Cap and Trade Boondoggle

This time, through no fault of PG & E, the State Assembly passed AB 32 which requires the reduction of statewide "Green House Gases" (GHG) emissions to 1990 levels but gives air-polluters until 2020 to get the job done.  This Assembly Bill was passed in 2006, so one might assume fourteen years is plenty of time for these massive air polluters to clean up their act.  Incredibly, this rate increase request is not about costs related to cleaning up the air in an effort to limit global warming; instead, PG & E is required to purchase "allowances" (more commonly known as carbon credits or permits) in accordance to requirements proposed by the California Air Resources Board (ARB) and PG & E is asking their customers to pay for it.  Possibly you might ask, "Why a polluter would be required to purchase 'allowances' instead of spending the necessary funds to fix the problem - after all, it would appear there is plenty of time?"

It turns out ARB is utilizing California's "Cap and Trade" program as an enforcement device to implement AB 32.  In general, the policy requires companies that produce pollution, such as a utility or a refinery, to buy "permits" from the State which would allow it to send a specified amount of carbon dioxide and other greenhouse gases into the air each year.  In successive years the amount of credits would be reduced by 2 or 3 percent.  The "Unused" permits could be bought and sold by the polluters in a marketplace or over the internet.  If, for example, a company is able to operate 20 percent below its pollution allowance, it could sell the unused portion to a company that has exceeded its quota.  Currently the market rate for carbon credits is $19 per ton.

The logic behind this scheme is "jaw-dropping" to say the least.  If one company is able to lower its pollution, but sells off credits to others thus allowing them to exceed pollution requirements, how are California's greenhouse gases reduced?  Why should a polluter be required to buy credits instead of spending the same money to correct his air quality problem?  But most of all, why should rate payers be asked to pay for this Cap and Trade boondoggle? 

An August 14, 2012, Sacramento Bee editorial warned this "global-warming law" is a job killer and a $1 billion tax that could force some of the state's heaviest industries to flee.  But under a new plan being considered, the state would dole out extra carbon credits; accordingly, the 430 affected companies would get most of their allowances from the state for free - some 90 percent in each of the first two years.  But many business leaders claim that even with loads of free credits, the cost of purchasing the rest could be prohibitive.  Indeed, it is estimated California industries are expected to pay $1 billion or more for allowances.

The Air Resources Board denies this cap and trade program is a tax scheme, but if PG & E succeeds in raising utility rates in order to purchase these carbon credits, the ratepayer would have every right to call this a tax which should be put on an election ballot for public vote.

Most consumers are not aware that public utility companies are required to provide a notice to ratepayers of all rate increase requests made to the CPUC and we, the ratepayers, are allowed to respond to these requests.  The rule of thumb is that if 50% plus one person objects to the proposed rate increase then the public utility is not allowed to raise their rates.  The drawback to this technique is, if a ratepayer fails to vote or respond in any way, this lack of response is counted as a "yes" vote.  As is the case with PG & E, which has thousands of customers, it is unlikely that any request for a rate increase will be voted down because most ratepayers do not realize that little notice included with their monthly bill should be acted upon.  It is not necessary to express a compelling reason for denying a rate increase - "just say no!"