As mandated by the state’s 2006 law, the California Public Utilities Commission (CPUC) and the California Energy Commission (CEC) late last Friday released their joint recommendation for greenhouse gas (GHG) emission limits in the electricity and natural gas sectors, proposing a mix of mandatory regulatory requirements and a cap-and-trade system. Ultimately the California Air Resources Board (CARB) will establish the standards.

The joint recommendations will have to be separately approved by the CPUC and CEC’s respective five-member governor-appointed commissions at meetings later this year. California’s Global Warming Solutions Act (AB 32) requires that CARB adopt the GHG emissions cap on all major sources to reduce statewide GHG to 1990 levels by 2020, and it specified that the CPUC and CEC be consulted on the energy industry rules.

These recommendations will be open for stakeholder comments for the next 30 days. When adopted by both energy panels the recommendations will go to CARB. The CPUC is expected to consider adoption March 13 and the CEC will do so on March 12 during regular business meetings of the two commissions.

As part of the draft recommendations, the CPUC and CEC call for regular monitoring and enforcement with “built-in monitoring, rapid identification of problems, and tools to react to, correct or penalize noncompliance.” They also commit to working collaboratively with other states and provinces in the Western Climate Initiative to design a western cap-and-trade system.

For both electricity and natural gas retail providers, the recommendation calls for requiring minimum levels of energy efficiency, and power providers are also supposed to step up the use of renewable (nonGHG-emitting) sources of power. The gas efficiency programs apply to transportation, distribution and/or retail sales of natural gas. The provisions are meant to apply to both private- and public-sector utilities.

Among the highlights of the two energy agency recommendations are provisions that call for all retail electricity providers to provide cost-effective energy efficiency and renewables beyond the 20% level of their retail sales.

Also specified is a “multi-sector cap-and-trade program that includes the electricity sector (the natural gas sector should not be included in a cap-and-trade system at this time but should be considered for inclusion in the future).”

As a variation of the so-called “first-seller” proposal advanced by the CARB Market Advisory Committee, the CPUC-CEC recommendation calls for CARB to designate “deliverers of electricity to California” as the entities responsible for compliance with AB 32 requirements.

“At least some portion of the emission allowances available to the electricity sector for the cap-and-trade program should be auctioned,” the joint recommendations state. “An integral part of this auction recommendation is that at least a portion of the proceeds from the auctioning of allowances for the electricity sector should be used in ways that benefit electricity consumers in California.”

The latter, the CPUC and CEC conclude, will encourage investments in energy efficiency and renewable energy and provide “bill relief” to customers.

©Copyright 2008Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.