FOR IMMEDIATE RELEASE
OCTOBER 6, 2008
LADWP DENOUNCES CPUC/CEC CAP AND TRADE PROPOSAL AS A RECIPE FOR WEALTH TRANSFER FROM SOUTHERN CALIFORNIA PUBLIC UTILITIES TO INVESTOR-OWNED UTILITIES AND FOR-PROFIT INTERESTS
LOS ANGELES – Los Angeles Department of Water and Power (LADWP) CEO and General Manager David Nahai reiterated LADWP’s commitment to reducing its greenhouse gas emissions but denounced the cap and trade proposal by the California Public Utilities Commission/California Energy Commission (CPUC/CEC) for the electric sector as flawed, and called it a strategy for a permanent wealth transfer from Southern California public power agencies to investor-owned utilities and other for-profit interests.
“I am extremely disappointed that the CPUC/CEC’s final opinion on cap and trade perpetuates the same bad public policy that was first proposed eight months ago,” Nahai said. “This strategy is nothing short of a recipe for a cataclysmic wealth transfer. It will divert billions of dollars from the people of Los Angeles and other Southern California cities to line the pockets of investor-owned utilities or marketers for carbon credits, while undercutting the true intent of AB 32, the state’s landmark Global Warming Solutions Act of 2006, to reduce greenhouse gas emissions.”
In a response filed Oct. 2, LADWP stated it remains committed to partnering with the state to achieve the goals of AB 32 to reach 1990 greenhouse gas emission levels by 2020, and advocates meeting this commitment through quantifiable, direct emissions reductions. LADWP strongly supports the state’s proposed 33% renewable portfolio standard and energy efficiency programs as the most effective mechanisms for the electricity sector to meet the AB 32 goal.
“LADWP is committed to weaning itself off of high-carbon coal power, and is aggressively pursuing the goal of obtaining 20% renewable resources by 2010 and 35% by 2020,” Nahai stated. “But this cap-and-trade scheme will not help – it will actually subvert our ability to truly reduce greenhouse gas emissions.”
While the CPUC/CEC has recognized the importance of expanding renewable energy resources and aggressive energy efficiency programs since issuing the interim decision, the joint commissions have put forth a cap-and-trade scheme that advocates a flawed framework for allocating greenhouse gas emissions credits (or allowances), Nahai said.
LADWP is not opposed to a cap-and-trade system if done properly, but the CPUC/CEC scheme wrongly shifts criteria for allocating such credits from actual emissions of greenhouse gases to the amount of sales or energy output provided by the utility. This sets up a scenario in which investor-owned utilities, which serve a larger customer load and have legacy investments in nuclear and hydro power, will reap the benefits of receiving more emissions credits that they can then sell on the open market. This approach violates the premise of cap-and-trade — that credits would become available because someone made cuts beyond their obligations under AB 32. Instead, tons of money shifts hands with absolutely zero environmental benefit.
LADWP and other Southern California public power agencies, which have historically higher carbon profiles, will then be forced to purchase more emissions credits at market-driven prices. LADWP estimates the proposed cap-and-trade system will cost ratepayers billions of dollars between 2012 and 2020 and divert capital away from the very programs, including energy efficiency and renewable energy initiatives, proven to directly reduce greenhouse gas emissions.
For instance, if emissions allowances sell for $100 per ton, PG&E would reap over $3.2 billion, while Southern California municipal utilities would pay almost $3.4 billion (of which LADWP’s portion is $2.2 billion), with no end in sight, according LADWP’s financial analysis.
The CPUC/CEC’s proposed “final opinion,” issued Sept. 12, will be submitted to the California Air Resources Board (ARB), which will adopt a plan to reduce statewide greenhouse gas emissions to 1990 levels by 2020. The ARB is required to adopt a scoping plan to achieve the AB 32 goals by Jan. 1, 2009.
“The CPUC/CEC’s final recommendation is truly unconscionable. I implore the ARB to do the right thing and carefully consider whether this proposal will accomplish the objectives of AB 32,” Nahai said. “LADWP is not seeking an exemption, only a fair and equitable solution that truly benefits the environment and effectuates the true intent of AB 32.”
LADWP has proposed an alternative methodology that ties the allocation of emissions credits directly to greenhouse gas emissions. This can be accomplished through a fuel-based, weighted allocation strategy, specifically targeting coal and natural gas because they produce the most greenhouse gas emissions. “If the state opts to go with a cap-and-trade program then we advocate they adopt a strategy based on fuel type to directly crack down on emissions,” Nahai said. “This will allow LADWP to continue to put our public dollars where they can do the most good – toward direct reduction of greenhouse gas emissions through renewable energy and energy efficiency programs.”
The Los Angeles Department of Water and Power, the nation’s largest municipal utility, provides reliable, low-cost water and power services to Los Angeles residents and businesses in an environmentally responsible manner. LADWP services about 1.4 million electric customers and 680,000 water customers in Los Angeles.