Tracking, including TEACs and CO2RCs
Several parties argue that difficulties in tracking the contractual responsibility for the electricity used to serve a retail provider's load back to the ultimate sources constitutes a serious weakness to the retail provider approach. Powerex argues that the use of "broadly estimated regional intensity factors" would decrease not only accuracy but also the likelihood of real reductions. SCE states that the inability to accurately match load to sources is the fundamental and unavoidable flaw in a load-based approach. Morgan Stanley believes that, largely due to issues associated with unspecified power, a retail provider approach would be more administratively complex than the deliverer approach.
In contrast, other parties believe that issues regarding accurately tracking retail provider responsibility for GHG emissions can be overcome. SCPPA states that the retail provider approach may actually be superior to the deliverer approach and less costly due to the ability to use contracts and settlements data of a retail provider to identify the sources of energy derived from a third party.
GPI argues that a comprehensive regional tracking system is needed to improve the accuracy of GHG attribution to retail providers, and that this effort could piggy-back on multi-attribute tracking systems that have already been developed in other parts of the country. SMUD prefers a tracking system that uses existing settlements and reporting data as much as possible, stating that accuracy for unspecified sources would improve as more parties opt in to the tracking system. However, SCPPA believes that developing, and requiring the use of, a universal source-to-sink accounting would have the potential to impede energy market trading and to reduce market liquidity.
An alternative form of retail provider point of regulation that would use TEACs for compliance was proposed by WPTF. As proposed, this system would work by giving a certificate to generators for every MWh of output that represents the GHG emissions associated with that output. Similar to the use of tradable renewable energy certificates (RECs), retail providers would be required to obtain certificates to match each MWh of load served. A punitive high default rate would be assigned for every MWh of a retail provider's load that is not covered by a certificate. WPTF explained its view that using TEACs could improve accuracy by reducing the need for default emission rates for unspecified purchases, and that improved accuracy in attribution of emissions also would send the right economic signals to all generators. WRA submitted a similar proposal that would assign CO2 reduction credits (CO2RCs) to generators based on the difference between generators' emission rates and a high default rate.
Some parties believe that the TEAC/CO2RC approach deserves serious consideration. IEP likes the CO2RC or TEAC approach should a retail provider-based point of regulation be chosen. DRA supports WRA's CO2RC proposal, arguing that favorable aspects of this approach include administrative simplicity, likelihood of achieving real reductions by mitigating contract shuffling, compatibility with source-based systems, and low legal risk.
Several parties, including WPTF, Calpine, Constellation, and AREM, state that, while they prefer a source-based system, the TEAC approach would offer significant advantages if California adopts a retail provider point of regulation. Calpine states that, since "TEACs would provide a carbon signal directly to generators, it would provide a strong incentive for both investment in, and dispatch of, low-emission generation."
By contrast, the CAISO Market Surveillance Committee states that a TEAC approach would be functionally and economically equivalent to a source-based approach with output-based allocation of allowances, and argues that the additional administrative complexity of a TEAC system is unnecessary. PG&E and SCE similarly assert that the costs of creating and administering a TEAC system would outweigh any possible advantages that it might offer. SCPPA contends that, rather than being simple, this approach itself would need to track all power that is generated and delivered to retail providers in California.
