On January 14, 2011, the California Public Utilities Commission (CPUC) issued Decision 11-01-025 lifting the stay on its earlier Decision 10-03-021 from March 2010 authorizing the use of unbundled renewable energy credits (RECs), known as Tradable Renewable Energy Credits (TRECs), as an additional compliance tool for the California Renewables Portfolio Standard Program (RPS program).
TRECs are RECs that can be traded separately from the generated energy underlying them, and do not have to be bundled in the same transaction with their underlying renewable energy. As determined by the CPUC, procurement by California utilities of renewable resources that do not have their first point of interconnection with a California balancing authority will generally be deemed TRECs (not a bundled transaction of RECs and their underlying renewable energy).
Significantly, Decision 10-03-021 imposes limitations on the use of TRECs for RPS program compliance including (i) a use cap of 25% on TRECs for California’s three largest investor-owned utilities, and (ii) a price cap of $50 per TREC. Decision 11-01-025 extends the period of time in which these caps will remain in effect to December 2013. In a separate Decision 11-01-026, the CPUC also imposed a use cap of 25% cap on TRECs for Energy Service Providers in California, but declined to impose the $50/TREC price cap.
While TREC transactions can finally move forward now that the stay has been lifted, the sale of TRECs by out-of-state renewable energy generation projects will continue to be limited by the CPUC-imposed caps. One issue left unresolved by the CPUC decisions is whether out-of-state renewable energy supported by firm transmission arrangements into California may qualify for REC “bundled” status (and thus not subject to the cap) rather than TREC-status. The CPUC has directed its Staff to address this issue further.
For the time being, the most recent decision to lift the stay on Decision 10-03-021 has advanced California’s almost half-decade effort to implement the 2006 legislation authorizing the CPUC to approve TREC transactions. Policies on TRECs are likely to continue to shift and evolve in the future. Requests for rehearing of Decision 11-01-025 have been filed, and subsequent judicial challenges may also occur. In addition, the California State Senate recently passed SB 2X which, if ultimately enacted into law, would also place certain limitations on TRECs associated with out-of-state resources.