The Cap and Trade Program (Program) is one of the State’s key implementation tools intended to encourage reduction of greenhouse gas (GHG) emissions as part of Assembly Bill 32 (AB 32), passed in 2007. Under the Program, which is overseen by the California Air Resources Board (ARB), GHG emission reductions are accomplished through the use of economic pricing mechanisms that place a cost on the emissions of GHGs. The Anaheim Public Utilities (APU), like all other electric utilities in California, is a covered entity under the Program and, as such, is required to participate in the Program. In March 2012, the City Council approved APU’s Compliance program (staff report below).
The Program has the potential to affect electricity rates because it is an additional new cost to APU's generation of electricity. As APU generates electricity from its fossil fuel power plants, GHG emissions are also generated. In order to comply with the Program, APU must surrender Allowances, essentially permits, equal in number to the total metric tons of GHG emissions from these electric generation facilities. Therefore, the Program incentivizes the APU and all covered entities to reduce GHG emissions in order to reduce costs for procuring the Allowances necessary to cover their GHG emissions. It is APU’s goal to minimize the costs necessary to comply with the Program requirements by employing a variety of measures that include, but are not limited to, managing how we generate electricity and how we acquire Allowances. At this time, the Program is not expected to result in any additional costs to customers; however, it does have the potential to add additional costs of up to $5 million annually, based in part, upon the future costs and the availability of Allowances in the market.
The status of APU’s compliance with the Program requirements is provided to the City Council on a regular basis. Additionally, this Program is only one of many regulations that are impacting APU as a result of AB 32. Other regulations include the Renewable Portfolio Standard (RPS) which requires all California electric utilities to meet 33% of their customer needs with renewable energy resources, as well as energy efficiency and conservation requirements. An overview of how the APU is impacted by these regulations can be found in this presentation to City Council (March 13, 2012) - Drivers Affecting Anaheim’s Resource Portfolio. As APU implements the other regulations related to AB 32, it is expected that the Program compliance obligations and costs will be reduced as GHG emissions are subsequently reduced.