Yesterday, the California Public Utilities Commission (CPUC) adopted rules to allow Load Servicing Entities (LSEs) in the state to use tradable renewable energy certificates (TRECs) to comply with the State’s renewable energy obligations.

California has one of the most ambitious renewable portfolio standards (RPS), requiring entities selling electricity in the State to match at least 20% of their obligations with renewable energy. The decision, which effectively allows electricity sellers to purchase renewable energy attributes separate from the electricity – and do so from projects outside of California – is likely to increase the efficiency of the California REC market and help lower costs for consumers.

 The CPUC decision laid out the details on how the TREC program would operate. Key provisions include:

TREC Transaction Definition

• REC-only Transactions: trades in which an entity purchases only the renewable attributes or RECs – and not the underlying energy – from a renewable power generator.
• REC+Power Transactions: trades that include both the RECs and the underlying energy but do not meet the Commissions criteria for bundled RPS procurement transactions.  

Effective Date

• The decision is effective immediately.

Eligibility of TRECs

• Associated with RPS-eligible energy generated on or after January 01, 2008.
• All TRECs must be tracked in the Western Renewable Energy Generation Information System (WREGIS).

Usage Limit

• Electricity providers may use TRECs to meet no more than 25% of their renewable portfolio obligations. This cap expires December 2013.

Price Cap

• TRECs have a price cap of $50/REC for REC-only contracts. This price cap expires December 2013.

Banking

• TRECs can be banked for three years before being used for compliance.

We will provide a more detailed analysis of the market in the coming weeks, including an overview of the potential trading market and risk management strategies utilizing TRECs. For more information on the TREC decision by the CPUC or to transact in this market, please contact the Evolution Markets West Coast Renewable Energy team at: +1 415.963.9120.