This page last reviewed December 8, 2017

Electrical Distribution Utility and Natural Gas Supplier Use of Allocated Allowance Value

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Background

The Cap-and-Trade Regulation (Regulation) places limits on the use of allowances that ARB allocates to electrical distribution utilities (EDU) and natural gas suppliers. These requirements, which are in sections 95892 (EDUs) and 95893 (natural gas suppliers) of the Regulation, require that each EDU and natural gas supplier annually report to ARB on how its uses of allocated allowances met these requirements. The requirements focus on the value of allowances being “used exclusively for the benefit of retail ratepayers of each [EDU or natural gas supplier], consistent with the goals of AB 32” (sections 95892(d)(3) and 95893(d)(3) of the Regulation).

Reporting Requirement

Each EDU and natural gas supplier that receives an allowance allocation pursuant to section 95892(a) or 95893(a), respectively, of the Regulation is required to report to the Executive Officer the use of allocated allowance value received for the prior calendar year. The report is due June 30 each year. Under this reporting requirement, described in sections 95892(e) and 95893(e), respectively, each EDU or natural gas supplier must describe how its use of allocated allowance value meets the requirements of the Regulation. ARB provides forms which EDUs and natural gas suppliers may use when fulfilling this reporting requirement.

EDU Reporting Form

The Electrical Distribution Utility Use of Allocated Allowance Value Form can be used to report the use of allocated allowance value of the previous year’s vintage. This form also provides the opportunity to report any allocated allowance value from prior years that was not previously reported as used.  For example, in 2016, an EDU can use the form to report the use of allocated vintage 2015 allowance value and may also report the use of any allocated allowance value of vintages 2013 and 2014 not previously reported as used.

The Air Resources Board must receive the information contained in this form no later than 5:00 p.m. on June 30 of the reporting year.  If an EDU elects to use the provided form, ARB requests that an electronic copy of the spreadsheet be e-mailed to edu-allocation@arb.ca.gov Please mail the signed paper copy of the information to the following address:

Program Development Section
CCPEB, 6th Floor
Air Resources Board
1001 “I" Street
Sacramento, CA 95814

Natural Gas Supplier Reporting Form

The Natural Gas Supplier Use of Allocated Allowance Value Form can be used to report the use of allocated allowance value of the previous year’s vintage. This form also provides the opportunity to report any allocated allowance value from prior years that was not previously reported as used.  For example, in 2017, a natural gas supplier can use the form to report the use of allocated vintage 2016 allowance value and may also report the use of any allocated allowance value of vintage 2015 not previously reported as used.

The Air Resources Board must receive the information contained in this form no later than 5:00 p.m. on June 30 of the reporting year.  If a natural gas supplier elects to use the provided form, ARB requests that an electronic copy of the spreadsheet be e-mailed to ehlavka@arb.ca.gov. Please mail the signed paper copy of the information to the following address:

Program Development Section
CCPEB, 6th Floor
Air Resources Board
1001 “I" Street
Sacramento, CA 95814

EDU Summary Report

ARB also provides an annual summary of how EDUs used their allocated allowance value.This summary report is based on EDU reports provided to ARB pursuant to section 95892 of the Regulation. The first summary report is the Summary of Vintage 2013 Electrical Distribution Utility Allocated Allowance Value Reports.

CAISO Sales Prohibition

The Regulation prohibits EDUs from using allocated allowance value to meet compliance obligations for electricity sold into the California Independent System Operator (CAISO) markets. Specifically, section 95892(d)(5) of the Regulation states, "[u]se of the value of any allowance allocated to an electrical distribution utility other than for the benefit of retail ratepayers consistent with the goals of AB 32 is prohibited, including use of such allowances to meet compliance obligations for electricity sold into the California Independent System Operator markets." As explained in page 2168 of the 2011 Final Statement of Reasons, "[t]his section applies not only to freely allocated allowances but also to the allowance value, a category that includes proceeds from the sale for freely allocated allowances. The utilities are prohibited from using their freely allocated allowances, and the value from the sales of these allowances, for electricity sold into the CAISO market."

In order to demonstrate compliance with section 95892(d)(5) for allowances deposited directly into compliance accounts, publicly owned utilities and electrical cooperatives (co-op) are required to report under section 95111(a)(12) of the Mandatory Reporting Regulation (MRR) their annual MWh of electricity sold into the CAISO markets for which these EDUs have a compliance obligation under the Cap-and-Trade Regulation. Publicly owned utilities and co-ops must also ensure they are in compliance with section 95892(d)(5) for any allowances purchased with allocated allowance proceeds. CARB may request that publicly owned utilities and co-ops provide information demonstrating compliance with section 95892(d)(5) vis-á-vis allowance value (e.g., allowances purchased with allocated allowance proceeds) pursuant to Health & Safety Code section 38580 and Government Code sections 11180 and 11181.


For EDU questions or comments, please contact EDU allocation team lead Rachel Gold at edu-allocation@arb.ca.gov or (916) 327-1517.

For natural gas supplier questions or comments, please contact the natural gas supplier allocation team lead Eileen Hlavka at ehlavka@arb.ca.gov or (916) 322-7648.

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