CPUC Decision Allows Tradable RECs

The California Public Utilities Commission (CPUC) this week issued a decision that would allow the use of tradeable renewable energy credits (TRECs) in the state. The legislature had previously authorized the CPUC to allow the use of TRECS in 2006. In October, 2008, the CPUC issued its first proposed decision authorizing the use of TRECs. Since then the CPUC considered various proposed decisions that would have permitted the use of TRECs until adopting the final decision on March 11.

TRECs are renewable energy credits that can be traded separate and apart from the energy associated with their creation.

California’s current renewable portfolio standard requires not only that renewable energy come from certain sources, it also must be delivered directly to the state. The California Energy Commission (CEC) however has made it acceptable for renewable energy delivered to California to be produced independently of the power associated with the renewable energy credits (RECs).

As a result, utilities bought both the RECs and the power from a renewable energy generator, then sold the power back to the generator while retaining the RECs. Under the CPUC’s decision, utilities will now be able to purchase the TRECs from the renewable generator, without having to purchase the associated power.

To address whether there should be limits place on TRECs, the CPUC chose to define certain transactions as unbundled transactions, in other words, transactions that did not result in the importation of additional renewable generation into California. Those TREC transactions would be subject to a cap.

According to analysis of the decision by Stoel Rives,”The decision also recognizes that certain transactions with firm transmission arrangements might also qualify as bundled transactions. Although the cap currently will apply to those transactions, the CPUC will consider in the future whether to allow those transactions, or some subset of those transactions, to be considered bundled transactions not subject to the cap.”

The analysis also said that RECs associated with power that is transferred to the state will be considered a bundled transaction and will not be subject to any limit. Contracts that are already on the books, would be considered unbundled under the rules adopted in the decision, future deliveries under those contracts will be counted toward the cap.

However, Stoel Rives said if those pre-existing contracts cause a utility to exceed the cap, all of those deliveries will still be permitted to count toward a utility’s RPS.

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