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WHEREAS, The National Association of Regulatory Utility Commissioners
(NARUC) formed a Task
Force on Climate Policy in March 2007 in order to educate NARUC members
concerning climate
policy issues and to develop policy proposals for consideration by the NARUC
membership; and
WHEREAS, The NARUC Board of Directors adopted a resolution sponsored by the
Task Force on
Climate Policy at the 2007 NARUC Summer Meetings held in New York, New York,
on July 18,
2007, that enunciated ten policy principles that NARUC believes should
inform federal climate policy;
and
WHEREAS, The relative merits of a market mechanism proposed for inclusion in
any federal climate
change legislation, including, but not limited to, a cap-and-trade
mechanism, a carbon tax, and a load-
side cap, should be carefully evaluated in determining how to achieve the
desired emissions reductions
consistent with the ten principles previously adopted by NARUC; and
WHEREAS, Congress has continued to debate various policy proposals for
addressing the
environmental and economic consequences of alternative climate change
policies since the 2007
NARUC Summer Meetings; and
WHEREAS, Since the 2007 NARUC Summer Meetings, the Task Force on Climate
Policy has also
continued to examine various policy proposals relating to climate change
issues; and
WHEREAS, The momentum for enactment of federal legislation regulating the
emission of
greenhouse gases (GHG) appears to have further increased, making the
enactment of such legislation
within the foreseeable future likely; and
WHEREAS, The existence of uncertainty about the nature and extent to which
GHG emissions will be
subject to future federal regulation makes it difficult for State
regulators, regulated utilities, and others
to appropriately plan for needed investments in electric transmission and
generation infrastructure; and
WHEREAS, Despite a diversity of opinion within NARUC’s membership regarding
the need for
national limitations on the emission of GHGs for the purpose of addressing
concerns over warming of
the Earth’s climate, NARUC’s members are in general agreement that the
enactment of federal
legislation limiting such emissions in would be appropriate in order to
remove existing uncertainties
that are hampering the making of transmission and generation investment
decisions; and
WHEREAS, NARUC’s members are also in general agreement that appropriate
federal climate
change legislation should be enacted in order to enhance the likelihood that
appropriate technologies
will be developed and other solutions implemented so as to achieve desired
reductions in GHG
emissions in the most economical manner possible; now, therefore, be it
RESOLVED, That the National Association of Regulatory Utility Commissioners,
convened in its
November 2007 Annual Convention in Anaheim, California, supports the
enactment of federal
legislation intended to reduce GHG emissions so long as such legislation
relies, to the extent
practicable, on an appropriate market mechanism or mechanisms as part of an
economy-wide approach
to GHG regulation; provides for an appropriate transition period prior to
the implementation of full
regulation of GHG emissions; creates sufficient certainty to ensure the
financing of needed energy
infrastructure consistent with the achievement of the environmental
objectives intended to be
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accomplished by such legislation; and is otherwise consistent with the
policy principles developed by
the Task Force on Climate Policy and approved by the NARUC Board of
Directors at the 2007
NARUC Summer Meetings held in New York, New York, on July 18, 2007; and be
it further
RESOLVED, That the Task Force on Climate Policy should consider and develop,
as appropriate,
proposed resolutions for NARUC’s consideration addressing additional market
mechanisms including,
but not limited to, a carbon tax and a load-side cap; and be it further
RESOLVED, That, in the event that Congress chooses to implement a cap and
trade mechanism for
the purpose of limiting electric sector GHG emissions, any such federal
climate change legislation
should rest upon the following cap-and-trade design principles in order to
appropriately balance
competing criteria, including, but not limited to, equity, economic
efficiency, and ease of
administration:
1. Auctioning of all allowances is ultimately the most economically
efficient mechanism for
achieving emission reduction goals from electric generation. However, the
allocation of
emission allowances within the electricity sector at no cost is an
appropriate transitional
measure in order to ensure continued reliability, minimize economic
dislocation resulting from
the carbon intensity of the existing electricity generation infrastructure,
and allow for the
development of appropriate new technology.
2. Any emissions allowance allocation program, consistent with an
economy-wide approach,
should involve a reduction in the number of allowances allocated within the
electricity sector
over time to ensure that needed reductions in GHG emissions are encouraged
through a gradual
increase in the cost of carbon-intensive generation sources as compared to
the cost of other
generation sources.
3. The primary purpose of any transitional emissions allowance allocation
process applicable to
the electricity sector should be to minimize the initial economic impact of
GHG-emissions
regulation to end-user customers by phasing in the impact of such regulation
over a reasonable
period of time.
4. Any emissions allowance allocation program should produce reasonable
outcomes, consistent
with these cap-and-trade design principles, regardless of applicable
electricity market or
regulatory structures.
5. Any emissions allowance allocation program should assign all allocated
allowances available
to the electricity sector to local distribution companies providing a
regulated local distribution
function for end-user customers (including vertically-integrated utilities,
distribution utilities,
rural-electric cooperatives, municipal distribution systems, and all other
entities providing
distribution service directly to end-user customers subject to State
regulation or its equivalent).
This approach will allow State PUCs or other authorities to ensure that the
value of these no-
cost allowances will inure to the benefit of end-use consumers.
Alternatively, States should be
able to adopt other methods for distributing benefits to end-use consumers.
6. The assignment of no-cost allocated allowances to local distribution
companies as defined
above should be based primarily on the level of GHG-emissions from the
resources used to
provide service to the local distribution company’s load during an
appropriate baseline period.
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7. Any emissions allowance allocation program should not inappropriately
advantage or
disadvantage particular regions, local distribution companies (as defined
above), or generators,
and should ensure that end-user customers receive the benefit of allocated
emissions
allowances for the purpose of offsetting the increased costs resulting from
the institution of
GHG-emissions regulation.
8. Any assignment of allocated emissions allowances should seek to
accommodate any efforts
made in particular regions or States to reduce GHG-emissions in anticipation
of the enactment
of federal legislation regulating GHG-emissions.
9. In defining the baseline period, proper precautions should be taken to
ensure that
counterproductive behavior by any allowance market participants is
discouraged and that
gaming does not occur.
10 Cost-containment measures should be included in any cap-and-trade
mechanism in order to
minimize abrupt changes in the cost of compliance, including during the
initial phases of
implementation, which could adversely affect electricity consumers or
allowance markets.
Such measures should be designed to achieve effective and appropriate
environmental benefits
while ensuring price stability and predictability, promoting investment in
appropriate
technologies, and minimizing adverse consumer impacts, including price
volatility; and be it
further
RESOLVED, That any federal climate change legislation should be consistent
with existing NARUC
policies regarding non-discriminatory wholesale competition; demand
response; energy efficiency;
renewable generation; generation resource adequacy; fuel diversity; the
development of clean coal and
improved nuclear technologies; and the development of a comprehensive
solution for the existing
nuclear waste disposal problem.
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Sponsored by the Committees on Electricity, Energy Resources and the
Environment, and Gas
Recommended by the NARUC Board of Directors, November13, 2007
Adopted by the Committee of the Whole, November 14, 2007