8. Comments on Proposed Decision

The proposed decision of the assigned Commissioner in this matter was mailed to the parties in accordance with Section 311 of the Public Utilities Code and comments were allowed under Rule 14.3 of the Public Utilities Commission's Rules of Practice and Procedure. Comments were filed no later than October 2, 2008 and reply comments were filed no later than October 7, 2008, except that DRA was allowed to late-file its reply comments on October 10, 2008. We have made corrections and clarifications in the proposed decision in response to comments, as well as substantive changes on selected issues, as we describe in today's decision.

In comments, several parties ask that we modify the proposed decision's recommendations to ARB to address implementation details of particular concern to them. We have made revisions to address certain implementation issues. Other implementation details, however, require further analysis. For convenience, we provide here a list of issues, certainly not exhaustive, that we have identified as requiring additional consideration as we work with ARB on the design and implementation of regulations related to AB 32:

· Market and regulatory barriers for CHP (discussed in Section 4.1.3.2 above);

· Electrification in other sectors and potential impacts on allowance allocations to the electricity sector (Section 4.3.2.1 above);

· Natural gas sector contributions to GHG reductions and potential impacts of increased use of natural gas as a transportation fuel (Section 4.3.2.2);

· Weighting factors to be used for fuel-differentiated output based allowance allocations to deliverers (Section 5.4.2.4), including bottoming-cycle CHP (Section 6.4.2);

· How to update deliverer-specific output-based proportions used in the distribution process, and whether a small number of allowances should be set aside for new deliverers (Section 5.4.2.4);

· How to allocate allowances to new retail providers, and how to calculate and update sales-based proportions used for allocations to retail providers (Section 5.4.2.4);

· The appropriate trajectory for the transition from historical emissions-based to sales-based allowance allocations for retail providers (Section 5.4.2.4);

· Whether and how allowances should be distributed for verified energy efficiency (Section 5.4.3.1); and

· Whether and how allowances should be set aside for the voluntary renewable electricity market (Section 5.4.3.2).

One other issue raised in comments on the proposed decision deserves mention here. SCPPA asks that, in the allowance auctioning process, deliverers that are also retail providers be allowed to pay only the net difference between the cost of allowances they purchase and the auction revenues that are to be distributed to them as retail providers. We do not resolve this issue today, but believe it should be added to the list of issues for future consideration.