California Suspends Cap-and-Trade Provision for Electricity Imports

The California Air Resources Board (CARB) on Thursday said it would suspend, for 18 months, enforcement of part of its carbon trading rule as it applies to electricity imported to the state. The measure would help avoid a "negative" impact on energy supplies and reliability for the power-strapped state, the state air regulator said.

In an Aug. 16 letter to Federal Energy Regulatory Commission Commissioner Philip Moeller, CARB Chair Mary Nichols said the agency "fully" agreed that design and implementation of the state’s cap-and-trade program should be carried out in a way that would not disrupt supplies to California or other western states.

Earlier this month, Moeller asked California Governor Jerry Brown to suspend the "resource shuffling" provision of the state’s greenhouse gas trading plan, saying he was "extremely concerned" about the "potential disruption” to the state’s electricity market arising from implementation of the program.

"Specifically, by failing to clearly define ‘resource shuffling’ but nevertheless prohibiting it, and by requiring energy importers to affirm, under penalty of perjury, that they have not engaged in resource shuffling the [CARB] is creating uncertainty and great concern among entities that sell into California," Moeller wrote in a letter dated Aug. 6.

The commissioner pointed out that California depends on imports for nearly 25% of its consumed power and could not maintain "reliable and affordable" electricity if out-of-state resources chose not to participate in the California market to avoid regulatory uncertainty.

It was necessary that CARB was vigilant in ensuring "appropriate incentives exist to prevent gains in emission reductions that occur in California from being offset by increases in emissions elsewhere," Nichols responded on Thursday. But she said the agency agreed that participants needed a clear understanding of the rules to which they would be held accountable.

"Until that process is complete, and while we are reviewing the trades that take place in the first 18 months of active allowance trading, it is appropriate to suspend enforcement of the provisions of the cap and trade regulation that require importers of electricity to annually attest that they have not engaged in resource shuffling during the previous year of a compliance period," Nichols wrote.

During the 18 months, CARB is expected to work with other western state energy agencies to monitor emissions associated with imports of power into California.

Sources: POWERnews, CARB, FERC

—Sonal Patel, Senior Writer (@POWERmagazine)