(August 7, 2012) The California Chamber of Commerce is calling on the Legislature to correct an inequity in how the state will attempt to mitigate the higher electricity costs that ratepayers face due to California’s AB 32 greenhouse gas cap-and-trade program.
The unfair treatment of a significant portion of electricity customers is due to language enacted in a budget trailer bill, SB 1018 (Committee on Budget and Fiscal Review), which excluded certain customers from receiving credit offsets to increased electricity rates from the sale of utility sector AB 32 cap-and-trade allowances.
The flawed approach will hit customers such as K-12 schools, local governments, courts, hospitals, prisons, mass transit, agricultural entities, colleges, universities, large employers and commercial businesses. Together, these customers use more than half the electricity provided by California’s investor-owned utilities.
All electricity customers will bear the responsibility of paying for the greenhouse gas cap-and-trade program beginning January 1, 2013. Nevertheless, when approving SB 1018, the Legislature specified only some categories of customers as being eligible to receive credit in the form of offsets to increased electric rates from revenues the state will receive from selling utility sector AB 32 cap-and-trade allowances.
SB 1018 specifies that residential, small business and emissions-intensive trade-exposed customers will receive the credit offsets. No other categories of customers are specified as eligible for this credit.
To leave some customers behind is unfair and could result in adverse economic consequences such as reduced public services, lost private sector jobs, and public resistance to important environmental programs.
Cost Containment Critical to Success of AB 32
The California Air Resources Board (ARB) allocation of AB 32 cap-and-trade allowances for the benefit of electric utility customers and ARB’s support for returning allowance auction revenue to those customers is one of the most important customer protection features in the AB 32 cap-and-trade program. This approach facilitates a smooth transition to a low carbon economy.
Returning allowance auction revenue to all customers in proportion to their AB 32 cost responsibility is the only mechanism to assure fairness. If the language SB 1018 placed in the Public Utilities Code is left uncorrected, certain customers will be excluded from receiving any cost mitigation. That exclusion will hinder customer acceptance of the cap-and-trade program while hurting the California economy and consumers.
Electric Customer AB 32 Investment Significant
Returning utility allowance revenue to all affected customers in proportion to their AB 32 cost burden recognizes the impact that meeting the goals of AB 32 (reducing the state’s greenhouse gas emissions to 1990 levels by 2020) will have on all customers.
In addition to the costs of the cap-and-trade program itself, customers have been and will continue to pay for other AB 32-related programs, such as increased renewable energy, distributed generation and energy efficiency, as well as transmission and distribution upgrades associated with integrating renewable resources and the traditional electricity source.
The very significant investment in greenhouse gas reduction measures being made by electricity customers can at least be partially mitigated in a fair manner by returning utility allowance revenue to all customers in proportion to their AB 32 cost burdens. This allocation approach is critical to help ensure a smooth transition to a low carbon economy and customer acceptance of these AB 32 programs.
The CalChamber is urging businesses to contact legislators and ask them to amend the SB 1018 language to enact a fair and equitable policy that ensures all electric customers are eligible to receive AB 32 allowance revenues to mitigate the actual AB 32 costs borne by all customers. Revenues from auctioning greenhouse gas allowances should be allocated in proportion to the actual AB 32 that customers incur.
Staff Contact: Brenda M. Coleman