California to Set Cap on Utility Greenhouse Gas Emissions

February 22, 2006

The California Public Utilities Commission (CPUC) announced on February 16th that it will develop a cap on greenhouse gas (GHG) emissions for the state's investor-owned utilities and the companies from which those utilities buy their power. The CPUC plans to set the cap based on the customer load served by each utility, treating power equally whether it is imported into the state or generated in California. According to the CPUC, the cap will encompass all of the GHG emissions produced in the course of generating the electricity, eventually including six major GHGs by setting the cap in terms of the equivalent tons of carbon dioxide emitted. In addition, the CPUC will continue to work with the Governor's Climate Action Team to ensure that municipal utilities are also subject to a GHG emissions reduction regime.

In setting the cap and developing compliance mechanisms, the CPUC plans to minimize costs to ratepayers, while providing appropriate incentives to utility managers and shareholders. The CPUC intends to give utilities some flexibility in how they achieve the GHG cap, possibly including the banking and trading of GHG credits and the use of offsets, which allow utilities to take credit for GHG-reducing projects that don't directly impact their GHG emissions from power generation. In current GHG reduction schemes—including the system under development in the Northeast—such offsets generally include energy efficiency measures for energy sources other than electricity, landfill gas energy projects (which reduce landfill methane emissions), and non-electrical clean energy projects funded by the utility. See the CPUC press release.

California is also moving ahead on its regulations to control GHGs from vehicles. In December, the California Air Resources Board (CARB) sent a letter to the U.S. Environmental Protection Agency, requesting that the state be allowed to set tighter air emission requirements than those specified in the federal Clean Air Act. See the CARB letter (PDF 422 KB). Download Adobe Reader.