CPUC Approves TRECs For Use In RE Program

The California Public Utilities Commission (CPUC) has authorized the use of tradable renewable energy credits (TRECs) for use in the state's renewables portfolio standard (RPS) program, which requires investor-owned utilities, energy service providers and community choice aggregators to obtain 20% of their retail sales from renewable energy sources by this year.

The CPUC determined that the use of TRECs for RPS compliance will provide more options and flexibility for RPS-obligated electricity sellers to comply with RPS mandates in both the near and longer term. Over time, it will also provide additional resources and incentives for the development of RPS-eligible generation.

Previously, utilities were required to procure exclusively ‘bundled’ renewable contracts, for both energy and RECs together. The new framework implemented allows them also to buy RECs separate from the associated energy.

‘The essential elements of this framework are intended to support this market well into the future,’ says Michael R. Peevey, president of the CPUC. ‘Although the tradable REC market may be modest in the next two or three years, the market rules put in place in this decision will both allow this new market to develop and provide robust rules as the tradable REC market matures.’

The new rules create a market in which the use of tradable RECs for RPS compliance is initially limited to not more than 25% of a given investor-owned utility's annual procurement obligation. However, this limitation sunsets at the end of 2011. This cap is intended to allow the CPUC and the market to better understand the implications of REC trading before opening the market to unfettered use of unbundled RECs.

In order to use RECs, participants must meet the requirements set forth by the CPUC for REC trading, as well the requirements of the Western Renewable Generation Information System (WREGIS) – the system through which all California RPS-eligible RECs must be tracked – as well as the eligibility rules of the California Energy Commission.

To promote market liquidity while preserving the value of TRECs for RPS procurement planning, TRECs may be traded for up to three years from their date of creation before they must be committed to use for RPS compliance. However, consistent with the existing flexible compliance rules, once retired in WREGIS for RPS compliance, the compliance value of RECs can be banked indefinitely. The CPUC decision also allows tradable RECs from existing RPS contracts to be unbundled and sold under certain conditions.

SOURCE: California Public Utilities Commission

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