Energy Law Alert: CPUC Charges Forward on Emissions Standards for Baseload Generation
10/26/2006
On September 29, 2006, Governor Schwarzenegger signed Senate Bill 1368, which bars any electric utility (as well as energy service providers and community choice aggregators) from entering into a new ownership investment in baseload generation or a new or renewed contract for a term of five or more years for the procurement of baseload generation, unless that baseload generation complies with a greenhouse gas emissions performance standard. That standard, to be developed by the California Public Utilities Commission ("CPUC") for utilities, energy service providers, and community choice aggregators, and by the California Energy Commission ("CEC") for local publicly-owned utilities, cannot be any higher than the greenhouse gas emissions rate from a baseload combined-cycle natural-gas-fired plant. The statute defines "baseload generation" as generation from a power plant that is designed and intended to provide electricity at an annualized plant capacity factor of at least 60 percent.
Although the statute became law less than a month ago, the CPUC is already well on its way to developing the emissions standard for those entities subject to its jurisdiction. In April of this year, well before the passage of SB 1368, the Commission instituted a rulemaking to develop greenhouse gas emissions standards (R.06-04-009). In a Decision (D.06-10-020) approved on October 5, 2006, the Commission formally designated this rulemaking as the procedural forum for the development of the SB 1368 emissions standard.
In June, CPUC staff held workshops on a potential emissions standard, and issued a draft workshop report for comment on August 21, 2006. On October 2, 2006, CPUC staff issued its final workshop report, which includes the staff’s proposal for implementation of the emissions standard required by SB 1368. The highlights of the staff’s emissions standard proposal include:
- An emissions standard of 1100 pounds CO2 per megawatt hour;
- The standard will apply to all new and repowered facilities, as well as all new and renewal contracts for power, including cogeneration facilities;
- Renewables compliant with California’s Renewable Portfolio Standard (RPS) are covered resources subject to the emissions standard and must estimate their emissions;
- Unspecified resource contracts are assigned the average emissions of the most current CEC "Net System Power" at the time of the new or renewed commitment;
- "Null renewable power" (power from a renewable resource that has sold the associated renewable energy credits to another entity) is treated the same as unspecified resource contracts;
- Potential Research and Development exemptions for higher-emitting sources determined on a case-by-case basis;
- No offsets or market price safety valves.
The staff’s August draft report had originally recommended that RPS-compliant renewables should be exempted from the emissions standard. At the urging of The Utility Reform Nework and the Natural Resources Defense Council, however, staff amended the final version of its report to require renewables to report their emissions.
Although the workshop report is now final, interested parties still have opportunities to participate in the CPUC proceeding. The same day that the Commission approved D.06-10-020, formally adopting Rulemaking 06-04-009 as the procedural vehicle to implement SB 1368, Assigned Commissioner Peevey also issued a revised schedule for the proceeding. Under the new schedule, parties were permitted to submit opening comments on the staff’s final proposal on October 18, and reply comments are due October 27, 2006. The Commission will issue a draft decision on the emissions standard in mid-December, and parties will have an opportunity to submit comments on the draft. The final decision will be adopted prior to February 1, 2007, as required by SB 1368.
In contrast to the CPUC, the CEC has not yet initiated a rulemaking to develop the emissions standard. However, SB 1368 requires that the CPUC’s emissions standard and the CEC’s emissions standard be "consistent." Thus whatever the CPUC adopts will arguably limit the options the CEC may consider in developing its own standard.
If you have any questions about this update or if you would like our assistance in connection with this matter, please contact your Stoel Rives lawyer or one of the following renewable energy attorneys:
Stephen Hall, schall@stoel.com, (503) 294-9625
Seth Hilton, sdhilton@stoel.com, (415) 617-8943
John McKinsey, jamckinsey@stoel.com, (916) 319-4746
Marcus Wood, mwood@stoel.com, (503) 294-9434
Thomas Wood, trwood@stoel.com, (503) 294-9396