CSDA is teaming up with other stakeholders to advocate for clean-up legislation to ensure all stakeholders are included. For more background changes instituted by SB 1018 and how they will affect special districts, please read our coalition letter below or by clicking here (pdf).

July 30, 2012

California Legislature
State Capitol
Sacramento, California 95814

Re: SB 1018 (Budget Bill) clean up language

We, the undersigned electric customers and our respective electric utilities seek immediate modifications to Public Utilities Code Section 748.5 enacted recently by SB 1018. The portion of Section 748.5 regarding the costs of California’s AB 32 greenhouse gas cap‐and‐trade program fails to expressly provide mitigation of those costs to all electricity customers who will bear the responsibility of paying for the program beginning January 1, 2013.

The express language in SB 1018 only links some categories of customers to eligibility for mitigation of AB 32 costs, while excluding other major categories of customers. As such, it creates an unfair distribution of allowance auction revenues because it does not link the allocation of revenues for AB 32 cost mitigation proportionally to the actual AB 32 costs borne by those customers.    To leave some customers behind is unfair and could result in adverse economic consequences such as reduced public services, lost private sector jobs, and public resistance to important environmental programs.

COST CONTAINMENT IS CRITICAL TO SUCCESS OF AB 32

The California Air Resources Board allocation of AB 32 cap‐and trade allowances for the benefit of electric utility customers and the Board’s support for the return of allowance auction revenue to those customers is one of the most important customer protection features in the AB 32 cap‐and‐trade program.    This approach facilitates a smooth transition to a low carbon economy. Returning allowance auction revenue to all customers in proportion to their AB 32 cost responsibility is the only mechanism to assure fairness. By excluding certain customers from receiving any cost mitigation, SB 1018 will hinder customer acceptance of the cap‐and‐trade program while hurting the California economy and consumers.

CUSTOMERS WHO REPRESENT MORE THAN HALF OF INVESTOR‐OWNED UTILITY ELECTRICITY USAGE RECEIVE NO COST MITIGATION UNDER SB 1018

SB 1018 specifies that residential, small business and emissions‐intensive trade‐exposed customers will receive credit in the form of offsets to increased electric rates from the revenues received from the sale of utility sector AB 32 cap‐and‐trade allowances. No other categories of customers are specified as eligible for this credit.

This flawed approach creates an unfair and significant cost impact on customers such as K‐12 schools, local governments, courts, hospitals, prisons, mass transit, agricultural entities, colleges, universities, large employers and commercial businesses.    Together these customers use more than one half of electricity provided by the California investor‐owned utilities and bear a proportional cost burden under AB 32. These customers deserve to receive their fair share of the revenue from allowance auctions under AB 32.

ELECTRIC CUSTOMER AB 32 INVESTMENT IS SIGNIFICANT

The return of utility allowance revenue to all impacted customers in proportion to their AB 32 cost burden recognizes the impact on all customers of meeting the AB 32 goals. In addition to the costs of the cap‐and‐trade program itself, customers have been and will continue to pay other AB 32 related programs such as increased renewable energy, distributed generation and energy efficiency as well as transmission and distribution upgrades associated with integrating renewable resources.

The very significant investment in greenhouse gas reduction measures being made by electricity customers can at least be partially mitigated in a fair manner by returning utility allowance revenue to all customers in proportion to their AB 32 cost burdens. This allocation approach is critical to help ensure a smooth transition to a low carbon economy and customer acceptance of these AB 32 programs.

It is for these reasons the undersigned parties ask for legislative action to amend SB 1018 to enact a fair and equitable policy that ensures all electric customers are eligible to receive AB 32 allowance revenues to mitigate the actual AB 32 costs borne by all customers.

Sincerely,

Alliance for Retail Energy Markets
American Chemistry Council Industrial Gases Panel
California Business Properties Association
California Chamber of Commerce
California Farm Bureau Federation
California Grocers Association
California Large Energy Consumers Association
California Manufacturers & Technology Association
California Special Districts Association
California State Association of Counties
California Taxpayers Association
California Transit Association
Chemical Industry Council of California
Direct Access Customer Coalition
Energy Users Forum
League of California Cities
PacifiCorp
Pacific Gas & Electric
Regional Council of Rural Counties
San Francisco Bay Area Rapid Transit District
San Francisco Municipal Transportation Agency
Santa Clara Valley Transportation Authority
School Project for Utility Rate Reduction
Sempra Energy Southern California Edison