The California Public Utilities Commission agreed to cap carbon dioxide emissions from investor-owned utilities' energy supplies - in and out of the state - February 16. The CPUC, on a 4-0 vote, took the first of many steps needed to create a ceiling on Pacific Gas & Electric's, Southern California Edison's, and San Diego Gas & Electric's greenhouse gas emissions. "We are joining in the pioneering efforts" of the Northeast and Mid-Atlantic states setting caps on utility power plants' CO2 emissions, said CPUC president Mike Peevey. "We hope that the parallel efforts on both coasts to reduce greenhouse gas emissions will help move the ball forward on initiatives to reduce emissions and mitigate global climate change in the U.S. and around the world," he added. Commissioner John Bohn said the move is "an important step." But as important, he noted, will be "a full examination of the costs involved." He added that an integral part of the program will be CO2 trading, which is expected to create market incentives. The commission said its program avoids Interstate Commerce Clause violations that could put the plan in legal trouble because the emissions cap treats out-of-state resources the same as in-state supplies serving utility load. Utilities are responsible for about 20 percent of the state's greenhouse gas emissions - about 44 million metric tons of CO2. Imported power raises the level to about 55 MM tons. The CPUC cap, known as load-based, will cover all polluting emissions generated in the course of producing power to serve ratepayers. The CPUC plans to put a ceiling on not just carbon dioxide but all six greenhouse gases in the program's fourth year. In addition to CO2, the emissions include methane, nitrous oxide, hydrofluorocarbons (HFC), perfluorocarbons (PFC), and sulfur hexafluoride (SF6). Emissions allowances will be in tons of CO2 equivalent. Utilities are required to include information about the impact of their power supply contracts' CO2 emissions. The commission plans to allow "flexible compliance." At this stage of the game, that means allowing trading, the use of emission offsets, and banking. Under consideration will be penalties for noncomplying utilities. In addition, many other complex issues, including the setting of a base year upon which to base the cap, will be dealt with in the implementation phase. Peevey first proposed the CO2 cap last month (Circuit, Jan. 27, 2006). "By resolving the 'fork in the road' policy issue today, we can now focus on addressing the myriad of implementation questions, including the appropriate level of greenhouse gas reductions over time," the decision states.