High Renewables Price Husbands Funding

By Published On: April 14, 2006

The California Public Utilities Commission unanimously adopted on April 13 a baseline price for 2005 renewables contracts 38 percent above that set a year earlier. Regulators set the 2005 price for renewables portfolio standard deals that utilities signed at $83.30/MWh. The 2004 renewables benchmark price was $60/MWh. The “market referent” price is based largely on the natural gas prices, and the referent price changes every year. The renewables benchmark price affects how fast public-goods funds, which cover the cost of green projects above the benchmark price, are spent. The higher the CPUC sets the price, the longer the public-goods funds allocated for renewables contracts last. The CPUC was given the task of setting an annual benchmark price under a complex formula pursuant to the 2002 renewables portfolio standard law. “Many of us would prefer a simpler approach,” said commissioner Dian Grueneich, noting the law’s complexities. Although the issue is intricate and seemingly obscure, it affects greenhouse gas levels because it affects the number of realized renewables deals, which reduce fossil-fuel-fired projects. In a related matter, the CPUC also agreed on a 5-0 vote to launch a rulemaking to cut greenhouse gas emissions from new utility power plants and contracts. Regulators will consider developing performance- based standards for utility procurement plans to protect ratepayers from the financial and environmental risks of climate change. “In my opinion there is no more important issue for California” than global warming, said California Public Utilities Commission president Mike Peevey. The order to open a docket states that addressing climate change risks requires “this commission to take proactive measures to mitigate both the causes and the impacts of climate change through our energy procurement policies.” Last October, the CPUC warned of the global warming impacts from up to 30 proposed coal-fired plants in the West – many of which would fuel the state. The new rulemaking will assess whether performance-based emissions standards should be adopted soon and whether they are needed prior to the development of or in addition to a greenhouse cap-and-trade system. Commissioner John Bohn echoed sentiments expressed earlier in the week that a cap-and-trade program must be carefully designed. He insisted that market forces need to be harnessed to decrease global warming. “If we get this wrong, it could be disaster for the state,” he said. But “doing it right,” he added, will result in significant environmental and economic benefits. The rulemaking will evaluate whether performance-based emissions standards should be integrated with a carbon adder that the CPUC requires to be part of new power-purchase deals. It will also involve: – Establishing emissions reporting and counting requirements. – Setting a greenhouse gas emissions baseline for utilities. – Determining how fast to ratchet down the caps and baseline. – Developing and administering emissions allocations and possibly offsets. – Adopting incentives, enforcement mechanisms, and penalties.

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