SOURCE: California Energy Commission

March 12, 2008 16:53 ET

Energy Commission Adopts Recommendations to Reduce Greenhouse Gases

SACRAMENTO, CA--(Marketwire - March 12, 2008) - The California Energy Commission today adopted a report to develop comprehensive regulatory strategies to meet AB 32 greenhouse gas reduction goals. The "Interim Opinion on Greenhouse Strategies" was prepared jointly by the Energy Commission and the California Public Utilities Commission (CPUC). The Opinion makes recommendations to the California Air Resources Board (ARB) for a regulatory structure that includes a combination of market and program approaches to reduce greenhouse gas emissions in the electricity and natural gas sectors.

"Clearly, AB 32's aggressive goals and timetable require swift action by state regulators and utilities. I am pleased by the initial efforts of our two agencies," said Jackalyne Pfannenstiel, Chairman of the Energy Commission. "This interim opinion lays the groundwork for a balanced and fair approach to reducing greenhouse gas emissions in a way that will protect consumers, ensure grid reliability and provide a model for other states and the federal government."

The Interim Opinion is the first of two phases tasked to the Commissions under AB 32. This initial decision that defines the point of regulation and a second opinion to be issued in the summer of 2008 will describe the specific mechanisms for requiring the electricity and natural gas industries to meet their goals. Both decisions will be considered and possibly incorporated into the ARB's Scoping Plan for the agency's further work in implementing AB 32.

The foundation of this proposed regulatory framework is based on the state's "loading order" which puts energy efficiency as the top priority, followed by renewable energy investment. The Interim Opinion recommends that all retail providers of electricity and natural gas be required to provide, at minimum, yet-to-be determined levels of all cost-effective energy efficiency and renewable energy. The proposal designates the deliverers of electricity to the California grid to be the entities responsible for complying with AB 32 greenhouse gas reductions. The Interim Opinion also recommends that some portion of these available greenhouse gas emission allowances be auctioned and that a majority of the proceeds be used in ways that benefit California's electricity consumers.

The Interim Opinion further recommends that if a multi-sector cap-and-trade program is developed for California, the electricity industry should take part. The Energy Commission believes that if a robust cap-and-trade program is implemented by the ARB, the electricity sector can provide reductions in greenhouse gases beyond the mandatory programs and at a lower cost with increased flexibility and innovation.

Additional recommendations will be provided later this year to ARB after detailed economic modeling is finished on emission reduction opportunities and costs in the electric and natural gas sectors.

"We can now move into the next phase of our joint proceeding, working with our stakeholders, to develop recommendations for the design of an emissions allocation system," commented Chairman Pfannenstiel.

Development of this Interim Opinion has been an open public process beginning with a joint Commission symposium in April 2007 that addressed greenhouse gas emissions and various types of cap-and-trade markets. In August, the Commissions held a public workshop and a joint meeting to discuss the point of regulation. The CPUC will consider adopting this opinion at their March 13, 2008 Business Meeting.

The "Interim Opinion on Greenhouse Strategies" is available from the Energy Commission at http://www.energy.ca.gov/ghg_emissions/meetings/

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