Generators Pressured to Report Greenhouse Gas Emissions

As California utilities warm up to the need to track and reduce greenhouse gas emissions, most independent power producers have yet to come to the table, but their days are probably numbered. Generators soon may face increased pressure to join California's efforts to combat global climate change. With the exception of the homegrown company Calpine, merchant generators-primarily owned by out-of-state corporations-have yet to join the centerpiece organization of the state's burgeoning global warming program, the California Climate Action Registry, created by statute in 2001. The registry's goal is to develop rigorous and consistent standards for companies to use in reporting their emissions of carbon dioxide and other greenhouse gases. This will allow firms to clearly demonstrate compliance with future emission reduction requirements. "A Duke Power or Mirant are national and don't feel any California heat yet," said Bud Beebe, liaison to the registry for the Sacramento Municipal Utility District. "Once they have their long-term contract, they melt into the woodwork." A spokesperson for Mirant Corp. replied that the company outlines its carbon dioxide emissions for each of its power plants in regularly published annual reports. He also acknowledged that the company is not participating in the registry. A California spokesperson for Duke Energy said his company lacks sufficient staff to report emissions to the registry. The situation for merchant generators may soon change. On November 18, the governors of California, Oregon, and California endorsed a final joint climate action protection strategy that calls for energy efficiency standards and a regional cap on greenhouse gas emissions. Generators that stay under the cap would be able to sell the resulting emissions reductions credits to those that need them to cover any shortfalls in emissions reductions. "Because the causes of climate change are not isolated to one state or region, it is important that we continue to work together on actions to reduce greenhouse gas emissions," said California Governor Arnold Schwarzenegger. Russian ratification of the Kyoto Protocol will bring the treaty into force around the world early next year. Since many generators?including Mirant?operate internationally, they will face the need to reduce CO2 emissions even though the United States has not ratified the international pact. "We still have to be in the world, and we still have to deal with greenhouse gases," Beebe said. The treaty could put companies that do not comply, even in the U.S., at risk of liability lawsuits brought in international courts that are "several orders of magnitude greater than tobacco," said Joel Levin, vice-president of business development for the registry. In California and the U.S., foreign-owned utilities and power producers may be the first to heed the Kyoto Protocol. "Our overall strategy is preparing for a carbon-constrained world," said Bill Edmonds, environmental policy director for PacifiCorp. The Portland, Oregon-based utility is owned by Scottish Power and serves a slice of Northern California. "It's important we get data from our long-term contracts so we can feed that into our data." Some of the state's energy agencies are taking climate change seriously. This week, California Public Utilities Commission administrative law judge Carol Brown proposed that the state's investor-owned utilities consider the cost of carbon dioxide emissions when weighing long-term power-purchase agreements. PacifiCorp already does so, and Pacific Gas & Electric is planning to follow suit. Brown also opened the door to the commission eventually setting a "carbon cap" for investor-owned utilities to minimize their contribution to climate change. Under her proposed decision, the utilities would have to include a "carbon adder" when determining the least-cost bid for power-purchase contracts. The adder would range from $8 to $25 per ton of carbon dioxide emitted by bidders, or about 0.35 cent per kilowatt-hour for gas power and 0.85 cent/kWh for coal power. An analysis tool only, the adder would not necessarily raise the cost of electricity, except when renewable power providers bid at a cost somewhere between the least-cost fossil-fuel provider and the cost of that fossil-fuel-based power bid after including the carbon adder. Utilities could begin using the adder as early as December 16, when the commission meets to consider the proposed decision. However, to successfully implement the plan, power producers may need to join the state's utilities in regularly reporting their greenhouse gas emissions to the California Climate Action Registry. Under the registry's power/utility industry reporting protocol adopted last month, utilities are to report their direct emissions from generation facilities. They also are to report their emissions based on total electricity deliveries, including emissions from purchased power. Without detailed and consistent data from merchant generators, they will have to use average factors that may distort actual emissions numbers. This will make it difficult for the state's utilities to pass the third-party audits needed to obtain registry certification of their emissions reports, according to Beebe. Down the road, it may create complications in demonstrating compliance with any standards. To solve the dilemma, said the climate registry's Levin, PG&E and other state utilities are interested in requiring power wholesalers to regularly report detailed greenhouse gas emission data to them following the reporting protocol outlined by the registry. PG&E has joined with a small group of utilities in Washington, D.C., to support S 843, sponsored by Senator Tom Carper (D-Delaware), which would set a cap on carbon dioxide emissions and allow for trading of emissions credits. The measure may include reporting requirements for power producers in future electricity-purchase contracts, said Wendy Pulling, director of environmental policy for the company. While Carper's bill, expected to be reintroduced in the new Congress, would make only a modest reduction in carbon dioxide emissions, it is indicative that many utilities are coming to grips with the problem of global warming. "There is an important recognition that climate change is an important policy issue," Pulling said. The type of consistent and rigorous emission reporting standards developed by the registry will be essential to demonstrating compliance with any future greenhouse gas emissions reduction standards, she added. In another sign of pressure on merchant generators, the California Energy Commission is beginning to require new power plant operators to report their greenhouse gas emissions. "I suspect we're going to get a lot of independent power producer participation in the future," said Levin. "You're going to have to deal with this stuff."

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