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California Public Utilities Commission Issues New Proposed Decision on Tradable Renewable Energy Credits

Apr 3, 2009 - Stoel Rives, LLP
Renewable Energy Law Alert

On October 29 of last year, the California Public Utilities Commission issued a proposed decision that, if approved, would have allowed California's investor-owned utilities to meet their obligation to procure renewable generation by purchasing tradable or unbundled renewable energy credits ("Tradable RECs").1 Tradable RECs are the environmental or "green" attributes of renewable power separated from the underlying energy, allowing the utility to purchase the Tradable RECs from a renewable generator without buying the energy.

After the comment period on the proposed decision had elapsed, it appeared on the agenda for the Commission's voting meeting for the first time on December 4, 2008. Immediately prior to that meeting, the proposed decision was held (removed from the agenda and placed on the agenda for a later meeting) at the request of Commissioner Simon. Thereafter, at successive meetings, the proposed decision was in turn held at the request of Commissioners Bohn, Gruenich (twice), and then President Peevey. President Peevey's hold placed the proposed decision on the agenda for the March 26, 2009 voting meeting.

Immediately prior to that meeting, the proposed decision was withdrawn. Instead, on March 26 the Commission issued a new proposed decision, making several substantial revisions to the text of the proposed decision. Although the new proposed decision, like the old proposed decision, authorizes the use of Tradable RECs, it imposes a significant new restriction on the use of those Tradable RECs, limiting the three largest investor-owned utilities—Pacific Gas and Electric, Southern California Edison, and San Diego Gas and Electric—to meeting only up to 5% of their annual RPS obligations through Tradable RECs. The proposed decision also clarified when a transaction would be considered a Tradable REC-only transaction, subject to the 5% limitation, and when it would be considered a bundled transaction for both RECs and energy, and thus not subject to the cap.

Aside from these changes, the new proposed decision would impose a similar structure and set of rules as those set forth in the October 29 proposed decision. Although the new proposed decision seeks to create a market in which participation in Tradable REC transactions is "not restricted," participants must meet the requirements set forth by both the CPUC and the Western Renewable Generation Information System ("WREGIS") . The proposed decision would also require that Tradable RECs be committed to use for RPS compliance within three calendar years of the date the electricity associated with the Tradable RECs was generated. Tradable RECs committed to RPS compliance will be treated similarly to bundled energy purchases for reporting and compliance purposes. In addition, under certain conditions, Tradable RECs may be unbundled from existing contracts and sold. The new proposed decision also retains the transitional price cap on Tradable RECs used for RPS compliance by all investor-owned utilities.

The issuance of a new proposed decision has triggered another opportunity for parties to provide comments and reply comments on the proposed decision. Comments are due on April 15, 2009. The Commission will not vote on the proposed decision until the 30-day comment period has elapsed.

For more information, please contact:

Seth Hilton at (916) 319-4749 or
John McKinsey at (916) 319-4746 or
Howard Susman at (858) 794-1462 or
Steve Hall at (503) 294-9625 or
Marcus Wood at (503) 294-9434 or
Dina Dubson at (503) 294-9675 or


Updated: 2003/07/28