CPUC May Not Favor California-Only Cap & Trade for Power Sector

By Published On: December 21, 2007

As the date approaches for the California Public Utilities Commission to initially recommend how to control greenhouse gases from the state’s electricity sector, it appears ready to back a cap-and-trade system only if it is linked to a broader western regional or national emissions trading program. “It’s really hard for one state to design a cap-and-trade program for the electricity sector when we’re so integrated,” said Julie Fitch, CPUC director of strategic planning, at a California Air Resources Board meeting December 14. “The answer might be different from a California-only solution.” The commission hopes to make an initial recommendation to the Air Board by late February 2008 on how to regulate the industry under the state’s global warming law, AB 32. That recommendation is expected to include which entities should be covered by the law–such as generators, utilities, or wholesalers–and whether to rely on prescriptive rules or market mechanisms to cut greenhouse gases. Aside from those complications, Fitch said another major question looming at the CPUC is the potential cost of regulating the industry under the climate protection law. “In terms of cost, there’s going to be upward pressure on rates,” she acknowledged. “There’s a potential for great increase in California.” In answering questions from the audience at the Air Board meeting–held as part of an effort to develop a plan for carrying out AB 32–Fitch acknowledged that cutting greenhouse gases could boost power rates as much as 30 percent by 2020, an average of 2.5 percent a year. She characterized that figure, however, as preliminary. The law requires the state to cut its greenhouse gas emissions to the 1990 level by 2020, which the Air Board has calculated requires a 29 percent reduction. The Air Board is in charge of developing and enforcing rules to achieve those cuts in coordination with other state agencies. When it comes to power, the state has done a good job of holding electricity consumption per capita fairly level, said Karen Griffin, California Energy Commission technical advisor. However, population increases are likely to continue to drive growth in overall power demand and greenhouse gas emissions through 2020. This growth, coupled with the West’s multi-state power market–governed under an overlying set of western regional and federal standards for maintaining reliability of the grid–hopefully increase the odds that the Western Climate Initiative is set to agree on a multi-state greenhouse gas cap-and-trade program, the energy regulators said. “We hope the Western Climate Initiative will succeed,” said Griffin, and that California will be able to rely on a regional program for cutting greenhouse gas emissions from the power sector. Otherwise, Fitch said that the power sector in California could cut its emissions to 1990 levels under existing state policies–such as implementing 100 percent of economic energy efficiency measures and producing a third of its electricity from renewable technology. However, even then the industry would be able to cut back to 1990 emission levels only if neighboring states that supplied about a quarter of the state’s power last year enforced similar requirements, she added. The Western Regional Climate Initiative is a project of several Western states and Canadian provinces to forge a regional approach to controlling greenhouse gas emissions under a cap-and-trade system. Participants are planning to continue ongoing talks to that end in Portland on January 10, 2008. In Washington, a climate change bill that would create a federal cap-and-trade program has moved to the Senate floor, where it is expected to be considered next year. Editors’ note: For more on the Air Board’s AB 32 planning meeting, please see our sister publication E=MC2- Energy Meets Climate Challenge, www.energymeetsclimate.com.

Share this story

Not a member yet?

Subscribe Now