Cap-and-Trade Basics

Utilities to Use Allowance Value to Benefit Ratepayers

Electric utilities will be given allowances to be sold at auction for the benefit of ratepayers.

The regulation states that electrical distribution utilities must use allowance value for the benefit of retail ratepayers, consistent with the goals of AB 32. We believe ratepayers could benefit from rebates, customer bill relief, or energy-efficiency programs.

Who decides the use of auction revenue?

We will initiate a public process to develop recommendations to the Legislature and Governor on the types of projects and programs to be funded by auction revenues, during which the potential uses of revenues will be further developed.  ARB will recommend types of projects and programs to be funded by the revenues generated by the quarterly allowance auctions.

How will ratepayers benefit?

The utilities have indicated that they will use allowance value for the benefit of their ratepayers. The allocation mechanism to electrical distribution utilities on behalf of ratepayers should compensate all ratepayers for the costs of the program, provided that utilities are meeting their reduction requirements (e.g., 33 percent Renewable Portfolio Standard).  Additional value is provided to utility ratepayers for early investment in energy efficiency and renewable technologies.

ARB agreed with the recommended uses of allowances made by the economic and allocation advisory committee (EAAC).  EAAC recommended a per capita consumer rebate program that uses a per capita lump sum distribution of the proceeds raised at auction would help consumers avoid negative impacts of higher electricity and fuel prices, while still providing the correct incentives to reduce fossil fuel use. During the public process, ARB will also look at the feasibility of returning allowance value to households through lump-sum rebates.

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