TITLE
Recommendation to authorize City Manager to adjust rates for natural gas service to recover current and future costs related to Assembly Bill 32, the California Cap-and-Trade Program; and increase appropriations in the Gas Fund (EF 301) in the Long Beach Gas and Oil Department (GO) by $1,800,000. (Citywide)
DISCUSSION
In order to reduce the amount of greenhouse gases emitted into the atmosphere, the California legislature passed the Global Warming Solutions Act Assembly Bill 32 (AB 32) in 2006. AB 32 requires covered entities to reduce greenhouse gas emissions to 1990 levels by the year 2020 and ultimately achieve an 80 percent reduction from 1990 levels by 2050.
As part of AB 32, the California Air Resources Board (CARB) developed a Cap-and-Trade Program, which uses a market-based approach that provides economic incentives for covered entities to reduce the emission of greenhouse gasses. Beginning in 2015, all natural gas utilities in California were required to comply with the California’s Cap-and-Trade Program. As a participant, Long Beach Gas and Oil Department (LBGO) must obtain emission allowances equal to the amount of carbon dioxide released by customers from the burning of natural gas within LBGO service territory, with each allowance equal to one metric ton of carbon dioxide. To reduce the economic impact to ratepayers, CARB allocated an amount of free emission allowances to cover approximately 75 percent of LBGO’s total carbon dioxide emissions in 2015. To meet the remaining 25 percent of the total 2015 obligation, LBGO was required to purchase emission allowances from the CARB online auction platform. To continue to phase in energy-efficiency incentives, CARB decreases the amount of free allowances distributed to utilities each subsequent year. LBGO estimates it will receive an amount of free allowances equal to 70 percent of its total compliance obligation in 2016.
For calendar year 2016, the regulatory cost of Cap-and-Trade Progr...
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