’s greenhouse gas emissions. The companies are expected to be required to report their annual emissions electronically. The Air Board amended its original proposal to shift the obligation for emissions reporting and fees to first deliverers of electricity from the California transmission system. The rule applies equally both to owners and operators of in-state generation facilities and importers of out-of-state power that deliver electricity generated by fossil fuels at the first point of delivery into the California grid. The Air Board initially included retail providers and marketers of imported electricity from fossil fuels in the emissions reporting and fee requirement. The Air Board exempted small generators with less than 1 MW of capacity or that emit less than 2,500 metric tons of carbon dioxide from generating electricity during the reporting year. Cogenerators also are exempt from fees on their emissions, but have to report and pay the emissions fee on their natural gas and other fuel sources. According to the Air Board’s 2006 emissions inventory, the electricity sector accounts for 83.8 million metric tons of carbon dioxide emissions, or 20.9 percent of the state’s total 399.5 million metric tons of emissions that year. By comparison, the natural gas sector, excluding gas-fired power plants, emitted 92.6 million metric tons of carbon dioxide in 2006, 23.1 percent of the state’s total emissions. The Air Board estimated that utilities, producers, large users, and pipeline owners and operators that distribute or use natural gas in California would pay $14.6 million in emissions fees next year--$.00084/therm--based on its 2006 emissions inventory. The Air Board expects utilities and other companies to pass through their emissions fees to consumers. The forecast is about 77 cents more per year for household electricity and natural gas bills and 80 cents more per year for motor vehicle fuel. An office building with 100 employees would pay $9 a year more in energy bills, a restaurant $17 more per year, and a full-service grocery store about $120 more per year, according to the agency. The California Legislature authorized the Air Board to levy a fee on major sources of greenhouse gas emissions to fund the costs of implementing AB 32. The Bay Area Air Quality Management District adopted the nation’s first fee on large greenhouse gas emitters last year and uses the money to monitor carbon dioxide emissions. Eleven associations, whose members are covered by the emissions reporting and fee requirement, sued the Air Board to disclose how it calculated the costs of monitoring and regulating greenhouse gases. The plaintiffs want the Air Board to conduct annual audits and reviews of the program. However, a state judge ruled in favor of the Air Board last month.

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