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Comment 13 for Cap & Trade Public Meeting (may-17-allocation-ws) - 1st Workshop.
First Name: JOHN
Last Name: BUSTERUD
Email Address: JWBB@PGE.COM
Affiliation: PACIFIC GAS AND ELECTRIC COMPANY
Subject: PG&E'S COMMENTS ON MAY 17, 2010 WORKSHOP
Comment:
June 7, 2010 E-Filing ARB’s Cap-and-Trade Website Kevin M. Kennedy, Ph.D. Assistant Executive Officer – Climate Change CALIFORNIA AIR RESOURCES BOARD 1001 “I” Street Sacramento, CA 95814-2828 Re: Pacific Gas and Electric Company’s Comments on the Air Resources Board’s May 17, 2010 Workshop on the Greenhouse Gas Cap-and-Trade Regulation Status Update Dear Dr. Kennedy: Pacific Gas and Electric Company (“PG&E”) is pleased to submit these comments on the Air Resources Board’s (“ARB”) May 17, 2010 Workshop on the Greenhouse Gas Cap-and-Trade Regulation Status Update. A. Cap-and-Trade Regulation Status Update PG&E appreciates ARB staff’s update on the cap-and-trade regulation provided during the May 17th workshop. We agree with the program design principles outlined by staff and believe that AB 32 can be implemented in a manner that will achieve the goals of taking us to a lower carbon future while minimizing the impact on Californians and the California economy. Additionally, we support staff’s plan to gather further stakeholder feedback on key topics and hold workshops on key issues such as cost containment mechanisms, offset demand and supply, offset protocols, compliance scenario studies, monitoring and enforcement and mandatory reporting. We believe that key issues to address in the cost containment workshop include the extent to which the various alternatives being considered maintain environmental integrity and provide allowance price and quantity certainty to the marketplace to limit gaming or market manipulation. In the offset workshops, we believe it will be important to assess the projected supply of offsets and how various policies being considered may affect supply, especially in the early years of the program. PG&E also believes it is important to discuss the lead time associated with offset protocol development since timely approval of protocols and linking to established programs such as the Climate Action Reserve are critical to create a viable offset market in time for the start of the cap and trade program. B. Allowance Allocation PG&E agrees with the allowance allocation recommendations stated in the Joint Utilities March 26, 2010 letter to ARB Chair Mary Nichols. The Joint Utilities noted that “some of the Scoping Plan measures will be costly.” In order “to contain this disproportionate economic burden on electricity consumers and to manage the transition to a low carbon economy, the Joint Utilities recommend an administrative allocation of cap-and-trade allowances to local distribution companies (“LDCs”) on behalf of their customers.” PG&E generally supports staff’s overarching allowance allocation goals as expressed during the workshop, including their goal to “strive for a gradual transition.” We also support staff’s efforts to look for ways to use allowances to further the goals of AB 32, including use to mitigate the impact of the more costly AB 32 measures, such as above-market costs associated with renewable energy. We are concerned, however, that the allowances dedicated to LDCs for the benefit of their customers are presented as a subordinate use or in the 2nd tier of staff’s allowance value diagrams. We believe that the electricity sector will play a key role in the State’s transition to a low carbon economy, and that a sufficient quantity of allowances should be allocated to our sector to help facilitate that transition and provide assistance to California consumers and businesses. We support the Joint Utilities’ recommendation that the quantity of allowances administratively allocated to the electricity sector be based on the sector’s proportionate share of total capped sector emissions. C. Allowance Reserve for Price Mitigation PG&E also supports staff’s goal of mitigating “unexpectedly high or low allowance prices.” We support a price collar that preserves environmental integrity, with a price floor to encourage investment in low-carbon technology, and a price ceiling to protect customers from unexpectedly high prices for allowances. We believe a price collar should also include an allowance “window,” similar to the Federal Reserve Bank’s discount window, from which any complying entity, at any time, can purchase an allowance or offset at a pre-announced price. This “open-window” feature is important for electricity markets. If market trading of allowances ceases or produces volatile prices, generators may be unable to submit electricity bids that reflect allowance prices. In such a circumstance, these entities could submit electricity bids that reflect the penalty payable for emitting CO2 without an allowance. Because the wholesale electricity market clears every ten minutes, this behavior could rapidly lead to high prices in wholesale electricity markets. Therefore, PG&E encourages staff to implement an allowance “window” that is always open. Thank you for the opportunity to present these comments. Please do not hesitate to contact me at (415) 973-6617 if you have any questions regarding these comments or if we may be of further assistance. Very truly yours /S/ John W. Busterud JWB:kp:bd cc: Mr. Steve Cliff, Manager – Program Development Section, Office of Climate Change Ms. Lucille Van Ommering, Manager – Program Evaluation Branch, Office of Climate Change Mr. Sam Wade, Air Pollution Engineer – Program Evaluation Branch, Office of Climate Change
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Date and Time Comment Was Submitted: 2010-06-07 12:15:53
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