Document 6524326

STATE OF CALIFORNIA
Budget Change Proposal - Cover Sheet
DF-46 (REV 03/13)
Fiscal Year
2014-15
BCP No.
5
Department
California Public Utilities Commission
Org. Code
8660
Program
10 Regulation of Utilities
Element
10.50 Energy
Priority No.
Component
Proposal Title
Implement Greenhouse Gas Revenue Return to Energy Intensive, Trade-Exposed Industries
Proposal Summary
Increase in $1 million in reimbursable authority so that the CPUC can pursue two contracts . First, the CPUC will
seek a contract with a financial service firm to coliect revenue from the utilities and distribute it to industrial
companies. This contract is would be for $500,000 per year and is necessary to ensure that the companies'
confidential business information is protected from disclosure under the Public Records Act. Second, because
the state has not yet conducted a comprehensive study of industries put at risk due to cap and trade , the CPUC
would like to engage researchers at the University of California to conduct a far-ranging study of other industries
that might need industrial assistance. This contract is expected to cost roughly $500,000 and last for
approximately one year. In total , the Commission requests $1 million increase in reimbusable authority for FY
2014/15 and decreasing to $500,000 per year for fiscal year FV 2015/16.
Requires Legislation
Code Section(s) to be Added/Amended/Repealed
~ No
OVes
Does this BCP contain information technology (IT)
components? 0 Ves
~ No
Date
Department CIO
If yes, departmental Chief Information Officer must sign.
For IT requests, specify the date a Special Project Report (SPR) or Feasibility Study Report (FSR) was
approved by the California Technology Agency, or previously by the Department of Finance.
o FSR
0
SPR
Project No.
Date:
If proposal affects another department, does other department concur with proposal?
Attach comments of affected
and dated
OVes
ONO
the
Date
2.-30- 13
Additional Review: 0 capital Outlay
BCPType:
PPBA
o Policy
0
ITCU
0
FSCU
0
OSAE
0
CALSTARS
0
Technology Agency
o Wor1doad Budget per Government Code 13308.05
Date submitted to the Legislature
DF-46 (REV 03/13)
Fiscal Summary
(Dollars in thousands)
BCP No.
Proposal Title
Program
5
Implement Greenhouse Gas Revenue Return
Positions
Personal Services
CY
BY
BY + 1
Total Salaries and Wages
10 Regulation of Utilities
Dollars
BY
BY + 1
CY
1
Total Staff Benefits 2
Total Personal Services
0.0
0.0
0.0
$0
$0
$0
1,000
500
Operating Expenses and Equipment
General Expense
Printing
Communications
Postage
Travel-In State
Travel-Out of State
Training
Facilities Operations
Utilities
Consulting & Professional Services: Interdepartmental 3
Consulting & Professional Services: External 3
Data Center Services
Information Technology
Equipment 3
Other/Special Items of Expense: 4
Total Operating Expenses and Equipment
$0
$1,000
$500
Total State Operations Expenditures
$0
$1,000
$500
$1,000
$500
$0
$0
$0
$0
$1,000
$500
Fund Source
Org
Item Number
Ref
Fund
8860
001
0995
General Fund
Special Funds5
Federal Funds
Other Funds (Specify)
Reimbursements
Total Local Assistance Expenditures
Fund Source
Org
Item Number
Ref
Fund
General Fund
Special Funds5
Federal Funds
Other Funds (Specify)
Reimbursements
Grand Total, State Operations and Local Assistance
1
Itemize positions by classification on the Personal Services Detail worksheet.
2
Provide benefit detail on the Personal Services Detail worksheet.
3
Provide list on the Supplemental Information worksheet.
4
Other/Special Items of Expense must be listed individually. Refer to the Uniform Codes Manual for a list of standard titles.
5
Attach a Fund Condition Statement that reflects special fund or bond fund expenditures (or revenue) as proposed.
Personal Services Detail
(Whole dollars)
BCP No.
Proposal Title
5
Implement Greenhouse Gas Revenue Return
Salaries and Wages Detail
Classification 1
2
CY
Total Salaries and Wages 3
0.0
Positions
BY
BY + 1
0.0
Salary
Range
Total Staff Benefits
CY
0.0
Staff Benefits Detail
OASDI
Health/Dental/Vision Insurance
Retirement
Miscellaneous
Safety
Industrial
Other:
Workers' Compensation
Industrial Disability Leave
Non-Industrial Disability Leave
Unemployment Insurance
Other:
3
Grand Total, Personal Services
Dollars
BY
$0
CY
BY + 1
$0
BY
$0
BY + 1
$0
$0
$0
$0
$0
$0
1
Use standard abbreviations per the Salaries and Wages Supplement. Show any effective date or limited-term expiration date in parentheses if the
position is not proposed for a full year or is not permanent, e.g. (exp 6-30-13) or (eff 1-1-13)
Note: Information provided should appear in the same format as it would on the Changes in Authorized Positions.
2
If multiple programs require positions, please include a subheading under the classification section to identify positions by program/element.
3
Totals must be rounded to the nearest thousand dollars before posting to the Fiscal Summary.
Supplemental Information
(Dollars in thousands)
BCP No.
Proposal Title
Implement Greenhouse Gas Revenue Return
5
Equipment
CY
BY
BY +1
Standard Complement
Total
$0
$0
$0
1,000
500
Consulting & Professional Services
consulting & Professional Services
Total
$0
$1,000
$500
Total
$0
$0
$0
Facility/Capital Costs
Yes
One-Time/Limited-Term Costs
Description
x
No
BY
Positions
BY +1
Positions
Dollars
Dollars
$0
0.0
Yes
Full-Year Cost Adjustment
0.0
No
BY +2
Positions
Dollars
$0
$0
0.0
Future Savings
Yes
0.0
BY +2
Positions
Dollars
$0
0.0
0.0
$0
No
Specify fiscal year and estimated savings, including any decrease in positions.
BY
BY +1
Item Number
Positions
Dollars
Positions
Dollars
Total
$0
x
Provide the incremental change in dollars and positions by fiscal year.
BY
BY +1
Item Number
Positions
Dollars
Positions
Dollars
Total
0.0
$0
0.0
$0
BY +2
Positions
Dollars
0.0
$0
Special Fund Detail
(Dollars in thousands)
BCP No.
5
Special Fund Title
Proposal Title
Implement Greenhouse Gas Revenue Return
Item Number
Fund
CY
Org
Ref
Total Special Funds - State Operations
Special Fund Title
1
Org
Dollars
BY
$0
Item Number
Ref
Fund
$0
Dollars
BY
CY
Total Special Funds - Local Assistance 2
BY + 1
$0
$0
BY + 1
$0
1
Total must tie to "various" funds identified for State Operations, Special Funds in the Fiscal Summary. Add rows if necessary.
2
Total must tie to "various" funds identified for Local Assistance, Special Funds in the Fiscal Summary.
$0
Analysis of Problem
A. Proposal Summary
As part of its implementation of California’s Cap and Trade Program (AB 32, the Global Warming
Solutions Act), the Air Resources Board (ARB) issues greenhouse gas (GHG) allowances, which are
permits to emit GHGs into the atmosphere. In order to protect electric ratepayers from price increases,
ARB allocates free allowances to the state’s electric utilities and requires them to sell those allowances,
returning the revenue to ratepayers. Subsequent Legislation (SB 1018) requires this revenue to be
provided directly to residential customers, small businesses, and companies in emissions intensive,
trade-exposed (EITE) industries. The allocation to EITE companies is intended to ensure that industrial
production currently occurring in California does not move outside the state as a result of Cap and
Trade, thus causing emissions to “leak” out of the state.
In December 2012, the Commission approved Decision (D.) 12-12-033, which further refined the
methodology by which the utilities return GHG allowance revenue to those customer classes.
Throughout 2013, the CPUC’s Energy Division has been developing a program to address the need to
mitigate leakage risk; including specific formulas to determine how much allowance revenue each EITE
company should receive, and to base the allocation primarily on product output. In developing this
program, however, two separate problems have emerged.
First, in order to calculate the amount of allowances to provide to each company in the EITE industries,
those companies must provide the CPUC with information regarding their costs, product output and
other sensitive business information. If the CPUC conveys this information to the utilities, or even tells
the utilities how much money to give to any one company, the utilities would have sensitive information
that could be used by other companies in the sector to gain competitive advantage. After consulting
with attorneys at both the CPUC and the ARB, Energy Division staff has determined that if this
information is provided to the utilities for the purposes of calculating appropriate payments to these
affected companies, the information would not be protected from disclosure under a Public Records Act
(PRA) request. Moreover, the CPUC does not have the processes and technical capabilities in place to
handle the transfer of large amounts of money from the utilities to EITE companies. Therefore, in order
to comply with statutory requirements, and to ensure that these transactions are conducted in a safe,
secure and confidential manner, the CPUC must contract with a financial services firm that can accept
the GHG allowance revenue from the utilities and distribute it to EITE companies in accordance with
the formulas determined by the CPUC. The financial services administrator will be selected via
competitive solicitation. The CPUC estimates that the cost is not likely to exceed $500,000 per year
based on a similar contract recently executed by ARB. The CPUC is requesting $500,000 in
reimbursable authority on a yearly basis through for FY 2014/15 through FY 2021/22. Although the
current ARB Cap and Trade Regulation only sets rules for the program through December 31, 2020, it
is possible that the CPUC will need to retain the financial services firm into 2022 in order to “true up”
the difference between actual costs/revenues and the amounts disbursed based on predicted
costs/revenues.
Second, the CPUC and ARB are not yet aware of all the companies in California that may be in danger
of leaving this state or losing market share due to the Cap and Trade program – i.e. those that pose a
leakage risk and are thus in need of industrial assistance. In preparing its Cap and Trade regulation,
ARB studied only those companies with a direct compliance obligation (i.e. only companies that directly
emit more than 25,000 MT of CO2 per year) to determine which companies should receive industrial
assistance in the form of a direct allocation of allowances. By contrast, the CPUC is overseeing
industrial assistance to companies that pose a leakage risk because of their indirect emissions –
emissions created in the production of electricity that creates a cost ultimately paid by the company in
its electricity bills. Because no study has ever been conducted to determine which companies are at
risk due to indirect emissions, the CPUC is using the results of ARB’s direct emissions study in
returning revenue to industrial customers. It is likely however, that there are many more companies at
risk of leaving the state or facing reduced competitiveness due to the cost of cap and trade in electricity
prices, and these companies will not receive revenue until a study is conducted to determine who they
are. Conducting this study will require at least one full-time researcher with expertise in trade and
industrial economics, as well as access to data sources and analytical tools that are not available to
CPUC staff. Thus, the CPUC requests reimbursable authority to contract with researchers in the
University of California system to conduct a study of other industries that might need industrial
-1-
Analysis of Problem
assistance. Based on a similar study completed by ARB last year, we expect this contract to cost
roughly $500,000 and last for approximately one year.
The total for these two tasks necessary to provide industrial assistance to California businesses, the
CPUC requests: $1 million in reimbursable authority for FY 2014/15 to cover both the $500,000 cost for
one year for the financial services administrator and the $500,000 cost for the expanded study of
industrial leakage risk. In addition, the CPUC requests$500,000 per year for each fiscal year from FY
2015/16 through FY 2021/22 to cover the cost of the financial services administrator on an ongoing
basis.
B. Background/History (Provide relevant background/history and provide program resource history.
Provide workload metrics, if applicable.)
In 2006, the Legislature passed the Global Warming Solutions Act (AB 32), which caps California’s
GHG emissions at 1990 levels, with this level to be reached by 2020. The Air Resources Board (ARB)
is the state agency responsible for implementing this Legislation. Under ARB’s final cap and trade
regulation, ARB allocates free allowances to electric service providers and requires them to consign
those allowances to auction, with the auction revenues distributed back to electric ratepayers.
In addition to allocating free allowances to electric service providers, ARB also provided free
allowances to industrial entities designated “Emission-Intensive and Trade-Exposed” (EITE), in order to
prevent those industrial facilities from leaving California or from losing market-share to companies in
other political jurisdictions, thus causing GHG emissions to “leak” out of California. In order to
determine which industries qualified for industrial assistance, ARB conducted a study of emissions
intensity and trade exposure of industries operating in California. In conducting this study, ARB only
considered those industries with facilities that have a direct compliance obligation under the Cap and
Trade Program – that is, industries with facilities that produce a lot of emissions on-site as a result of
manufacturing or other processes. ARB did not consider industries exposed to GHG costs from indirect
emissions – those emissions embedded in the producer’s electricity usage imported form off-site.
In December 2012, the California Public Utilities Commission approved Decision (D.) 12-12-033, which
established a methodology by which investor-owned utilities are to return GHG allowance revenue to
their customers. The Decision sets out four uses of GHG allowances: 1) Compensate EITE industries
(as defined by ARB) for their indirect emissions costs so that those industries do not leave California or
lose market share to other political jurisdictions, thus causing emissions to “leak” outside of California;
2) Offset GHG costs in electric rates for small businesses on a volumetric basis; 3) Offset all GHG
costs in residential rates on a volumetric basis; 4) Return remaining revenues to residential customers
in the form of a twice-yearly “climate dividend.”
In July 2013, the CPUC’s Energy Division released a Staff Proposal recommending a methodology for
calculating the amount of revenue to be returned to each company in an EITE industry. In order to
incent companies to use energy more efficiently, the Staff Proposal recommends using product output
as the basis for returning revenue where feasible. The CPUC assumed that the utilities would return the
revenue directly to the affected companies. In subsequent conversations with ARB regarding the Staff
Proposal, however, ARB raised concerns that sensitive confidential business information could be
disclosed during the return of revenue to industrial customers. This is because in order to return money
to EITE companies, the utility would need to know the exact dollar amount to return to each company,
and this information could be used to “back out” product output for each company. CPUC Legal
Division agreed with ARB that, because the CPUC does not have a contract with the utilities, this
information would not be protected from disclosure under a Public Records Act request. ARB
recommended that the CPUC solve this problem by contracting with a financial firm to collect allowance
revenue from the utilities and distribute it to the EITE companies so that the utilities do not need access
to sensitive business information. Because the financial services firm would be under contract with the
PUC, this firm would be protected from disclosure under the Public Records Act. In addition, the CPUC
does not have the resources to securely handle the transfers of large amounts of money between the
utilities and private companies. Therefore, the only option available is to contract with a financial
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Analysis of Problem
services firm. Based on a similar contract executed recently by ARB, we expect this contract will cost
roughly $500,000 per year on an ongoing basis through FY 2021/22.
Moreover, because Energy Division did not have access to data on which entities pose a leakage risk
due to their indirect emissions, the Staff Proposal only includes companies classified as “EITE” due to
their direct emissions, as determined by ARB. Agricultural firms and others have recently complained to
the CPUC that they are in need of industrial assistance, but they do not qualify under the Staff Proposal
because they were not included in ARB’s list of EITE industries, since their direct emissions do not
trigger a compliance obligation. Because there has been no comprehensive study of leakage risk due
to indirect emissions, a potentially large sector of California’s industrial economy is at risk of being
competitively disadvantaged compared with those outside California as a result of the Cap and Trade
Program. The CPUC currently does not have the resources or the expertise to conduct this study, and
because the study will be limited in duration and scope, hiring a permanent position to conduct it would
not be an efficient solution. Based on a similar study conducted by ARB last year, we expect this study
will cost roughly $500,000 and last approximately one year.
On August 13, 2013, the Assigned Commissioner and Administrative Law Judge in the GHG
proceeding at the CPUC released a Ruling proposing to allocate $500,000 of the utilities’ GHG
allowance revenue to perform a study to determine which industries should qualify for industrial
assistance due to their indirect emissions costs. On September 4, 2013, the CPUC received comments
on the Ruling from the California Manufacturers and Technology Association (CMTA), the California
Large Energy Consumers Association (CLECA), the California League of Food Producers (CLFP), the
California Farm Bureau Federation, the Data Center Coalition, the three large utilities (PG&E, SCE and
SDG&E), and the Natural Resources Defense Council (NRDC). Without exception, all parties filing
comments supported the proposal to study additional sectors for inclusion in industrial assistance, and
many stressed the harm that delay in expanding the industrial assistance program would cause
California industry.
Because this is a new statutory requirement, there is no resource or workload history related to this
program need.
Workload History
Workload Measure
e.g., Applications Received,
Applications Processed, Call
Volume, etc.
Decision 12-12-033 passed on
GHG revenue allocation
Staff white paper authored
proposing methodologies for
GHG revenue return
PY - 4
PY - 3
PY - 2
PY - 1
PY
C. State Level Considerations
This BCP is consistent with the following state level laws, policies and goals:

The Global Warming Solutions Act of 2006, AB 32, caps California’s GHG emissions at 1990
levels, with this level to be reached by 2020. The Air Resources Board (ARB) is the state
agency responsible for implementing this Legislation. Under ARB’s final cap and trade
regulation, ARB allocates free allowances to electric service providers and requires them to
consign those allowances to auction, with the auction revenues distributed back to electric
ratepayers. In addition to allocating free allowances electric service providers, ARB also
provided free allowances to industrial entities designated “Emission-Intensive and TradeExposed” (EITE), in order to prevent those industrial facilities from leaving California or from
-3-
Analysis of Problem
losing market-share to companies in other political jurisdictions, thus causing GHG emissions to
“leak” out of California.

SB 1018 requires some amount of revenue generated from the sale of Greenhouse Gas
emissions allowances by the investor-owned utilities to be returned to EITE customers and
small businesses.

California Public Utilities Commission Decision (D.) 12-12-033 established a methodology by
which investor-owned utilities are to return GHG allowance revenue to their customers. The
Decision sets out four uses of GHG allowances: 1) Compensate EITE industries for their indirect
emissions costs so that those industries do not leave California or lose market share to other
political jurisdictions, thus causing “leakage”; 2) Offset GHG costs in electric rates for small
businesses on a volumetric basis; 3) Offset all GHG costs in residential rates on a volumetric
basis; 4) Return remaining revenues to customers in the form of a twice-yearly “climate
dividend.”

In July, 2013, CPUC Energy Division released a Staff Proposal recommending a methodology
for calculating the amount of revenue to be returned to each company in an EITE industry. In
order to incent companies to use energy more efficiently, the Staff Proposal recommends using
product output as the basis for returning revenue where feasible.
At the present time, only companies in direct-emission industries are classified as “EITE” by the ARB
and can receive industrial assistance. In addition to these companies, there may be many more
companies that pose a leakage risk as a result of their “indirect” emissions – those emissions
embedded in electricity use – that would not receive industrial assistance under the Staff Proposal. It is
in the state’s interest to address the impacts of cap and trade on companies who have indirect
emissions to discourage business from leaving the state.
D. Justification
The overriding focus of this request is to allow the timely, effective implementation of the Global
Warming Solutions Act and to ensure the Act can be implemented without causing industrial activity to
leave California. In implementing the Act the Commission has a responsibility to ensure that all
qualifying entities receive industrial assistance, regardless of whether their GHG costs are direct or
indirect. In addition, the Commission wishes to protect the sensitive information of companies
participating in the program so that their competitiveness is not compromised.
With regard to the EITE expansion study, the Energy Division is already severely understaffed on
implementation of the Cap and Trade Program. The program is currently being implemented with one
position that is only working on the program part time. Re-directing that staffer’s efforts to perform the
EITE expansion study – which will be a full-time job for at least one year – would cause the GHG
revenue return to be severely delayed. Industrial entities might be exposed to GHG costs without
offsetting allowance revenue, which could be damaging to the California economy and could cause
some businesses to leave California.
It is important to note that the CPUC is not situated to perform either of the tasks described above. The
CPUC does not have the secure systems and processes in place to guarantee the secure transfer of
money between utilities and private companies, and it does not have access to data, quantitative
analytical tools, and expertise necessary to analyze the trade-exposure and emissions intensity of all
industries in California. These are tasks that call for very specialized skills and tools. However, even if
the CPUC possessed these specialized skills and computing tools, Energy Division does not have
sufficient staff to perform these functions.
The Emerging Procurement Strategies Section, which manages implementation of the Cap and Trade
Program, consists of five employees – four analysts and a Supervisor. The section is responsible for
managing five programs: 1) Cap and Trade; 2) Combined Heat and Power (CHP); 3) Electric Vehicles
-4-
Analysis of Problem
(EVs); 4) The Electric Program Investment Charge (EPIC); and 5) the 21st Century Energy Systems
(CES-21) Program. Division of workload is currently:
 PURA V – Electric Vehicles and Cap and Trade outreach and education. This analyst is currently
working on a decision on electric vehicle sub-metering, a new Order Instituting Rulemaking on
Electric Vehicle Policy, organizing workshops on vehicle-to-grid technology, and representing the
CPUC on electric vehicle policy on inter-agency working groups and industry collaborative. In
addition to this work, he also oversees education and outreach of the climate dividend.
 PURA III: Implementing Cap and Trade and overseeing SDG&E’s portion of the CHP program. This
analyst is currently working on three decisions necessary to allow GHG costs to flow through utility
rates and to return revenues to customers: 1) A decision on formulas to return GHG revenue to
EITE entities, small businesses and refineries; 2) The utilities’ GHG implementation plans; 3) The
utilities’ applications, filed August 1, forecasting GHG costs and revenues. This analyst is also
working with ARB on their newest updated of the cap and trade regulation. In addition to the work
on cap and trade, he also oversees SDG&E’s portion of the CHP procurement program, the AB
1613 Feed-in tariff, other issues related to qualifying facilities, and legacy contracts.
 PURA III: Overseeing PG&E’s CHP program, building and maintaining a procurement database,
working on EPIC and CES-21. This analyst is currently overseeing PG&E’s second CHP request for
offers, in which PG&E will procure hundreds of MW of CHP and submit those contracts to the
Commission for approval. Each contract submitted will require many hours of analytical work to
ensure that the terms of the contract comply with the CHP settlement, and each will require the
analyst to write a lengthy Resolution summarizing the controversial issues and spelling out the
reasons for approval or denial of the contract. In addition, this analyst has been assisting an
Administrative Law Judge and Assigned Commissioner’s office to write a Decision approving the
Electric Program Investment Charge, and he has been analyzing Advice Letters submitted to
implement CES-21. Finally, this analyst has been constructing a database of all energy
procurement executed by the IOUs so that Energy Division will be better able to manage electric
resources in California.
PURA I: Overseeing SCE’s CHP program, helping develop EV policy, building and maintaining web
resources. This analyst has been reviewing SCE’s CHP contracts, writing complex and
controversial Resolutions approving or denying those contracts, and overseeing SCE’s second
round CHP solicitation. The analyst has also been participating in the governor’s CHP strike force,
conducting quantitative analysis of GHG reductions from CHP, and providing input to the ARB
scoping plan. In addition, he provides support to the PURA V on electric vehicle policy, such as
overseeing implementation of the NRG settlement to install EV charging stations in California, and
he is currently overhauling the section’s web site.
E. Outcomes and Accountability (Provide projected workload metrics that reflect how this proposal
improves the metrics outlined in the Background/History section.)
Return of GHG allowance revenue to industrial customers is a new program, required by SB 1018,
which was approved in 2012. The program provides assistance to industrial customers that might
otherwise leave the state or lose market share as a result of the Cap and Trade Program. Energy
Division estimates that the utilities will return roughly $44 million of allowance revenue per year to
industrial customers that have been identified by ARB as qualifying for industrial assistance because of
their direct compliance obligation. Revenue will start flowing to those customers in 2014. Assuming a
roughly equivalent number of companies qualify for assistance as a result of indirect emissions, the
amount of revenue returned would double in next budget year.
-5-
Analysis of Problem
Projected Outcomes
Workload Measure
Return of GHG revenue beginning in 2014 to
companies ARB identified as EITE due to their
direct emissions, through a financial services
company that guarantees confidentiality
Completion of a study identifying California
companies that can be classified as EITE due
to their indirect emissions, and return of
revenue to those companies in 2015
PY
CY
$44 million
BY
$44 million
$44 million
F. Analysis of All Feasible Alternatives
Alternative 1: Adopt the proposal for $1 million in reimbursable authority for FY 2014/15 and $500,000
in reimbursable authority per year for FY 2015/16 through FY 2021/22. This alternative will enable the
Commission to effectively implement the GHG revenue return to emission-intensive, trade-exposed
industries so that industrial activity does not leave the state of California as a result of the Cap and
Trade Program. The reimbursable authority will assure that the PUC can: 1) Ensure sensitive
confidential business information is not compromised or made public in the transfer of revenue between
utilities and EITE companies, and 2) Complete a study to determine which industries are at risk of
leaving the state due to the indirect emissions costs imposed by the Cap and Trade program.
Alternative 2: Redirect staff from other areas within the Energy Division or the Commission.
There is no opportunity for Staff to serve as a financial services administrator, as the CPUC does not
have the technical capability or statutory authority to serve as a financial transfer agent. In addition, the
CPUC does not have staff available to serve this function, which could require a full-time position
depending on the number of companies that qualify for a return of GHG revenue. If the CPUC is
required to perform this function with existing staff resources, we would likely direct the utilities to
distribute the revenue despite the legal concerns, which would put at risk the confidential business
information of the EITE companies.
Alternative 3: Deny Request
Again, denying this request would severely impede the Commission’s ability to help large industrial
companies remain competitive against companies outside California as they face costs from the cap
and trade program. First, the Commission would not be able to securely receive and transmit sensitive
information necessary to provide GHG allowance revenue to EITE companies. Some companies may
choose not to receive revenue rather than be put in the position of submitting sensitive information that
cannot be secured. Second, the CPUC would not know the complete range of industrial companies put
at risk of reduced competitiveness due to the cap and trade program. Some companies may go out of
business, leave California or lose market share to competitors in jurisdictions that do not have a cap
and trade program.
G. Implementation Plan
The CPUC’s Energy Division has been working throughout 2013 to implement the return of GHG
revenue to companies in EITE industries and other electric ratepayers. In May, Energy Division staff
released a draft Staff Proposal recommending formulas and methodologies for calculating the GHG
revenue return to EITE companies, small businesses and refineries. Energy Division held a workshop
on this proposal in June and subsequently released a final Staff Proposal in July. The Staff Proposal is
expected to go before a vote of the Commission in fall 2013.
Following release of the Staff Proposal, attorneys at ARB identified the protection of confidential
business information as a problem that would need to be addressed before returning GHG revenue to
EITE companies. Concurrent with consideration of this BCP, the CPUC will take comment from parties
on a proposal to allocate $500,000 per year of GHG allowance revenue to hire a financial services
-6-
Analysis of Problem
administrator to ensure that the transfer of revenue does not result in confidential business information
become public. Once the Commission authorizes the use of allowance revenue for that purpose, and if
the reimbursable authority requested in this BCP is granted, Energy Division will release a request for
proposals in 2014 seeking a financial services firm that can securely accept GHG allowance revenue
from the utilities and distribute that money to EITE companies in amounts determined by the Staff
Proposal. Energy Division anticipates that if these actions are completed, GHG allowance revenue can
begin to be distributed to industrial companies in summer 2014 and continue annually through 2020.
Once the Commission approves a Decision authorizing the use of these funds, and assuming this BCP
is approved, Energy Division will release a request for qualifications under an existing research contract
with the University of California to find academic experts with the resources and ability to execute this
study. A scope of work for the study will then be drafted and a contract will be executed that spells out
deliverables and milestones. Energy Division expects the study could be completed by the end of 2014,
allowing the CPUC to return GHG allowance revenue to an expanded list of EITE companies by 2015.
H.
Supplemental Information (Check box(es) below and provide additional descriptions.)
None
I.
Facility/Capital Costs
Equipment
Contracts
Other
Recommendation
The Commission recommends approval of Alternative 1, i.e. authorize $1 million in reimbursable
authority for FY 2014/15 and $500,000 per year from FY 2015/16 through FY 2021/22, so that Energy
Division can: 1) contract with a financial services administrator to return GHG allowance revenue to
firms in emissions-intensive, trade-exposed industries without compromising their sensitive product
output information; and 2) contract with researchers from the University of California system to conduct
a study to determine which industries are in need of industrial assistance due to indirect costs of the
cap and trade program.
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