Presenting a live 90 ‐ minute webinar with interactive Q&A Renewable Energy Certificates and Carbon Offsets Strategies to Negotiate Offsets and Structure REC Transactions WEDNES DAY, APRIL 20, 2011 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific T d Today’s faculty features: ’ f l f Keith M. Casto, Partner, Shook Hardy & Bacon , S an Francisco Christopher B. Berendt, Of Counsel, Drinker Biddle & Reath , Washington, D.C. Adam C. Raphaely, Director, Environmental Markets, Karbone Inc. , New Y ork The audio portion of the conference may be accessed via the p y telephone or by using your computer's speakers. Please refer to the instructions emailed to regist rants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10 .
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Tradable Renewable Energy Credits (TRECs) in California Credits (TRECs) in California Keith M. Casto
What is a What is a Tradable Renewable Energy Credit? • “A certificate of proof, issued through the Western Renewable Generation Information System (WREGIS), that one megawatt-hour of System (WREGIS), that one megawatt hour of electricity was generated by an Renewable Portfolio Standard (RPS)-eligible renewable energy resource and delivered for consumption energy resource and delivered for consumption by California end-use retail customers.” 5
The Basics of TRECs (T (Tradable Renewable Energy Credits) d bl R bl E C dit ) • The “green” attributes of power generation, can be separated off from the power itself. separated off from the power itself. • This would be traded and reattached to other forms of power which help those entities fulfill their green power energy requirements. energy requirements. • The credit is produced at the time of energy production. • And is “cashed in” or removed from the market once purchased allowing the buyer to claim to have promoted purchased, allowing the buyer to claim to have promoted the corresponding volume of electricity from renewable energy sources. • • The purpose of TRECs is to reduce costs and greatly The purpose of TRECs is to reduce costs and greatly increase flexibility for those entities with RPS compliance obligations, by allowing them to procure power at lower costs while also meeting their RPS compliance g p obligations. 6
Development of TRECs in California p • 2006 – Passed in 2006 by the California Legislature, SB 107 required at least 20% of total electricity sold to retail required at least 20% of total electricity sold to retail customers be from eligible renewable energy sources by December 2010. – April 2006 – The California Public Utilities Commission April 2006 The California Public Utilities Commission (CPUC) initiated proceedings to define what constitutes a REC. • 2007 – CPUC determines that RECs generated from renewable systems belong to the system’s owner. – September 2007 – California Legislature passes AB September 2007 California Legislature passes AB 1613, which authorized the CPUC to require that IOUs buy excess power from combined heat and power systems. 7
Development of TRECs in California • 2008 – CPUC determines that an REC is “a certificate of proof, issued through the Western Renewable Generation issued through the Western Renewable Generation Information System (WREGIS), that one megawatt-hour of electricity was generated by an Renewable Portfolio Standard (RPS)-eligible renewable energy resource and delivered for consumption by California end-use retail customers.” – October 29, 2008 – CPUC proposed creating TRECs as a mechanism to potentially reduce costs and increase h i t t ti ll d t d i flexibility for entities with RPS compliance obligations. – November 17, 2008 – Governor Schwarzenegger issues Executive Order S 14 08 which along with E O S 21 09 Executive Order S-14-08, which along with E.O. S-21-09 (passed in Sept. 2009), increase the target from 20% to 33% of renewable energy sources by 2020. 8
Development of TRECs in California • 2009 – California Legislature passes SB 14 and AB 64 which together authorize investor-owned utilities (IOUs) to use together authorize investor owned utilities (IOUs) to use TRECs for RPS-compliance purposes and limited out-of- state RPS purchases of RPS-qualified MWh which could be eligible as TRECs. – October 2009 – Governor Schwarzenegger vetoes both bills, largely because they discriminate against out-of- state RPS power. • 2010 – March 11, 2010 – CPUC issues the “2010 TREC Decision,” authorizing renewable energy credits for compliance with California RPS obligations, though li ith C lif i RPS bli ti th h placed some limitations, including a limit on IOUs including a 25% cap on an IOU’s RPS MWh purchases. 9
D Development of TRECs in California l t f TREC i C lif i • 2010 (continued) • April 12, 2010 all three IOUs (PG&E, SCE, SDG&E) file a Joint Petition for modification of the TREC Decision, seeking to change the definition of an REC-only and bundled transactions among other requests bundled transactions among other requests. • April 15, 2010 – Independent Energy Producers Assoc. (IEP) files a similar Petition seeking to have the CPUC adopt a presumption that transactions using firm adopt a presumption that transactions using firm transmission qualify as bundled transactions. • May 6, 2010 – CPUC stays the 2010 TREC Decision and places a moratorium on any further commission p y approvals until controversy sorted out. 10
D Development of TRECs in California l t f TREC i C lif i • 2010 (continued) • June 2010 – When CPUC was originally to decide on the June 2010 When CPUC was originally to decide on the TREC Decision and accompanying Petitions, but legislation was circulating the California Legislature (SB 722) may have trumped CPUC’s actions, so nothing was done at this time. – August 25, 2010 – during final days of Legislature, CPUC President Michael Peevey issues a Proposed Decision th t that would change the IOUs cap from 25% to 40%. ld h th IOU f 25% t 40% – October 2010 – CPUC President Peevey issues a second Proposed Decision that would have changed the cap from 25% to 30% just a day before the decision cap from 25% to 30% just a day before the decision conference was to be held. 11
D Development of TRECs in California l t f TREC i C lif i • 2010 (continued) – October 25, 2010 – Commissioner Grueneich issues an Alternative Proposed Decision which would have denied both Peevey PDs, lift the stay, and eliminate an b th P PD lift th t d li i t expiration date for the TREC cap and price cap. (Due to procedural rules, this pushes the decision conference until December 2010) until December 2010). – December 2010 – decision conference was held, none of the Proposed Decisions were adopted, and the term ended (ending the terms of two Commissioners including ( g g Grueneich) 12
D Development of TRECs in California l t f TREC i C lif i • 2011 – January 7, 2011 – CPUC President Peevey revises his prior Proposed Decision and essentially adopts a more restrictive TREC program similar to the Grueneich PD. t i ti TREC i il t th G i h PD – January 13, 2011 – CPUC rejects the Joint Petition filed by the three IOUs as well as IEPAs Petition, adopts the 2001 Peevey PD/2011 TREC Decision and lifts the stay 2001 Peevey PD/2011 TREC Decision and lifts the stay and moratorium imposed in 2010. – January 13, 2011 – CPUC implements SB 695, which requires the CPUC to treat Electric Service Providers requires the CPUC to treat Electric Service Providers (ESPs) the same as IOUs and subject to the same requirements and limitations. – April 12, 2011 – Governor Brown signs Senate Bill 2 p , g (SBX 2), which affects the 2011 TREC Decision caps. 13
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