The California Public Utility Commission (CPUC) today approved by a unanimous vote the Long Term Procurement Plans (LTPP) for the states investor owned utilities (IOUs), PG&E, SCE and SDG&E. CPUC approval of the LTPP provides a green light for the IOUs to begin procurement of greenhouse gas emissions products for AB 32 compliance.

The decision was well received by the market as it signals liquidity growth in the nascent California carbon market. The decision will enable the IOUs to begin procurement of allowances via the Intercontinental Exchange (ICE), as the IOUs are currently approved to execute on the ICE for power products. In addition, the IOUs can now purchase GHG instruments through an RFP process. Allowance and offsets compliance products can be purchased under forward contracts or on a spot basis pursuant to the decision. Offset products must be insured by the Seller against Invalidation

The market responded positively trading up on the week. As of this update, roughly 250 December 2013 settled contracts have traded hands on the ICE in a range of $14.00-$15.50 per ton -- with the last trade today at $15.50. In addition to the IOUs now being able to engage, other new entrants were seen in the market this week for the first time. We expect to see increasing participants, volumes, and liquidity as the California Air Resources Board CARB) prepares for the simulation auction in August.

If you have any questions on the current market conditions, please contact our US Carbon team at: +1 415.963.9137 or +1 914.323.0265