CPUC TO ALLOCATE GREENHOUSE GAS ALLOWANCE TO UTILITY CUSTOMERS

     (The following press release from the California Public Utilities 
Commission was received by e-mail and was reformatted. The sender verified the 
statement.) 
FOR IMMEDIATE RELEASE                                                           
PRESS RELEASE
Docket #: R.11-03-012 
CPUC ALLOCATES 85 PERCENT OF REVENUE FROM SALE OF UTILITIES' GREENHOUSE GAS 
ALLOWANCES TO RESIDENTIAL CUSTOMERS 
SAN FRANCISCO, December 20, 2012 - The California Public Utilities Commission 
(CPUC) today issued a decision that will direct approximately 85 percent of the 
revenues generated from the sale of greenhouse gas emission allowances 
allocated to the investor-owned electric utilities to households as a both rate 
reduction and a semi-annual "climate dividend." 
As part of the California Air Resources Board's (ARB) Greenhouse Gas 
Cap-and-Trade program, the ARB allocated allowances to the state's electric 
distribution utilities to help compensate electricity customers for the costs 
that will be incurred under Cap-and-Trade.  The investor-owned electric 
utilities are required to sell all of their allowances at ARB's quarterly 
auctions, and the proceeds from the auction are to be used for the benefit of 
retail ratepayers, consistent with the goals of Assembly Bill 32. The total 
amount of revenue to be returned to ratepayers between 2013 and 2020 is 
expected to range from $5.7 billion to $22.6 billion. 
For most non-residential customers, the CPUC's decision today follows the 
"polluter pays" principle by reflecting the cost of greenhouse gas emission 
allowances in rates.  By putting a price on greenhouse gas pollution, this 
approach maintains the incentive provided by the Cap-and-Trade program to 
reduce total greenhouse gas emissions through increased efficiency and greater 
reliance on clean generating technologies.  Preserving the carbon price signal 
is critical to providing appropriate incentives for businesses and individuals 
to reduce greenhouse gas emissions when making decisions regarding their energy 
use.  However, in some circumstances, other important factors need to be 
considered.  Following an extensive, stakeholder driven process, the CPUC has 
allocated the revenues as follows: 
*         To ensure the program does not disadvantage California industries, 
the investor-owned utilities will return allowance revenues to businesses 
operating in industries identified by the ARB as emissions-intensive and 
trade-exposed, such as cement and glass manufacturing. These businesses emit 
large amounts of greenhouse gas emissions and operate in highly competitive 
markets. This allocation of revenue is expected to cover the majority of the 
Cap-and-Trade-related costs these industries will experience in electricity 
rates while preserving incentives for these entities to reduce their emissions. 
*         Consistent with the direction provided by Senate Bill 1018, 
investor-owned utilities will use allowance revenue to offset the Cap-and-Trade 
costs in small business electricity rates.  Over the 2013-2020 period, the 
level of compensation to small businesses will decline, and the electricity 
rates small businesses are subject to will gradually rise to reflect the cost 
of carbon. This gradual transition is intended to enable small businesses to 
adjust to the Cap-and-Trade program through investments in energy efficiency, 
operational improvements, and clean energy technologies. Qualifying small 
businesses are non-residential customers - including agriculture, nonprofits, 
and others - that consume less than 20 kilowatts of power. 
*         Allowance revenues will be used to mitigate the carbon costs that 
would otherwise be reflected in residential rates.  While not consistent with 
the general preference to preserve the carbon pollution price signal, the CPUC 
determined that an exception is warranted given the tiered structure of 
residential rates, which due to statutory constraints prevents carbon costs 
associated with residential consumption from being passed through to 
lower-tiers. The CPUC said that including additional carbon costs resulting 
from the Cap-and-Trade program only in upper-tier rates would be unfair to 
customers with consumption in the upper tiers. 
*         The remaining revenues will be given to residential customers as an 
equal semi-annual bill credit for each residential account.  This climate 
dividend is intended to help offset any increases in the costs of goods and 
services that may result from the Cap-and-Trade program. This holds entities to 
account for their contributions to climate change, while limiting the impact of 
the Cap-and-Trade program on household budgets. 
"Today's decision is ground-breaking in two ways," said CPUC President Michael 
R. Peevey. "First, the cost of emitting greenhouse gas pollution will now be 
reflected in most non-residential customers' rates, creating a strong incentive 
for businesses throughout California to invest in energy efficiency and clean 
energy.  Second, residential customers will receive 85 percent of the revenues 
from the sale of the utilities' greenhouse gas allowances, mostly in the form 
of a semi-annual climate dividend.   This precedent-setting decision marks the 
first time that a Cap-and-Trade program has returned pollution payments from 
large emitters directly to households to compensate them for any price 
increases that may result from Cap-and-Trade." 
"I support this decision allocating a greenhouse gas allowance to utility 
customers," said Commissioner Timothy Alan Simon.  "Allocation of revenue from 
the sale of greenhouse gas allowances is a critical piece of the state's 
Cap-and-Trade program and will set paths for numerous stakeholders, as well as 
other states and nations, as California continues to set greenhouse gas 
emission policy." 
Said Commissioner Catherine J.K. Sandoval, "Consistent with legislative goals, 
this decision increases affordability of electric services for residents and 
businesses, supports price transparency, promotes California's economic 
competitiveness, and protects its  environment." 
Added Commissioner Mark J. Ferron, "Tackling climate change is a top priority. 
The carbon price signal that the Cap-and-Trade program creates, and that this 
decision helps maintain, will again make California a leader in effective 
climate policy." 
The proposal voted on today is available at 
http://docs.cpuc.ca.gov/PublishedDocs/Published/G000/M039/K594/39594673.PDF. 
For more information on the CPUC, please visit www.cpuc.ca.gov 
Media Contact: Terrie Prosper, 415.703.1366, news@cpuc.ca.gov                    
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