Renewable Credit Ruling Goes Back to 25%

By Published On: January 14, 2011

After months of additional work, the California Public Utilities Commission on a 3-0 vote revived a decision from last March that limited to 25 percent the use of out-of-state unbundled renewable energy credits for meeting California’s renewable energy mandate. “We’ve gone round and round,” said Mike Peevey, CPUC president. The disputed decision puts to rest--for the time being--the magnitude of the role renewable energy credits can play in satisfying utilities’ renewable mandate. Peevey noted that the issue’s “long and torturous history” had morphed into a “proxy fight” over in-state non-fossil energy development versus alternative energy imports. “The real problem has its roots in Sacramento,” added Nancy Ryan. She emphasized the 25 percent tradable renewable energy credit limitation only applies to the 20 percent alternative power law applicable to utilities and independent providers of retail energy. The decision approved this week does not apply to the 33 percent renewable energy standard approved by the California Air Resources Board, according to Ryan. The Air Board adopted the standard after state legislation attempting to raise the renewables bar failed last year. Utilities won’t sign contracts for more than the renewable energy credit limit approved by regulators because they could be denied cost recovery for those deals, according to a renewable energy advocate. The Jan. 13 ruling applies to what are known as “REC only” versus “bundled transactions” that do not separate out the renewable attribute of a solar or wind project. The parsing of those definitions and what constitutes bona fide power delivery into California has been intensely debated. Consumer advocates and proponents of in-state renewable energy say that the one-fifth renewable portfolio standard law is aimed at bolstering California-based renewable development. Generally, utilities and out-of-state renewable stakeholders insist alternative energy imports shouldn’t be restricted because they drive down the price of green energy. Either way, greenhouse gases are reduced. PG&E was “encouraged by the CPUC’s action” but it had concerns about unresolved issues, stated Cindy Pollack, PG&E spokesperson. The utility hopes regulators act quickly to “address outstanding issues in this proceeding and will closely monitor how limits on the procurement of out-of-state resources, when combined with development challenges in California, affect our ability to reach the RPS goals.” The decision “ignores the [Independent Power Producers’] concerns about delays resulting from Commerce Clause litigation and continues to discriminate against comparably situated out-of-state renewable resources,” warned Jan Smutny-Jones, IEP executive director. Shortly after the CPUC’s tradable renewable energy credit March 2010 ruling was approved, it was suspended because of vigorous opposition from then-Governor Schwarzenegger’s administration. The former governor wanted unrestricted use of credits representing the green attribute of alternative energy projects. Subsequently, five commission proposals were put forward that would have allowed up to 40 percent of the renewable mandate to be met with imported renewable energy credits. In addition to this week’s action’s 25 percent limit on renewable credits on utility and energy service providers annual renewable procurement mandate, the revived decision by Peevey also caps the price investor-owned utilities pay for renewable energy credits at $50 until the end of 2013. That $50 price cap was given an additional two-year life this week. However, it does not apply to energy service providers’ renewable obligations. Peevey reasoned that the non-utility provider world is subject to “competition” and “the ability to change providers,” unlike investor-owned utility “monopoly providers.” The trio of regulators, which included commissioner Tim Simon, also approved a framework for energy service providers’ 20 percent renewable procurement plans as required by SB 695.

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