7. Assignment of Proceeding
Michael R. Peevey is the Assigned Commissioner and Anne E. Simon and Burton W. Mattson are the assigned ALJs for this proceeding.
1. The attributes of a REC have not been definitively specified by this Commission.
2. RECs are playing an increasing part in several important aspects of energy policy, including participation in net-metering, the California Solar Initiative, the Self-Generation Incentive Program, tariffs or standard contracts for utilities' purchase of RPS-eligible generation from certain water and wastewater facilities, and voluntary programs reducing emissions of GHG.
3. SB 107 authorizes, but does not require, this Commission to allow the use of tradable RECs for RPS compliance.
4. Because of the importance of RECs in a variety of areas of energy policy, it is reasonable to develop a definition and characterize the attributes of a REC in advance of, and independent of, any decision on the use of tradable RECs for RPS compliance.
5. Once a REC has been retired for RPS compliance purposes, the use of the REC as an offset for emissions of GHGs or other pollutants would be inconsistent with California's regulatory policy and the policy of voluntary offset markets.
6. STC 2 of PPAs for RPS-eligible energy uses language that in its use of the term "landfill gas," rather than "biogas," is not consistent with the language of SB 107.
7. It is reasonable to make the language of STC 2 consistent with the language of SB 107 on the use of the term "biogas" in advance of a more comprehensive review of RPS STCs in the context of a possible authorization of the use of tradable RECs for RPS compliance.
8. It is reasonable to revise the language of STC 2 to be consistent with the treatment of avoided emissions in the definition of a REC.
1. A REC should be defined to include all the attributes necessary to conform to statutory definitions and meet all legal requirements, and to exclude the attributes prohibited from a REC or otherwise inappropriate or inconsistent with any legal requirements.
2. A REC should be defined to minimize the likelihood of double counting of any of its attributes.
3. STC 2 should be revised to use the term "biogas," rather than "landfill gas," consistent with the language of SB 107.
4. STC 2 should be revised to be consistent with the treatment of avoided emissions in the definition of a REC.
5. This decision should be effective immediately to permit a timely update of STC 2 and provide greater clarity about RECs for several aspects of energy policy.
IT IS ORDERED that:
1. A renewable energy credit (REC) for compliance with the California renewables portfolio standard (RPS) is:
a certificate of proof, issued through the Western Renewable Generation Information System, that one megawatt-hour of electricity was generated by an RPS-eligible renewable energy resource and delivered for consumption by California end-use retail customers. A REC includes all renewable and environmental attributes associated with the production of electricity from the eligible renewable energy resource, including any avoided emission of pollutants to the air, soil or water; any avoided emissions of carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, sulfur hexafluoride, or any other greenhouse gases that have been determined by the United Nations Intergovernmental Panel on Climate Change, or otherwise by law, to contribute to the actual or potential threat of global climate change;77 and the reporting rights to these avoided emissions, such as Green Tag reporting rights.78
A REC does not include any emissions reduction credit issued pursuant to § 40709 of the Health and Safety Code or any credits or payments associated with the reduction of solid waste or treatment benefits created by the utilization of biomass or biogas fuels. A REC also does not include any energy, capacity, reliability or other power attributes of the generation; any tax credits or other financial incentives in the form of credits, reductions, or allowances associated with the generation that are applicable to a state or federal income taxation obligation; any fuel-related subsidies or "tipping fees" or local subsidies received by the generator for the destruction of particular preexisting pollutants or the promotion of local environmental benefits; or emission reduction credits (whether issued pursuant to § 40709 of the Health and Safety Code or any other authority) that are encumbered or used by the generator for compliance with local, state, or federal operating and/or air quality permits.
The electricity underlying a REC must be delivered for consumption by California end-use retail customers, in accordance with the definition of delivery implemented by the California Energy Commission (CEC).
No REC may be created based on any electricity generated pursuant to any contract with a California retail seller or a local publicly owned electric utility executed before January 1, 2005, unless the contract contains explicit terms and conditions specifying the ownership or disposition of the RECs. A REC may not be created based on any electricity generated pursuant to a contract with a qualifying facility pursuant to the Public Utility Regulatory Policies Act of 1978 that was executed after January 1, 2005.
A REC can not be created with respect to electricity generated by an eligible renewable energy resource attributable to the use of nonrenewable fuels, beyond a de minimus quantity as determined by the CEC.
2. Standard Term and Condition number 2 of power purchase agreements for bundled energy (energy, RECs, and all Green Attributes) for compliance with the California RPS program is revised as set out in Appendix B hereto.
This order is effective today.
Dated August 21, 2008, at San Francisco, California.
MICHAEL R. PEEVEY
President
DIAN M. GRUENEICH
JOHN A. BOHN
RACHELLE B. CHONG
TIMOTHY ALAN SIMON
Commissioners
APPENDIX A-1
Standard Terms and Conditions from Appendix A (pp. A2-A3) of D.04-06-014
(2) Definition and ownership of RECs (May not be modified)
"Environmental Attributes" shall be added as a new General Definition in Article One of the Agreement as follows:
"Environmental Attributes" means any and all credits, benefits, emissions reductions, offsets, and allowances, howsoever entitled, attributable to the generation from the Unit(s), and its displacement of conventional energy generation. Environmental Attributes include but are not limited to: (1) any avoided emissions of pollutants to the air, soil or water such as sulfur oxides (SOx), nitrogen oxides (NOx), carbon monoxide (CO) and other pollutants; (2) any avoided emissions of carbon dioxide (CO2), methane (CH4) and other greenhouse gases (GHGs) that have been determined by the United Nations Intergovernmental Panel on Climate Change to contribute to the actual or potential threat of altering the Earth's climate by trapping heat in the atmosphere; and (3) the reporting rights to these avoided emissions such as Green Tag Reporting Rights. Green Tag Reporting Rights are the right of a Green Tag Purchaser to report the ownership of accumulated Green Tags in compliance with federal or state law, if applicable, and to a federal or state agency or any other party at the Green Tag Purchaser's discretion, and include without limitation those Green Tag Reporting Rights accruing under Section 1605(b) of The Energy Policy Act of 1992 and any present or future federal, state, or local law, regulation or bill, and international or foreign emissions trading program. Green Tags are accumulated on kWh basis and one Green Tag represents the Environmental Attributes associated with one (1) MWh of energy. Environmental Attributes do not include (i) any energy, capacity, reliability or other power attributes from the Unit(s), (ii) production tax credits associated with the construction or operation of the energy projects and other financial incentives in the form of credits, reductions, or allowances associated with the project that are applicable to a state or federal income taxation obligation, (iii) fuel-related subsidies or "tipping fees" that may be paid to Seller to accept certain fuels, or local subsidies received by the generator for the destruction of particular pre-existing pollutants or the promotion of local environmental benefits, or (iv) emission reduction credits encumbered or used by the Unit(s) for compliance with local, state, or federal operating and/or air quality permits. If Seller's Unit(s) is a biomass or landfill gas facility and Seller receives any tradable Environmental Attributes based on the greenhouse gas reduction benefits or other emission offsets attributed to its fuel usage, it shall provide Buyer with sufficient Environmental Attributes to ensure that there are zero net emissions associated with the production of electricity from such facility."
New Section 3.4 shall be added to the Agreement as follows:
"3.4 Environmental Attributes. Seller hereby provides and conveys all Environmental Attributes from the Unit(s) to Buyer as part of the Product being delivered, as such term is described in the applicable Transaction confirmation for the period set forth in such confirmation. Seller represents and warrants that Seller holds the rights to all Environmental Attributes from the Unit(s), and Seller agrees to convey and hereby conveys all such Environmental Attributes to Buyer as included in the delivery of the Product from the Unit(s)."
(END OF APPENDIX A-1)
APPENDIX A-2
Standard Terms and Conditions, D.07-02-011, pp. 41-42,
Modified by D.07-05-05779
"Green Attributes" means any and all credits, benefits, emissions reductions, offsets, and allowances, howsoever entitled, attributable to the generation from the Project, and its displacement of conventional Energy generation. Green Attributes include but are not limited to: Renewable Energy Credits, as well as: (1) any avoided emissions of pollutants to the air, soil or water such as sulfur oxides (SOx), nitrogen oxides (NOx), carbon monoxide (CO) and other pollutants; (2) any avoided emissions of carbon dioxide (CO2), methane (CH4), nitrous oxide, hydrofluorocarbons, perfluorocarbons, sulfur hexafluoride and other greenhouse gases (GHGs) that have been determined by the United Nations Intergovernmental Panel on Climate Change, or otherwise by law, to contribute to the actual or potential threat of altering the Earth's climate by trapping heat in the atmosphere; (3) the reporting rights to these avoided emissions such as Green Tag Reporting Rights [and Renewable Energy Credits]. Green Tag Reporting Rights are the right of a Green Tag Purchaser to report the ownership of accumulated Green Tags in compliance with federal or state law, if applicable, and to a federal or state agency or any other party at the Green Tag Purchaser's discretion, and include without limitation those Green Tag Reporting Rights accruing under Section 1605(b) of The Energy Policy Act of 1992 and any present or future federal, state, or local law, regulation or bill, and international or foreign emissions trading program. Green Tags are accumulated on a MWh basis and one Green Tag represents the Green Attributes associated with one (1) MWh of Energy. Green Attributes do not include (i) any energy, capacity, reliability or other power attributes from the Project, (ii) production tax credits associated with the construction or operation of the Project and other financial incentives in the form of credits, reductions, or allowances associated with the project that are applicable to a state or federal income taxation obligation, (iii) fuel-related subsidies or "tipping fees" that may be paid to Seller to accept certain fuels, or local subsidies received by the generator for the destruction of particular preexisting pollutants or the promotion of local environmental benefits, or (iv) emission reduction credits encumbered or used by the Project for compliance with local, state, or federal operating and/or air quality permits. If the Project is a biomass or landfill gas facility and Seller receives any tradable Green Attributes based on the greenhouse gas reduction benefits or other emission offsets attributed to its fuel usage, it shall provide Buyer with sufficient Green Attributes to ensure that there are zero net emissions associated with the production of electricity from the Project.
3.4 Green Attributes. Seller hereby provides and conveys all Green Attributes from the Unit(s) to Buyer as part of the Product being delivered, as such term is described in the applicable Transaction confirmation for the period set forth in such confirmation. Seller represents and warrants that Seller holds the rights to all Green Attributes from the Unit(s), and Seller agrees to convey and hereby conveys all such Green Attributes to Buyer as included in the delivery of the Product from the Unit(s).
(END OF APPENDIX A-2)
APPENDIX B
Standard Term and Condition 2:
"Green Attributes" means any and all credits, benefits, emissions reductions, offsets, and allowances, howsoever entitled, attributable to the generation from the Project, and its avoided emission of pollutants. Green Attributes include but are not limited to Renewable Energy Credits, as well as: (1) any avoided emission of pollutants to the air, soil or water such as sulfur oxides (SOx), nitrogen oxides (NOx), carbon monoxide (CO) and other pollutants; (2) any avoided emissions of carbon dioxide (CO2), methane (CH4), nitrous oxide, hydrofluorocarbons, perfluorocarbons, sulfur hexafluoride and other greenhouse gases (GHGs) that have been determined by the United Nations Intergovernmental Panel on Climate Change, or otherwise by law, to contribute to the actual or potential threat of altering the Earth's climate by trapping heat in the atmosphere;80 (3) the reporting rights to these avoided emissions, such as Green Tag Reporting Rights. Green Tag Reporting Rights are the right of a Green Tag Purchaser to report the ownership of accumulated Green Tags in compliance with federal or state law, if applicable, and to a federal or state agency or any other party at the Green Tag Purchaser's discretion, and include without limitation those Green Tag Reporting Rights accruing under Section 1605(b) of The Energy Policy Act of 1992 and any present or future federal, state, or local law, regulation or bill, and international or foreign emissions trading program. Green Tags are accumulated on a MWh basis and one Green Tag represents the Green Attributes associated with one (1) MWh of Energy. Green Attributes do not include (i) any energy, capacity, reliability or other power attributes from the Project, (ii) production tax credits associated with the construction or operation of the Project and other financial incentives in the form of credits, reductions, or allowances associated with the project that are applicable to a state or federal income taxation obligation, (iii) fuel-related subsidies or "tipping fees" that may be paid to Seller to accept certain fuels, or local subsidies received by the generator for the destruction of particular preexisting pollutants or the promotion of local environmental benefits, or (iv) emission reduction credits encumbered or used by the Project for compliance with local, state, or federal operating and/or air quality permits. If the Project is a biomass or biogas facility and Seller receives any tradable Green Attributes based on the greenhouse gas reduction benefits or other emission offsets attributed to its fuel usage, it shall provide Buyer with sufficient Green Attributes to ensure that there are zero net emissions associated with the production of electricity from the Project.
3.2. Green Attributes. Seller hereby provides and conveys all Green Attributes associated with all electricity generation from the Project to Buyer as part of the Product being delivered. Seller represents and warrants that Seller holds the rights to all Green Attributes from the Project, and Seller agrees to convey and hereby conveys all such Green Attributes to Buyer as included in the delivery of the Product from the Project.
(END OF APPENDIX B)
77 Avoided emissions may or may not have any value for GHG compliance purposes. Although avoided emissions are included in the definition of the REC, this definition does not create any right to use those avoided emissions to comply with any GHG regulatory program.
78 Green Tag reporting rights are the right to report the ownership of accumulated Green Tags in compliance with federal or state law, if applicable, and to a federal or state agency or any other party and include without limitation those Green Tag reporting rights accruing under Section 1605(b) of the Energy Policy Act of 1992 and any present or future federal, state, or local law, regulation or bill, and international or foreign emissions trading program.
79 Bold words are changes to wording in App. A of D.04-06-014 made by D.07-02-011. Underlined words are additions made by D.07-05-057; [bracketed] words are deletions made by D.07-05-057.
80 Avoided emissions may or may not have any value for GHG compliance purposes. Although avoided emissions are included in the list of Green Attributes, this inclusion does not create any right to use those avoided emissions to comply with any GHG regulatory program.
