6. Issues Raised by Parties Outside the
Scope of Phase 1
Several parties raise issues in their comments that are outside the scope of Phase 1, which we mention briefly below.
Referencing § 8341(b)(6), Carson Hydrogen Power Project requests that we address policies to encourage "zero- or low-carbon generation resources" in this proceeding. Section 8341(b)(6) states:
"A long-term financial commitment entered into through a zero- or low-carbon generating resource that is contracted for, on behalf of consumers of this state on a cost-of-service basis, shall be recoverable in rates, in a manner determined by the commission consistent with Section 380. The commission may, after a hearing, approve an increase from one-half to 1 percent in the return on investment by the third party entering into the contract with an electrical corporation with respect to investment in zero- or low-carbon generation resources authorized pursuant to this subdivision."
Commission overall policies addressing "zero- or low-carbon generation resources" are not within the scope of Phase 1. If an electrical corporation seeks Commission approval of a rate-of-return increase on investments made by third parties, as described in § 8341(b)(6), it may file such a request in our Long-Term Procurement Rulemaking (R.06-02-013), or its successor proceeding.
Calpine recommends that the Commission take additional steps to encourage long-term commitments with resources with emissions below the EPS limit, such as providing incentives to reward LSEs for contracting with lower emitting resources and resource owners for developing such resources. This recommendation is beyond the scope of Phase 1. In D.06-02-032, we discuss how we intend to pursue financial incentives for preferred resources in conjunction with a GHG emissions cap, and identified the resource-specific proceedings where such "shareholder risk/return incentive mechanisms" will be considered. We also discuss our intent to pursue the concept of "allowance sale incentives" for superior performance in GHG reductions during Phase 2 of this proceeding.225
In post-workshop comments, San Francisco Community Power urges us to commit to a specific inventory of emission allowances on a date certain (e.g., January 1, 2007) for each LSE.. It would be premature, and beyond the scope of Phase 1, to establish target dates for these determinations in today's decision. The schedule for addressing this and other baseline-related issues for a load-based cap, including allowance allocations among individual LSEs, will be established during Phase 2 implementation of our adopted Procurement Incentive Framework, in coordination with CARB and other state agencies implementing AB 32. For similar reasons, we do not adopt PG&E's recommendations to "immediately" convene a Phase 1A in parallel with Phase 2 implementation of AB 32, in order to address issues related to the assignment of GHG emissions of unspecified power that would carry over in that phase.226 The Phase 2 scoping and scheduling process underway by the Assigned Commissioner and ALJs is the appropriate procedural forum for considering how best to sequence and prioritize the myriad of issues related to implementing AB 32, rather than today's Phase 1 decision.
Finally, in its opening comments on the Proposed Decision, the Community Environmental Council (CE Council) urges us to include in today's decision a preliminary "lifecycle" analysis of net emissions for natural gas plants that may use liquefied natural gas (LNG), and to indicate that the EPS will be modified in the future in accordance with the Commission's findings regarding GHG emissions from LNG. A definition of "lifecycle analysis" (including where the lifecycle begins and ends) is not presented in CE Council's comments.227 However, in the context of LNG, CE Council describes such an analysis as including the upstream carbon emissions associated with the extracting and shipping of LNG in addition to those resulting from the production of electricity at the natural gas plant.
The scoping of Phase 1 did not identify the issue that CE Council now raises in its comments on the Proposed Decision, namely, whether the Commission should undertake a lifecycle net emissions analysis to determine compliance with SB 1368, and if so, how that analysis should be conducted. Moreover, SB 1368 specifically directs us to consider lifecycle net emissions in one context only, and not in others, and we have followed that specific direction (e.g., for biomass, biogas or landfill gas-fueled plants where CO2 is removed from the atmosphere at one lifecycle stage and put into the atmosphere at another). If we were to go beyond that specific direction and take a lifecycle approach to other net emission calculations, we would have to do so for all other resources to treat them consistently--and not just for LNG as CE Council suggests. Taking such an approach was not raised during the scoping of Phase 1, during workshops or in pre- or post-workshop written comments. Even if it were, we do not have a sufficient record or time before the statute requires us to adopt an enforceable standard to take this approach for the interim EPS. For these reasons, we do not adopt CE Council's recommendation.
225 D.06-02-032, pp. 30-32, 34-35.
226 Reply Comments of PG&E on Proposed Decision, January 8, 2007, p. 3.
227 For example, the lifecycle emissions concept could encompass the process for extracting fuel (e.g., uranium for nuclear powerplants), transportation of fuel to the powerplant, as well as the fabrication of the generation facility (e.g., the wind turbine, photovoltaic cells, etc.) that produces the electric power and any associated fuel disposal processes. We have no record in Phase 1 on the various approaches and methods for conducting a lifecycle analysis of GHG emissions to consider in making this determination.
