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On Friday, December 16, 2010, the California Public Utilities Commission unanimously approved a decision ("Final Decision") ordering a new tariff for a procurement protocol called the Renewable Auction Mechanism, or RAM. RAM applies to California’s three largest investor-owned utilities ("IOUs"). All renewable energy projects up to 20 MW that are located in the service territory…

After a marathon 10-hour public hearing last Thursday, the California Air Resources Board voted 9-to-1 to adopt the state’s landmark Cap-and-Trade Program. My colleague, Lee Smith, and I spent the day at the packed California EPA auditorium, monitoring the hearing.  Over 150 people strode up to the podium to give testimony during the public comment period, spanning the gambit from staunch environmentalists, to climate change skeptics, environmental justice advocates, and many, many a representative of soon-to-be regulated industries and businesses. The chain of testimony was broken up six hours into the hearing by a feel-good guest appearance by Governor Schwarzenegger, who waxed eloquent on the mission of A.B. 32, California’s green jobs revolution, and the momentous step that the state’s Cap-and-Trade Program represented. Indeed, there were many thank yous from commenters to ARB staff and the Board for their hard work on crafting the extraordinarily complex Program and trying to make it more palatable for those affected. Regulated entities noted the outstanding efforts that staff had taken to work with them during the development process. 

It was clear, however, that many are still not satisfied with the Program, whether as a whole or with the details of its implementation that will affect various sectors. Environmental justice advocates, such as representatives from the Center for Race, Poverty and the Environment, are largely not in favor of the Cap-and-Trade Program as proposed, dissatisfied with the lack of guarantees that the Program will not disproportionately impact low income communities or communities of color. Most people testifying made pleas to have one aspect or another of the Program changed in some manner. 

Lucky for those industries hoping to get some kinks ironed out to make the regulation less painful for their business, staff’s job is not done yet. Many details on implementing the Program remain to be worked out. At the hearing, staff presented several modifications to the Cap-and-Trade regulation that was released in early November for public review, and Board members, based on testimony or questions they had, gave staff a laundry list of additional points to further study. The changes to the regulation and other “conforming modifications” will be released for a 15-day comment period. Staff will then continue to tweak the fine points that do not require further Board action, hopefully having all the details of the Program firmed up by July 2011. Regulated entities certainly canvassed for the implementing details to be finalized as soon as possible before the regulation goes into effect on January 1, 2012, in order to have some certainty as to their compliance obligations. 

The first hour or two of public comment was dedicated to testimony on the forest projects offset protocol that will allow certain forest projects that sequester carbon to create offset credits which emitters can buy to meet a percentage of their compliance obligations. Several foresters and forest industry representatives testified, but the bulk of the comment was an emotional plea from environmentalists and residents of the Sierras to prevent clearcutting and forest monoculture under the proposed protocol. 

How can a program to reduce greenhouse gas emissions involve clearcutting? The protocol requires adherence to California forest management practices, even for out of state projects. These forest management practices may be more stringent or protective of the environment than those of other states, but California practices allow for clearcutting on areas of 40 acres or less and for even-aged stand management. Under the forest projects protocol, such practices could be utilized in connection with an offset project, but staff and members of the working group that developed the protocol emphasized that the overall carbon storage of a forest stand in a project must be maintained or increased in order for it to qualify under the protocol and generate offsets. Even with an overall net storage of carbon, however, environmental groups stridently objected to even-aged stand management because older or more diverse forest stands may be replaced with stands having less biodiversity and such stands may be managed with herbicides.

With the considerable objections to this protocol and the Board’s aversion to appearing to be ‘for’ clearcutting, ARB considered modification of the protocol at the hearing. Board Member D’Adamo pressed for an exclusion of any future forest project that involved clearcutting, with several other Members agreeing. However, in the end, the Board approved the protocol as it was presented. Chairman Nichols noted that it may be beyond the scope of the Board’s job under A.B. 32 to dictate different forest practices from those developed by the state’s agencies charged with forest management. The environmental protections embedded in the protocol and the overall requirement to have a net zero carbon loss within any given project seemed to satisfy the majority of the Board in the end.

Continue reading for an explanation of some the major points of the Cap-and-Trade Program.Continue Reading California Adopts Cap-and-Trade

A legal update from our colleagues Seth Hilton, John McKinsey and Allison Smith:

The results are in on the California election, and it’s supportive of renewable energy. The two most important developments: Jerry Brown prevailed over Meg Whitman in the gubernatorial race and Proposition 23 failed. The election appears to have been, in part, an affirmation of California’s quest to expand its use of renewable energy.

Proposition 23 would have suspended the California Global Warming Solutions Act (AB 32) until the state’s unemployment rate dropped to 5.5% or less for four consecutive quarters. Given that California’s current unemployment rate is about 12% and the unemployment rate has been below 5.5% for four consecutive quarters only three times since 1980, Proposition 23 would have likely halted the implementation of AB 32 indefinitely. AB 32 mandates a reduction in greenhouse gas emissions to 1990 levels by 2020. More importantly for the renewably energy industry, the current mandate for 33% of the state’s electricity to come from renewable energy resources by 2020 hinges almost entirely on AB 32. The California Air Resources Board (ARB), pursuant to its authority under AB 32 and following the edict of Governor Schwarzenegger’s Executive Orders S-21-09 and S-14-08, is implementing a "33% by 2020" renewable energy standard (RES).Continue Reading California Election Results Provide Endorsement for Renewable Energy

The California Air Resources Board (ARB) has issued its proposed greenhouse gas cap-and-trade program, pursuant to the California Global Warming Solutions Act (AB 32). The proposed regulation builds on the conceptual framework for ARB’s cap-and-trade program, released in November 2009. The 45-day public comment period on the regulation opened yesterday and closes on December 15, 2010. Whether by design or happenstance, ARB released this latest on the cap-and-trade program just before Californians will vote today on whether to suspend AB 32 under ballot box Proposition 23. Proposition 23 would suspend AB 32 until California’s unemployment rate dropped to 5.5% or less, for four consecutive quarters. Given that the state’s current unemployment rate is about 12%, and the unemployment rate has been below 5.5% for four consecutive quarters only three times since 1980, Proposition 23 could halt the implementation of AB 32 indefinitely.Continue Reading California’s Proposed GHG Cap-and-Trade Program Out for Public Comment

Here’s an Energy Law Alert prepared by Seth Hilton, John McKinsey and Stephen Hall:

Last Thursday evening, the California Air Resources Board (ARB) unanimously adopted its Renewable Energy Standard (RES), mandating that California’s electric utilities—both public and investor-owned—procure 33% of their electricity from renewable resources by 2020. The RES was adopted pursuant to the authority granted the ARB in AB 32, the California Global Warming Solutions Act of 2006, which vested the ARB with the authority to promulgate regulations to reduce California’s greenhouse gas emissions. The RES requires utilities to submit plans by July 2012 on how they will comply with the new regulations. The regulation includes several multi-year compliance intervals—from 2012 to 2014 the RES is 20%, from 2015 through 2017 it is 24%, from 2018 to 2019 it is 28%, and from 2020 forward the RES remains at 33%. The RES is met through the retirement of Western Renewable Energy Generation Information System (WREGIS) certificates; unlike the current 20% Renewable Portfolio Standard (RPS) that applies to investor-owned utilities, there is no requirement that any energy be delivered to California. WREGIS certificates may be retained or traded for up to three years, utilities may also bank those certificates for RES compliance indefinitely. The RES also provides that ARB will conduct comprehensive reviews of the program by December 31, 2013, 2016, and 2018, and that those reviews may trigger modifications to the RES.Continue Reading Air Resources Board Adopts 33% Renewable Energy Standard; Four California Energy Agencies Vow to Cooperate on Implementation

An alert written by Stoel Rives partners Seth Hilton and John McKinsey:

The California Energy Commission RPS staff has proposed some significant and potentially important revisions to the RPS Eligibility Guidebook and the Overall Program Guidebook.  Written comments on the proposed revisions are due September 10, 2010, by 5:00 p.m.  The CEC will consider approval…

An alert written by Stoel Rives partner Seth Hilton:

Last night, the California legislature failed to pass Senate Bill 722—the 33% Renewable Portfolio Standard (RPS) legislation—by the close of the legislative session. The bill would have increased California’s RPS to 33% for both investor-owned and publicly owned utilities. It would also have placed limits on the use of renewable resources located out-of-state to meet California’s RPS—utilities would have been required to meet a certain percentage of their RPS obligations through resources whose first point of interconnection was a California balancing authority, or whose power is transmitted to California through a dynamic transfer arrangement or scheduled hourly or inter-hourly into California. The proposed legislation also would have authorized the use of renewable energy credits (RECs)—the environmental attributes of renewable power separated from the power itself—for RPS compliance, but would have imposed limits on the amount of RECs that could be used to meet the utilities’ RPS obligation.Continue Reading California Legislature Fails to Pass 33% Renewable Portfolio Standard

On August 25, the California Public Utilities Commission (“CPUC”) issued a proposed decision (“PD”) that would end the CPUC’s moratorium on approval of tradable renewable energy credit (“TREC”) transactions and increase the cap on such transactions for large investor-owned utilities to 40%.

Previously at its March 11, 2010 meeting, the CPUC authorized the use of TRECs for compliance with California’s Renewable Portfolio Standard (RPS), subject to certain limitations. CPUC Dec. 10-03-021 (Mar. 15, 2010)(“March Decision”). Among the limitations that the March Decision imposed was a cap limiting the use of TRECs for RPS compliance for the largest investor-owned utilities (Pacific Gas and Electric, Southern California Edison, and San Diego Gas and Electric) to 25% of their annual RPS compliance obligations. That cap was to remain in place until December 31, 2011, when the CPUC would consider modifying or removing that limitation. The March Decision also imposed a price cap of $50 per TREC. The price cap also expires on December 31, 2011.Continue Reading Energy Law Alert: CPUC Proposes to End Moratorium on TREC Transactions; Increase Cap to 40%

From our colleague Morten Lund:

On July 29, the California Public Utilities Commission (“CPUC”) issued a ruling lifting a prior temporary hold on certain applications under the California Solar Initiative (“CSI”). The CPUC had on July 9 placed a hold on new CSI applications for PBI projects and government/non-profit projects pending comments on certain…

Morten Lund reports:

The California Solar Initiative Handbook was updated June 8, 2010. The new version can be found by clicking here.

Of particular interest are changes to Section 2.4 (warranty requirements). These changes are not necessarily substantively significant, but may require some manufacturers and contractors/installers to conform their warranty language in order to…