COM/MP1/eap Mailed 5/25/2007
Decision 07-05-059 May 24, 2007
BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA
Order Instituting Rulemaking to Implement the Commission's Procurement Incentive Framework and to Examine the Integration of Greenhouse Gas Emissions Standards into Procurement Policies. |
Rulemaking 06-04-009 (Filed April 13, 2006) |
SECOND ORDER AMENDING ORDER INSTITUTING RULEMAKING
1. Summary
In today's order, the California Public Utilities Commission (the Commission) amends the April 13, 2006 Order Instituting Rulemaking (OIR) to modify the scope of Phase 2 of this proceeding regarding consideration of greenhouse gas (GHG) emission policies for the natural gas sector. The natural gas inquiry is expanded to address GHG emissions associated with the transmission, storage, and distribution of natural gas in California, in addition to the combustion of natural gas by non-electricity generator end-use customers. This modification is made to reflect provisions of Assembly Bill (AB) 32, which requires development of a statewide GHG emissions limit encompassing the entire California economy.
In addition, we amend the list of respondents to this proceeding to include all investor-owned gas utilities, as discussed below.
2. Background
The OIR established two major issue areas in this rulemaking. In Phase 1, the Commission addressed policy and implementation issues associated with a GHG performance standard for new generation and long-term procurement contracts undertaken by electric utilities and other load-serving entities (LSEs). In Phase 2, we are addressing implementation of a load-based GHG emissions cap for the electricity sector, as the cornerstone of the procurement incentive framework adopted in Decision (D.) 06-02-032 in Rulemaking (R.) 04-04-003. The Commission provided in D.06-02-032 that the load-based cap would apply initially to the GHG emissions of Pacific Gas and Electric Company (PG&E), Southern California Edison Company (SCE), San Diego Gas & Electric Company (SDG&E) and non-utility LSEs that provide electric power to customers in the PG&E, SCE, or SDG&E service territories. The OIR provided that Phase 2 also would define steps to take to ensure that GHG emissions associated with customers' direct use of natural gas, i.e., for purposes other than electricity generation, are incorporated into a procurement incentive framework, as contemplated by D.06-02-032.1 The OIR named as respondents PG&E, SCE, SDG&E, Southern California Gas Company (SoCalGas), and the non-utility load-serving entities (electric service providers and community choice aggregators) that provide electricity to customers within the service territories of PG&E, SCE, and SDG&E.
In D.06-10-020, the Commission amended the OIR to designate Phase 1 of this rulemaking as the procedural forum for the Commission's implementation of Senate Bill (SB) 1368 (codified in Public Utilities Code Sections (§§) 8340 et seq.2). SB 1368 required the Commission, on or before February 1, 2007, to establish and apply a GHG performance standard to "every electrical corporation, electric service provider, or community choice aggregator serving end-use customers in the State."3 In D.06-10-020, we amended the list of respondents in this proceeding to encompass the classes of LSEs addressed by SB 1368, i.e., all electrical corporations (as defined in § 218), electric service providers (as defined in § 218.3), and community choice aggregators (as defined in § 331.1). In D.07-01-039 culminating Phase 1, the Commission adopted a GHG emissions performance standard for all new long-term financial commitments to baseload electric generation undertaken by LSEs in California.
Meanwhile, on September 27, 2006, Governor Schwarzenegger signed into law AB 32, entitled "The California Global Warming Solutions Act of 2006" and codified in Health and Safety Code §§ 38500 et seq. This legislation requires the California Air Resources Board (CARB) to adopt a GHG emissions limit equivalent to the statewide GHG emissions levels in 1990, to be achieved by 2020.
The February 2, 2007 Assigned Commissioner's Ruling and Phase 2 Scoping Memo (Phase 2 Scoping Memo) addressed implementation of a load-based GHG emissions cap program for the electricity sector. It stated that a later scoping memo would establish procedures for consideration in Phase 2 of GHG emissions cap policies for customer use of natural gas, as directed by the OIR.
The Phase 2 Scoping Memo also specified that, in light of AB 32, Phase 2 should develop guidelines for a load-based emissions cap for the electricity sector that CARB can consider as it develops a GHG emissions limit for the California economy. Consistent with the Phase 2 Scoping Memo, Phase 2 of this rulemaking is the appropriate procedural forum for development of recommendations to CARB regarding a statewide GHG emissions limit as it pertains to the electricity and natural gas sectors.
The Phase 2 Scoping Memo recognized that, because D.06-02-032 was adopted prior to passage of AB 32, changes to the policies adopted in that order may be necessary. It placed the parties on notice that, in the course of Phase 2, the Commission may adopt policies that may modify portions of D.06-02-032 as a result of passage of AB 32, subsequent rulemakings by CARB, or any other record developed in the course of this proceeding.
As provided in the Phase 2 Scoping Memo, Phase 2 is being undertaken in collaboration with the California Energy Commission (CEC). The Commission will collaborate with the CEC in the development of joint recommendations regarding the electricity and natural gas sectors, for CARB's consideration as it implements AB 32. This interagency effort will utilize the CEC's expertise related to generation performance, system operation, energy policy, and GHG regulation and mitigation for the publicly-owned utilities (POUs), including its current efforts to adopt an emissions performance standard for POUs and its ongoing work with the POUs on a number of initiatives relevant to GHG reduction such as energy efficiency and renewables programs. We will also continue to work closely with the California Climate Action Registry, the Governor's Climate Action Team, the California Independent System Operator, and other entities involved in the implementation of AB 32.
1 OIR, mimeo., p. 13, citing Ordering Paragraph 5 of D.06-02-032. See also D.06-02-032, mimeo., pp. 50-52.
2 All section cites in this decision refer to the Public Utilities Code unless specified otherwise.
3 § 8340(h).
