California Finally Establishes Market for Tradable Renewable Energy Credits (TRECs)

The CPUC provided the structure and rules for the integration of TRECs for compliance with the Renewables Portfolio Standard (RPS), and largely reaffirmed the previous order issued in March 2010, which was subsequently stayed. The new order imposes two temporary caps on TREC use: 1) California's three large investor-owned utilities (IOUs) may use TRECs only for up to 25% of annual procurement targets for RPS compliance, and 2) all IOUs are permitted to pay only up to $50 per TREC. These two caps are intended to balance the promotion of renewable energy with protections for California ratepayers while the TREC market is being developed; the caps are set to expire at the end of 2013.

Bundled transactions, whereby the renewable energy credit is sold together with the underlying renewable energy, will continue to be the primary means for IOUs to achieve RPS compliance. The CPUC also narrowed the definition of what constitutes a bundled contract for out-of-state renewable energy, as compared to the CPUC’s prior approvals of bundled contracts. However, the temporary 25% limit does not apply to deliveries under such previously approved bundled contracts that would cause the utility to exceed the limit.

Read more: California Finally Establishes Market for Tradable Renewable Energy Credits (TRECs)

¹ CPUC Dec. 12-95-217, January 16, 2011, available at http://docs.cpuc.ca.gov/published/Final_decision/129517.htm