For the Benefit of California Electricity Ratepayers: Electricity Sector Options for the Use of Allowance Value Created Under California’s Cap-and-Trade Program

Resources for the Future DP 12-24

30 Pages Posted: 11 Jun 2012

See all articles by Dallas Burtraw

Dallas Burtraw

Resources for the Future

David Mclaughlin

Resources for the Future

Sarah Jo Fueyo Szambelan

Resources for the Future

Date Written: May 21, 2012

Abstract

California will implement a cap-and-trade program to limit emissions of carbon dioxide covering industry and electricity sector emissions in 2013, expanding to cover transportation and natural gas in 2015. Although cap-and-trade would increase annual electricity costs for the average customer by $30 to nearly $100, the allowance value created under the program can offset all of these costs and even reduce electricity bills. California’s Air Resources Board has directed electricity regulators to ensure this allowance value is used for the benefit of electricity ratepayers. This paper surveys four options: (1) reducing electricity bills; (2) sending equivalent revenue directly to households in proportion to costs; or (3) as equal payments per customer account; and (4) making investments to improve the electricity system and help reduce emissions. Under special consideration is this question: Who will receive the allowance value associated with the electricity sector? We explore the implications of three specific proposals.

Keywords: cap-and-trade, allocation, auction, public utility commission, investor-owned utility, energy efficiency, electricity rates

JEL Classification: Q54, Q58, L94

Suggested Citation

Burtraw, Dallas and Mclaughlin, David and Szambelan, Sarah Jo Fueyo, For the Benefit of California Electricity Ratepayers: Electricity Sector Options for the Use of Allowance Value Created Under California’s Cap-and-Trade Program (May 21, 2012). Resources for the Future DP 12-24, Available at SSRN: https://ssrn.com/abstract=2076639 or http://dx.doi.org/10.2139/ssrn.2076639

Dallas Burtraw (Contact Author)

Resources for the Future ( email )

1616 P Street, NW
Washington, DC 20036
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202-328-5087 (Phone)

David Mclaughlin

Resources for the Future ( email )

1616 P Street, NW
Washington, DC 20036
United States

Sarah Jo Fueyo Szambelan

Resources for the Future ( email )

1616 P Street, NW
Washington, DC 20036
United States

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