Energy Action Plan Greenhouse Gas Policy Activities / Update

1. Energy Action PlanGreenhouse Gas Policy Activities / Update Julie Fitch Director of Strategic Planning California Public Utilities Commission December 11, 2007

2. Three topics • Joint CPUC/CEC Greenhouse Gas Policy Proceeding Update • Electricity Point of Regulation • Natural Gas Options • Allocation Issues • Modeling • University proposal for California Institute of Climate Solutions • Other related CPUC proceedings/activities

3. Electricity Point of Regulation Key questions: • Will California electric sector participate in cap and trade? • If so, who will have compliance obligation? Four options: • Load-based (load-serving entities/retail providers) • Source-based (CA generators only) • First seller (entity first to deliver to CA grid) • Source-based for in-state; load-based for imports (“hybrid”)

4. Point of Regulation - schedule Key dates: • August 21 En Banc Hearing (parties filed comments August 6 and replies August 15) • November 9 ruling asking additional questions on options • December 3 and 17 final comments and replies from parties • Mid-late-January 2008 – mail proposed decision for 30-day comment • Late February 2008 – “Interim Decision” before both Commissions for final vote

5. Natural Gas Options Key questions: • Should end-user emissions from natural gas combustion be capped (participate in cap and trade) or treated through mandatory/regulatory policies and programmatic strategies? • Can we get more from the natural gas sector if we utilize cap and trade? • Is there a relationship to electricity sector policy? Two options: • Cap emissions at local distribution company level (similar to load-based for electric) • Address through programmatic strategies for energy efficiency and pipeline leak detection

6. Natural Gas - schedule Key dates: • Initial comments from parties filed prior to prehearing conference – July 26 2007 • August 2 prehearing conference • November 16 staff issued data request to gas market participants gathering data on sales by customer size/type • November 28 ruling asking for further comments on key questions • Comments due December 12, replies January 8 • Covered in “interim decision” on agendas in late February

7. Allocation Issues Key questions: • Are there particular allocation options that flow from different points of regulation? • What is the most reasonable methodology for electricity and natural gas sectors, especially for consumers? • How should methodology adjust over time? Two main options: • Auction • Administrative allocation/distribution based on: • Historical emissions • Historical emissions intensity (emissions per MWh or therm) • Sales (MWh or therms) • Other (population, growth rates, etc.)

8. Allocation - schedule Key dates: • First workshop May 22, 2007 • Additional workshop November 5 • Comments received October 31, replies November 14, supplemental replies December 7 • Preliminary conclusions included in “interim decision” on agendas in late February

9. Modeling Key questions: • Quantity of emissions reductions available in electricity and natural gas sectors, at what cost? • Availability of emissions reductions beyond existing efficiency and renewables policies Two main initial conclusions (preliminary): • Can get energy sectors back to proportional share of 1990 emissions with: • Energy efficiency at unprecedented levels (around 100% of economic potential) • Renewables at ~33% level • Additional efficiency and renewables in other Western states • Will not be free • Likely rate increases on order of 30% average statewide by 2020

10. Modeling - schedule Key dates: • Kickoff workshop September 21, 2007 • Initial results workshop November 14 • Parties comments and replies due January 4 and 18, 2008 • Second stage of analysis complete by April 2008, including: • Refined cost estimates • Analysis of impacts by utility/retail provider (implications for allocation policy) • Further details of emissions reductions achievable by various strategies • Also coordinating with ARB’s macroeconomic modeling

11. Remaining Issues for Joint Proceeding • Refinement of modeling analysis • crucial to determining share of energy sector responsibility for overall 2020 goal adopted by ARB • Emissions reductions possible • Rate impact • individual entity analysis required for equity determination • Elaboration on allowance allocation policy (?) • Flexible compliance options • Includes controversial issue of offsets • Banking, borrowing, compliance period definitions • Final recommendation to ARB by no later than August 2008 • All design to fit into ARB’s “scoping plan” schedule (framework for all sectors) by end of 2008

12. California Institute for Climate Solutions (CICS) proposal • Proposal from network of universities: • University of California • Private universities • California State Universities • Community colleges • Centralized hub to coordinate, fund, and disseminate research on climate change mitigation • Would award grants via open, competitive, peer-reviewed process

13. CICS Funding Request • $60 million per year over 10 years • Collected from electric and gas ratepayers • Would use this as seed funding, allowing CICS to leverage additional state, federal, and private funding

14. CICS Proposed Mission • Develop Sustainable Energy Roadmap • Fund primary research for gaps identified in Roadmap (avoid duplication) • Fund education projects, including workforce development to train professionals and technicians • Communicate/disseminate results through conferences, newsletters, etc. • Suggested priorities: • Buildings and homes • Energy supply, sources and technologies • Policy and management • Climate forecasts and analysis • Quality of life

15. Other related CPUC proceedings/activities Proceedings • Long-term procurement planning proceeding • Energy efficiency strategic planning • Treatment of renewable energy certificates in RPS • Sempra proposal for approval of certain early actions • Edison proposal for Clean Hydrogen Power Generation demonstration plant Activities • Western Climate Initiative subcommittees • Electricity • Allocation • Offsets • Reporting • California Climate Action Team subgroups • Chair the Energy subgroup, participate in others