CLIMATE CHANGE ROUNDUP: CPUC Considers Edison Coal Spending Exemption

By Published On: July 9, 2010

Southern California Edison may soon be able to seek recovery of up to $178.6 million in expenditures on a coal-fired power plant in New Mexico as part of its general rate case for 2012. A California Public Utilities Commission proposed decision--slated for adoption July 8 but delayed--grants a partial exemption from a commission decision under a 2006 state law, SB 1368. That law requires state utilities to end their dependence on coal power plants once their ownership or power purchase agreements expire unless their greenhouse gas emissions are cleaned up to the same levels as those from natural gas plants. The policy also bars utilities from making any investment in coal plants that may extend their lives by more than five years. Edison petitioned the commission for an exemption from the policy for its ownership interest in the Four Corners Generating Station in New Mexico. The plant supplies the utility with 720 MW of capacity. The utility argued it was contractually obligated to make the expenditures as part of its joint ownership arrangement of the plant with other utilities. The Natural Resources Defense Council and Division of Ratepayer Advocates contested the request. In comments filed just ahead of the CPUC meeting, the two called the decision too broad. Commission president Mike Peevey authored the decision that limits Edison’s cost recovery to expenditures made prior to 2012. It also subjects any single expenditure of $5 million or more on the plant to a reasonableness review, plus requires the utility to disclose if the expenditures extended the useful life of the plant by five years or more beyond 2016. The decision notes that it does not automatically approve any of the expenditures for rate recovery. Actual recovery is to be determined in the upcoming general rate case. It remained unclear at press time when the commission would consider adopting the Peevey’s proposed decision. * * * * * A California Public Utilities Commission proposed ruling would clarify that investor-owned utilities must make sure that any power plant supplies involving carbon capture and sequestration follow applicable federal or state regulations. The CPUC proposal by commission president Michael Peevey also states that if federal or state government rules concerning carbon capture and storage fail to materialize, the utilities must make sure operators have leak detection and monitoring systems in place and report any leaks to the commission. The decision, which was pulled from the July 8 meeting agenda, would also clarify a 2007 CPUC ruling that requires utilities to phase out dependence on coal power plants beginning in 2016 unless their emissions can be reduced to the same levels as those from a natural gas power plant. That ruling implements a state law known as SB 1368. The aim of the tentative decision--granted in response to a petition the Natural Resources Defense Council filed along with other groups--is to make sure that when carbon dioxide captured from power plants is pumped into underground geological formations it stays put and does not leak into the atmosphere. The power industry is pursuing carbon capture and storage as a way to keep coal power plants running in the face of greenhouse gas reduction requirements. Both the federal EPA and state of California are studying standards to govern the practice. * * * * * Climate change policies within the U.S. states and Canadian provinces that are party to the Western Climate Initiative can save money on energy while cutting greenhouse gas emissions, according to a study the initiative released July 7. WCI’s plan to institute a carbon cap-and-trade program throughout its seven western states and four provinces could save as much as $102 million on energy costs between 2012 and 2020, it said. Included in that figure are expected reductions in energy use due to cars that get better mileage under new state and federal requirements and the march of energy efficiency standards for buildings, appliances, and electronics. Center for Resource Solutions policy director Chris Busch said the study shows that investments in cleaner technologies, while more expensive initially, pay off in the long-run with energy savings. He added that the study leaves out additional benefits from cutting greenhouse gases, including better public health by eliminating combustion emissions and economic stimulus from developing new technologies. Both higher energy costs and faster economic growth with lower energy costs could magnify the savings, the study said. “WCI’s efforts complement California’s” said Linda Adams, California Environmental Protection Agency secretary. WCI includes Arizona, California Montana, New Mexico, Oregon, Utah, Washington and the Canadian provinces British Columbia, Manitoba, Ontario, and Quebec. Those states and provinces include 20 percent of the U.S. economy and 70 percent of Canada’s. Lawmakers in many of the U.S. states have stalled action to create a WCI carbon market. The study, though, assumes “everybody is in,” noted Busch. “Progress has been slower than hoped,” he added, noting that only California, New Mexico, and the Canadian provinces have laws in place to proceed with creating a carbon cap-and-trade program. * * * * * A Western Climate Initiative report released July 5 shows that a WCI carbon cap-and-trade program would cause production of electricity to shift in the East from three Canadian provinces that are members of the initiative to the U.S. and other provinces in a phenomenon known as “leakage.” The study found that by 2020 under a WCI cap-and-trade program annual power exports to the U.S. and non-WCI provinces from the three eastern provinces that are part of the initiative--namely, Manitoba, Ontario, and Quebec--would fall from 50 TWh to 38 TWh. Annual imports would increase from 8 TWh to 16 TWh. Depending upon the price or carbon emissions allowances in the cap-and-trade market, greenhouse gas emissions could increase because of the geographic shift in where power is made. That is, some of the power likely would be generated by dirtier sources. WCI called the finding “significant.” * * * * * The California Air Resources Board late last month set draft greenhouse gas reduction targets for metropolitan planning organizations in the state’s biggest urban areas. The Board set the targets under SB 375, which lawmakers enacted in 2008 to reduce emissions through improved land-use and transportation planning. Under the draft targets, the San Francisco Bay, Sacramento, greater Los Angeles, and San Diego areas would have to cut greenhouse gas emissions through better planning and management of land-use and transportation by 5-10 percent per capita by 2020. In 2035, the target for the Bay area is an additional 3-12 percent per capita, for Sacramento 13-17 percent, for San Diego 5-19 percent, and for greater Los Angeles 3-12 percent

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