Other Requirements in Conjunction with Generator Cap-and-Trade
Parties were asked to comment on whether expanding programmatic approaches to mitigate GHG emissions would be needed to meet AB 32 goals if an in-state source-based point of regulation were adopted.
Many parties express concern about the costs and effectiveness of expanding "command and control" approaches. Calpine states that, "Because out-of-state generators would not be subject to the emissions cap, a variety of indirect actions would need to be taken to...ensure emissions reductions...and would likely place additional burdens on in-state resources, ...increasing the costs to reduce emissions. Such an approach to ensuring compliance with AB 32 is clearly less efficient than a system that simply makes emissions from imported power subject to a cap."
Constellation urges that policies that create more incentives for offsets should be given special attention in the event imports are excluded.
DRA and NRDC/UCS believe that some additional programs are desirable in any event, as described in Section 3.2.1.2. NRDC/UCS argue that, if emissions from imports are excluded, it will be all the more critical for the State to expand energy efficiency and renewable energy programs. WPTF suggests that the current suite of policies be applied uniformly across retail providers if imports are not included in the cap-and-trade program. AREM strongly opposes extension of energy efficiency programs to ESPs as "inappropriate and unnecessary."
Several parties submit that strengthening the Emissions Performance Standard would not be an effective means of mitigating additional leakage that could occur from a California-only source-based cap-and- trade regime. They contend that the Emissions Performance Standard is not a suitable mechanism for reducing emissions from imports that fall below the 1,100 pounds (lbs)/MWh threshold, and that such imports, if they are not included in a California cap, could displace a substantial portion of cleaner in-state generation.
A threshold issue is the best formulation of a "deliverer" approach. This approach evolved out of the "first seller" approach recommended by the Market Advisory Committee. The Market Advisory Committee recommended that the point of regulation be either the owner or operator of the California power plant, or the importing contractual party, depending on whether the electricity is generated in-state or out-of-state. In comments, parties take differing positions regarding the proper formulation of a first seller approach, or a variation thereof.
PG&E suggests that, for in-state power, the owner or operator of the generating unit would be the point of regulation, since it is usually the first to deliver the power to the busbar, which is usually the first delivery point on the transmission grid in California. PG&E suggests that, for imports, the entity with ownership of or title to the power at the first point of delivery in California would be the point of regulation. In this view, for those imports that have E-tags, the deliverer would be the Purchasing/Selling Entity listed on the E-tag14 at the first point of delivery in California. Because intra-balancing authority15 imports would not have E-tags when they are delivered to the California grid, PG&E suggests a technical working group to address information sources for such imports.
SCPPA asserts that, in a deliverer approach, entities that control plants through tolling agreements should be the point of regulation rather than the generator. While such entities are neither owners nor operators, SCPPA states that they "are tantamount to being owners or operators" by virtue of their tolling agreements.
SCE takes the position that, rather than identifying the deliverer of imports based on the point of delivery within California, the deliverer should be identified based on the first delivery point for which the balancing authority is a California entity. SCE explains that this would include delivery points outside the State that are controlled by a California balancing authority.
Parties take differing positions regarding whether marketers and brokers should have compliance obligations under a deliverer approach. SCE submits that marketers and brokers should be treated as any other Purchasing/Selling Entity, except that generators would be responsible for all in-state transactions. Several parties take the position that marketers would be first sellers, but not brokers since they do not own or schedule the power (LADWP, SCPPA, WPTF/AREM, and DRA). Morgan Stanley states that, for imported power, the party responsible for scheduling the energy into California should be the point of regulation.
Several parties support a deliverer approach, including PG&E (if multi-sector California only), SDG&E/SoCalGas, SCE, Calpine, Powerex, Constellation (until a regional source-based system is implemented), Environmental Defense, Morgan Stanley, WPTF, and AREM.
14 North American Electric Reliability Corporation E-tags identify the Purchasing/ Selling Entity responsible for the power at a particular point or portion of the physical scheduling path, power quantities, and the balancing authorities where the power originates and sinks.
15 The balancing authorities in California are the CAISO; Imperial Irrigation District; LADWP; PacifiCorp-West; SMUD; Sierra Pacific Power Company; Turlock Irrigation District; and Western Area Power Administration, Lower Colorado Region.
