Cal. Code Regs. Tit. 17, § 95893 - Allocation to Natural Gas Suppliers for Protection of Natural Gas Ratepayers

(a) Allocation to Individual Natural Gas Suppliers. For each budget year, each natural gas supplier's allocation will be calculated as follows. Any allowances allocated to natural gas suppliers must be used exclusively for the benefit of retail ratepayers of each such natural gas supplier, consistent with the goals of AB 32, and may not be used for the benefit of entities or persons other than such ratepayers.

A_s,t = E₂₀₁₁ * c_t

Where:

"A_s,t" is the amount of California GHG allowances directly allocated to the natural gas supplier "S" from budget year "t";

"E₂₀₁₁" is the emissions for natural gas supplier "S" for data year 2011, as calculated using the compliance obligation calculation methods under section 95852(c); and

"c_t" is the adjustment factor for natural gas suppliers for budget year "t" to account for cap decline as specified in Table 9-2.

(b) Transfer to Natural Gas Supplier Accounts.

(1) When a natural gas supplier as defined in section 95811(c) is eligible for a direct allocation, it shall inform the Executive Officer by September 1 of the amount of allowances to be placed into its compliance account and limited use holding account with the following constraints. If an entity fails to submit its distribution preference by this deadline, ARB will automatically place all directly allocated allowances for the following budget year in the entity's limited use holding account:

(A) The quantity of allowances placed into the limited use holding account will equal at least the amount of allowances provided in section 95893(a) multiplied by the applicable percentage in Table 9-5 or Table 9-6, rounded down to the nearest whole allowance.

(B) The remaining allowances from the total allowances allocated in section 95893(a) which are not placed into the limited use holding account will be placed into the entity's annual allocation holding account to be transferred by the Executive Officer into the entity's compliance account pursuant to section 95831(a)(6).

(c) Monetization Requirement. Within each calendar year beginning in 2015 and after, a natural gas supplier must offer for sale at auction all allowances in its limited use holding account that were issued from budget years that correspond to the current calendar year and from budget years prior to the current calendar year.

(d) Limitations on the Use of Auction Proceeds and Allowance Value.

(1) Proceeds obtained from the monetization of allowances directly allocated to a publicly owned natural gas utility shall be subject to any limitations imposed by the governing body of the utility and to the additional requirements set forth in sections 95893(d)(3) through 95893(d)(8) and 95893(e).

(2) Proceeds obtained from the monetization of allowances directly allocated to public utility gas corporations shall be subject to any limitations imposed by the California Public Utilities Commission and to the additional requirements set forth in sections 95893(d)(3) through 95893(d)(8) and 95893(e).

(3) Allowance value, including any allocated allowance auction proceeds, obtained by a natural gas supplier must be used for the primary benefit of retail natural gas ratepayers of each natural gas supplier, consistent with the goals of AB 32, and may not be used for the benefit of entities or persons other than such ratepayers. Allocated allowance auction proceeds must be used to reduce greenhouse gas emissions or returned to ratepayers using one or more of the approaches described in sections 95893(d)(3)(A)-(C) and may also be used to pay for administrative and outreach costs and educational programs described in section 95893(d)(4).

(A) Energy Efficiency. Funding programs or activities designed to reduce greenhouse gas emissions through reductions in energy use in the following categories:

1. Energy efficient equipment rebates;

2. Energy-efficient building retrofits;

3. Other projects that reduce energy demand;

(B) Other GHG Emission Reduction Activities. Funding programs or activities other than energy efficiency, for which the natural gas supplier can demonstrate GHG emission reductions per section 95893(d)(5). This includes funding projects or activities that reduce emissions of uncombusted natural gas and that are not mandated by any federal, state, or local health and safety requirements, Senate Bill 1371 (Morrell, 2014), or the Greenhouse Gas Emission Standards for Crude Oil and Natural Gas Facilities (California Code of Regulations, sections 95665-95677).

(C) Non-Volumetric Return to Ratepayers. Distribution of allocated allowance auction proceeds to some or all ratepayers in a non-volumetric manner, either on- or off-bill.

(4) Administrative and Outreach Costs and Educational Programs. Allocated allowance auction proceeds may be used for administrative costs only in so far as those costs are solely limited to necessary costs to administer the projects and activities funded pursuant to sections 95893(d)(3)(A)-(C). Allocated allowance auction proceeds may be used for outreach that supports the implementation of the projects and activities funded pursuant to sections 95893(d)(3)(A)-(C). Up to $100,000 or one percent of the total allocated allowance auction proceeds expended by the supplier in a data year, whichever is larger, may be used in that data year for educational programs that have the primary purpose of reducing the GHG emissions of the natural gas supplier's ratepayers, but for which expected GHG emissions, pursuant to sections 95893(d)(5) and 95893(e)(4)(B), cannot be demonstrated.

(5) Natural gas suppliers must demonstrate the expected GHG emissions reductions, pursuant to section 95893(e)(4)(B), for each use of allocated allowance auction proceeds described in sections 95893(d)(3)(A)-(B) that is undertaken.

(6) Public utility gas corporations shall ensure equal treatment of their procurement and delivery customers and delivery-only customers.

(7) Prohibited Use of Allocated Allowance Value. Use of the value of any allowance allocated to a natural gas supplier other than for the primary benefit of retail natural gas ratepayers consistent with the goals of AB 32 is prohibited. Prohibited uses include:

(A) Use of allocated allowance auction proceeds to pay for the costs of complying with MRR, the AB 32 Cost of Implementation Fee Regulation (California Code of Regulations, sections 95200-95207), or the Cap-and-Trade Regulation, including the purchase of allowances, except for the costs allowable pursuant to sections 95893(d)(3)-(4);

(B) Use of allocated allowance auction proceeds to pay for lobbying costs, employee bonuses, shareholder dividends, or costs, penalties, or activities mandated by any legal settlement, administrative enforcement action, or court order; and

(C) Returning allocated allowance auction proceeds to ratepayers in a volumetric manner.

(8) Deadline for Use of Allocated Allowance Value. For allocated allowances received on or after October 1, 2017, the proceeds received from the sale of allowances allocated to a natural gas supplier must be spent by December 31 of the year ten years after the vintage year of the allowances, and the value of allocated allowances received prior to Octo ber 1, 2017 must be spent by December 31, 2027. To be spent, the proceeds must not remain in any account owned or controlled by the natural gas supplier or its corporate associates. If the proceeds have not been spent within ten years, they must be returned to ratepayers in a non-volumetric manner by December 31 of the year eleven years after the vintage year of the allowances.

(e) Reporting on the Use of Auction Proceeds. No later than June 30, 2016, and June 30 of each calendar year thereafter, each natural gas supplier shall submit a report to the Executive Officer describing the disposition of all allocated allowance auction proceeds during the previous calendar year. This report shall include:

(1) The monetary value of any unspent allocated allowance auction proceeds remaining from prior years at the start of the previous calendar year.

(2) The monetary value of auction proceeds received by the natural gas supplier from the sale of allowances during the previous calendar year;

(3) The monetary value of all auction proceeds spent during the previous calendar year and the monetary value of all auction proceeds remaining unspent at the end of the previous calendar year;

(4) How each use of allocated allowance auction proceeds which were spent during the previous calendar year complies with the requirements of this section and the requirements of California Health and Safety Code sections 38500 et seq. This includes:

(A) Describing the nature and purpose of each use of allocated allowance auction proceeds, including how it benefits ratepayers, and specifying the amount of allocated allowance auction proceeds spent on that use. This includes describing the GHG reduction purpose of any educational programs;

(B) Estimating the GHG emission reductions from each use of allocated allowance auction proceeds allowed pursuant to sections 95893(d)(3)(A)-(B). The portion of total GHG emission reductions attributable to the use of the proceeds shall be based on the percentage of total project costs covered by the use of the proceeds. The total GHG emission reductions shall be based on comparing the expected GHG emissions with and without the use of the proceeds. The calculation shall use the following, as applicable:

1. Use-specific information on equipment efficiency, MMBtu of fuel saved, and vehicle miles travelled, as applicable.

2. GHG emissions factors applicable to the fuel used or saved, vehicle miles travelled or electricity saved, calculated as follows:

a. GHG Emission Factor for Natural Gas Saved. The GHG emission factor for natural gas shall be calculated using the emission factor and annual average high heating value used in the natural gas supplier's MRR reporting for the same reporting year.

b. GHG Emission Factors for Non-Transportation Fuels. The GHG emission factor for each fuel used or saved, other than natural gas, shall be as listed in Table C-1 of Subpart C of 40 CFR Part 98 (December 2010), which is hereby incorporated by reference, or calculated by means that can be demonstrated to the Executive Officer to be comparably accurate.

c. GHG Emission Factors for Vehicle Miles Travelled. If the use of allocated allowance auction proceeds reduces transportation-related GHG emissions, the GHG emission factor for the vehicles used with and without the use of proceeds shall be calculated using the methods in ARB's California Climate Investments Quantification Methodology Emission Factor Database Documentation (August 2018), which is hereby incorporated by reference, or by comparable means that can be demonstrated to the Executive Officer to be consistent with these methods. Active transportation may be assumed to have zero GHG emissions.

3. The expected time frame over which the emissions reductions will occur.

4. The percentage of total project costs covered by the use of allocated allowance auction proceeds.

(C) Itemizing any use of allocated allowance auction proceeds on administrative and outreach costs and educational programs described in section 95893(d)(4).

Table 9-5: Minimum Annual Percentage Consignment Requirements for Natural Gas Utilities for 2015-2020

Year	2015	2016	2017	2018	2019	2020
Minimum Percentage Consigned	25%	30%	35%	40%	45%	50%

Table 9-6: Minimum Annual Percentage Consignment Requirements for Natural Gas Utilities for 2021 and Subsequent Years

Year	2021	2022	2023	2024	2025	2026	2027	2028	2029	2030 and beyond
Minimum Percentage Consigned	55%	60%	65%	70%	75%	80%	85%	90%	95%	100%

Notes

Cal. Code Regs. Tit. 17, § 95893

1. New section filed 6-26-2014; operative 7-1-2014 pursuant to Government Code section 11343.4(b)(3) (Register 2014, No. 26). For prior history, see Register 2012, No. 7.
2. Amendment filed 9-18-2017; operative 10-1-2017 pursuant to Government Code section 11343.4(b)(3) (Register 2017, No. 38).
3. Amendment filed 3-29-2019; operative 3-29-2019 pursuant to Government Code section 11343.4(b)(3) (Register 2019, No. 13).

Note: Authority cited: Sections 38510, 38560, 38562, 38570, 38571, 38580, 39600 and 39601, Health and Safety Code. Reference: Sections 38530, 38560.5, 38564, 38565, 38570 and 39600, Health and Safety Code.

1. New section filed 6-26-2014; operative 7/1/2014 pursuant to Government Code section 11343.4(b)(3) (Register 2014, No. 26). For prior history, see Register 2012, No. 7.
2. Amendment filed 9-18-2017; operative 10/1/2017 pursuant to Government Code section 11343.4(b)(3) (Register 2017, No. 38).
3. Amendment filed 3-29-2019; operative 3/29/2019 pursuant to Government Code section 11343.4(b)(3) (Register 2019, No. 13).