UPDATE — California Cap & Trade Program Set to Expand in 2015

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On Friday, December 19, 2014 a California Administrative Law Judge (ALJ) issued a decision regarding natural gas utilities inclusion in the California Cap and Trade program that effectively postpones the start of implementation until later in 2015.  Decision 14-12-040 was issued in response to the proposed settlement developed by California natural gas utilities and covered resolution of Phase 1 issues – priority issues that needed to be resolved to ensure implementation by January 1, 2015.  Key findings from the decision are listed below.

  • The utilities proposed 2015 forecast of cap-and-trade compliance costs lack sufficient detail regarding assumptions and methodologies to be approved.  The ALJ required natural gas utilities, within 30 days of the decision (by January 19, 2015), to file information with sufficient detail that 2015 forecast costs can be authorized.  Natural gas utilities are not allowed to include cap and trade costs in natural gas rates until a 2015 forecast has been approved.
  • The proposed settlement inappropriately limits the ability to set a higher allowance consignment percentage.  Utilities are given some allowances to help defray compliance costs and limit price impacts.  A percentage of these allowances must be sold to benefit the ratepayers.  Utilities proposed that only the minimum number of allowances need be sold (25% in 2015, increasing 5% per year afterwards).  The ALJ rejected this proposal and deferred the decision to Phase 2.  No date has been set for the beginning of Phase 2.

This decision only delays the implementation of the expansion of the Cap and Trade program for California natural gas utilities; it does not cancel the expansion.  In Ruling 14-03-003 filed yesterday, the deadline for making final decisions was set for some time in June, 2015.

For a more in depth description of the proposed changes and their potential impacts the original post is available after the link. (more…)