Climate Change: CPUC Considers Emissions Fee Recovery

By Published On: October 19, 2012

Whether or not the three investor-owned utilities can recover fees they pay to comply with the state’s carbon emissions reduction program as part of their settled general rate cases is under debate at the California Public Utilities Commission. Two pending regulatory proposals review if the commission’s “Z factor” applies. “Z” limits and proscribes rate adjustments. If it does apply, it would allow the fees to be added to triennial rate cases. One of the proposed CPUC rulings would prohibit Pacific Gas & Electric, San Diego Gas & Electric, and Southern California Edison from collecting the money from ratepayers as part of their settled rate cases, which granted them specific revenue over three years and rates of return. It considers the fees outside Z factor parameters. “There are sound policy reasons why the commission limits the adjustments that may be made between rate cases and why, in this particular case it should not make any generic adjustments,” states the commission’s proposed decision. “Foremost among these reasons is the fact that changes go in both directions.” The nonutility Southwest Gas, however, would be allowed to recover its fees to comply with emission limits because it operates under a different rate recovery mechanism. Commissioner Mark Ferron’s alternate ruling would allow the utilities to recoup fees paid to the California Air Resources Board although their settled rate cases are in effect. Ferron would allow a deviation from standard ratemaking practices and additional rate recovery in the name of statewide uniformity. * * * * * California’s low carbon fuel standard got its day in court Oct. 16. On appeal by the California Air Resources Board, a three-judge panel of the U.S. Court of Appeals for the 9th Circuit heard oral arguments concerning whether it violates the Commerce Clause of the U.S. Constitution. The standard, which seeks to help move motorists to cars that use natural gas, electricity, and low-carbon biofuels instead of gasoline and diesel, was contested by the Rocky Mountain Farmers Union and the National Petrochemical & Refiners Association. They won in the U.S. District Court for the Eastern District of California, prompting the Air Board to appeal. One of the judges took issue with the state’s life-cycle analysis for fuel, asserting it gave California ethanol producers an advantage. Late last year, that court ruled the Air Board regulation seeking a 10 percent reduction in the carbon content of motor fuels by 2020 did tread on the Commerce Clause, which prevents states from restricting interstate trade. The Air Board estimates the rule will achieve 15 million metric tons of greenhouse gas reductions by 2020. Natural Resources Defense Council scientist Simon Mui said the state’s standard will help diversify transportation fuel sources and in so doing check future gasoline price spikes. NRDC is backing the Air Board in the case. The plaintiffs contended the rule constituted a restraint of interstate trade by applying standards to ethanol made outside the state. The court ruled the regulations discriminated against out-of-state ethanol sold in California by counting the carbon emissions that occur when the fuel is transported into California. * * * * * In this election season, the League of Conservation Voters announced Oct. 16 that it’s targeting Rep. Dan Lungren (R-CA) under its $2 million “Flat Earth Five” campaign. The campaign is aimed at defeating members of the House who deny human activity is causing global warming. The group is using a mobile billboard showing Lungren with Rush Limbaugh and Sarah Palin captioned “On climate change, they agree.” No word from the League on whether the truck pulling the billboard is zero emissions or a gas guzzler.

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