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California Public Utility Commision Releases Draft Regulation for REC Program
December 28, 2009
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On December 16, 2009, The California Public Utility Commission (CPUC) announced that its President, Michael R. Peevey, was confirmed by the California Senate for a new six-year term; while Commissioner Rachelle Chong was not. With these recent developments, the CPUC released a Proposed Decision (PD) on December 23rd for an unbundled Renewable Energy Certificate (REC) program for California's Renewable Portfolio Standard (RPS).
This PD on Tradable Renewable Energy Certificates (TREC) will provide another avenue for California's utilities to reach not only the current RPS target of 20% by 2010, but also Governor Schwarzenegger’s ambitious executive order of 33% by 2020. In the CPUC’s most recent attempt at a TREC program, they have alleviated a lot of the burdensome definitions, creating the most user friendly PD to date. Although TREC limits have been placed on the three major IOUs and a price cap on TRECs, the CPUC has given themselves the ability to remove both. This is a positive sign for California. Evolution Markets is hopeful that this version or a slightly modified version of this PD will be officially approved shortly.
Open comments are due on January 12, 2010, with reply comments due January 18, 2010. Once approved, the decision will go into effect immediately and advice letters for approval of TREC contracts should be filed by March 1, 2010.
Evolution Markets has reviewed the document in depth and provided you with a summary of the design elements below.
Summary
- Provisions for TREC Program:
- TRECs must be from an RPS-eligible source tracked in WREGIS.
- Banking:
- TRECs in a WREGIS active sub-account can be traded within three years of the time the associated electricity is generated, at which point the TREC will have to be transferred to an RPS compliance buyers retirement sub account.
- Once TRECs have entered an RPS compliance buyer’s WREGIS retirement sub account, they can no longer be traded.
- Use of TRECs by the three major IOUs are limited to 40% of their Annual Procurement Target (APT)
- Load Serving Entity's (LSE) will have no limit on the use of TRECs
- LSE's will be able to unbundle the TRECs from previously purchased bundled transactions after the first three years of an earmarked contract, and so long as the TRECs were not transferred into the compliance buyer’s WREGIS retirement account.
- $50/ REC price cap
- Both the IOU limit and price cap will be under review/revision within the next two years by the CPUC
- IOU contracts will be approved in the same manner as bundled contracts- expedited bundled contract cost caps are not applicable to TREC-only transactions
- Few amendments will be made to Standard Terms and Conditions (STC)
Definition of TREC-only transactions:
- TRECs only- no energy
- TRECs and Energy: The first point of interconnection needs to be within the WECC, but not within California. In addition, the first point of inter-connect can not be within the CA-ISO or another California balancing authority.
If you would like further insight and analysis on the CPUC's latest proposed decision for TRECs, or would like to learn more about TREC projects, please contact our San Francisco RECs team at 415.963.9130.
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The Intersection of Environment, Energy and Finance™
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San Francisco: +1 415-963-9130
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