3. Procedural Background

Under an unbundled REC regime, claim over the renewable attributes of energy produced by eligible renewable technologies can be transferred from the renewable generator to one LSE while the energy is delivered to another. However, once this transfer occurs, claim over the attributes cannot be resold. In contrast, under a tradable REC regime, although the concept of selling the energy and claim over the attributes to different parties remains intact, RECs may be transferred from the renewable generator to any third party, not just obligated LSEs. In addition, these attributes can be resold subsequent to the initial sale.6

Exploring the use of tradable RECs for RPS compliance by all RPS-obligated LSEs, including determining what attributes should be included in a REC;

Determining the appropriate treatment of RECs associated with energy generated by renewable customer-side distributed generation, after examination of two important issues-measurement of renewable output from customer-side distributed generation, and analysis of the impact of ratepayer subsidies of renewable distributed generation-in R.06-03-004; and

Determining the status of RECs associated with renewable energy generated by qualifying facilities (QFs) under contract with California utilities.

4 The REC white paper may be found at http://www.cpuc.ca.gov/word_pdf/REPORT/55606.doc.

5 Comments were filed by Central California Power; Sustainable Conservation; Powerex Corp. (Powerex); California Solar Energy Industries Association (CalSEIA), Clean Power Markets, Inc., PV NOW, Vote Solar Initiative (jointly); Pacific Gas and Electric Company (PG&E); Mountain Utilities (MU); Division of Ratepayer Advocates (DRA); Southern California Edison Company (SCE); San Diego Gas & Electric Company (SDG&E), Pilot Power Group, Inc. (Pilot Power); Alliance for Retail Energy Markets (AReM), Western Power Trading Forum (WPTF) (jointly); Aglet Consumer Alliance (Aglet); Green Power Institute (GPI); Center for Energy Efficiency and Renewable Technologies (CEERT); Independent Energy Producers Association (IEP); Union of Concerned Scientists (UCS); The Utility Reform Network (TURN); and California Large Energy Consumers Association and California Manufacturers and Technology Association (jointly).

6 REC white paper at 1, n. 1; D.06-10-019 at 33.

7 In view of our decision to authorize the use of tradable RECs, we will not use the category of "unbundled REC" in this decision. We will refer to transactions in which only TRECs (not energy) are bought or sold as "TREC transactions" or "REC-only transactions." If the context requires a reference to "RECs" because, for example, the RECs were procured through a bundled contract, the RECs so referenced should be presumed to be tradable (unless they are RECs governed by §§ 399.16(a)(5) or (6), as explained in § 4.8, below).

8 Pub. Util. Code §§ 399.16(a)(6), (5).

9 Section 399.16(a)(1).

10 The resolution and attached final report are available at http://docs.cpuc.ca.gov/WORD_PDF/FINAL_RESOLUTION/94349.PDF.

11 See http://energy.ca.gov/2008publications/CEC-300-2008-001/CEC-300-2008-001-CMF.PDF.

12 The workshop notice and the assigned Administrative Law Judge's rulings seeking pre-workshop and post-workshop comments were circulated to the service lists in this proceeding, R.06-05-027 (RPS administration), R.06-03-004 (distributed generation and California Solar Initiative), and R.06-04-009 (greenhouse gas policy). The workshop presentations are available at http://www.cpuc.ca.gov/PUC/energy/electric/RenewableEnergy/misc/recpresentations.htm.

13 Pre-workshop comments in response to the ALJ's Ruling Requesting Pre-Workshop Comments on Tradable Renewable Energy Credits (July 19, 2007) were filed by Central California Power; Powerex, Solar Alliance; PacifiCorp; CEERT; Sustainable Conservation; AReM and WPTF (jointly); CalpinePowerAmerica-CA, LLC (Calpine); Coral Power, LLC; SDG&E; Aglet; IEP; PG&E; UCS; SCE; GPI; PPM Energy, Inc.; CPV Renewable Energy Company, LLC; and Sempra Energy Solutions.

14 Post-workshop comments were filed by PG&E; GPI; Powerex; SDG&E; Golden State Water Company; IEP; Pilot Power; Central California Power; EcoSecurities; DRA; CEERT; Calpine Corporation and Calpine (jointly); AReM and WPTF (jointly); MU; SCE; TURN; PacifiCorp; California Farm Bureau Federation and Sustainable Conservation (jointly); Solar Alliance and CalSEIA (jointly).

15 Post-workshop reply comments were filed by Central California Power; PacifiCorp; Aglet; UCS; California Farm Bureau Federation, Inland Empire Utilities Agency, Sustainable Conservation (jointly); Recurrent Energy, Inc., Solar Alliance, CalSEIA (jointly); Calpine Corporation and Calpine (jointly); TURN; IEP; AReM; SCE; MU; CEERT; SDG&E; DRA; GPI; and PG&E.

16 Parties were notified informally by e-mail on May 28, 2008.

17 Reply comments were filed on June 11, 2008 by AReM and WPTF (jointly; collectively, AReM); DRA; GPI; IEP; SCE, PG&E, PacifiCorp, Sierra Pacific, and SDG&E (jointly; collectively, IOUs); Solar Alliance and CalSEIA; TURN; and UCS.

18 Although the definition of a REC is central to the tradability of a REC, the details of D.08-08-028 are largely not relevant to this decision. One convention that should be kept in mind throughout the discussion, however, is that one REC represents the environmental and renewable attributes associated with one megawatt-hour (MWh) of RPS-eligible generation. See WREGIS Operating Rules, section 2, which may be found at http://www.wregis.org/content/blogcategory/26/47/.

19 The RPS Eligibility Guidebook is available at http://www.energy.ca.gov/2007publications/CEC-300-2007-006/CEC-300-2007-006-ED3-CMF.PDF.

20 Comments were filed by Aglet, AReM, Bear Valley Electric Service (BVES), Calpine, CEERT, DRA, GPI, Horizon Wind Energy and Iberdrola Renewables (jointly; collectively, Horizon), IEP, MU, PG&E, PacifiCorp, Powerex, SDG&E, Sacramento Municipal Utility District (SMUD), SCE, UCS, and Wal-Mart.

21 Reply comments were filed by Aglet, AReM, IEP, Large-scale Solar Association, PG&E, SCE, SDG&E, TURN, and UCS.

22 Comments were filed by Aglet, BVES, SCE, PacifiCorp, Solar Alliance, NaturEner USA LLC, CEERT, SDG&E, Evolution Markets, Inc., AReM and WPTF (jointly; collectively, AReM), UCS, SMUD, IEP, Horizon, PG&E, DRA, TURN, GPI, and Large Scale Solar Association (LSA).

23 Reply comments were filed by Aglet, Iberdrola, PacifiCorp, PG&E, AReM, MU, BVES, LSA, SCE, UCS, CEERT, and NaturEner.

24 The transferred issues are:

a. The revision of utilities' least-cost best-fit methodologies to include evaluation of REC-only contracts.

b. The process of approval of utilities' bundled energy and REC-only short-term contracts (whether bilateral or the result of solicitations) and long-term bilateral contracts.

c. The development of price benchmarks for evaluating the reasonableness of utilities' short-term bundled contracts (whether bilateral or the result of solicitations) and long-term bilateral bundled contracts.

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