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Cap-and-trade could cost TID $5 million a year

POSTED November 23, 2010 8:59 p.m.
 A state plan to reduce greenhouse gas emissions could cost the Turlock Irrigation District $5 million each year, according to a report delivered to the TID Board of Directors on Tuesday.

California’s 2006 Assembly Bill 32 requires the California Air Resources Board to develop regulations to reduce the state’s greenhouse gas emissions by 25 percent by 2020. The bill’s scoping plan calls for a cap-and-trade system to limit those emissions.

“It’s an issue that’s still in flux, but it’s reaching a head pretty soon,” said Jim Farrar, assistant general manager of Resource Management, Planning and Rates.

Cap-and-trade works by placing an overall limit on emissions from certain sectors, like energy, transportation, and manufacturing. Businesses would be permitted for a certain amount of emissions – below current numbers, federal EPA mandates, and even Kyoto Protocol figures – and would be allowed to sell their allowances to other businesses.

Businesses would be required to purchase allowances for any emissions they create, placing an effective overall cap on emissions, charging those who produce more than their share, and rewarding those who produce less.

“Just about any large producer, it’s going to have an effect on,” Farrar said.

CARB released an initial, 3,000-page draft of the cap-and-trade program on Oct. 28, which will be considered for adoption at CARB’s Dec. 16 meeting. Per AB32, CARB must adopt cap-and-trade by Jan. 1, 2011, and the program must begin in 2012.

But several finer points of the plan – including how allowances will be distributed – are still in the air. Some utilities, like TID, are arguing for allowances to be divvied up based on sales, while others are fighting for the allowances to be based on existing emissions levels.

Based on the draft document, TID would be allocated around 800,000 tons of allowances each year. Factoring in emissions from TID’s share of energy generated at the Boardman Coal Plant, operated by Portland General Electric in Boardman, Ore., the district would be about 250,000 tons shy of the needed allowances.

Purchasing the allowances could cost the district $5 million annually.

The district’s allowance would be larger than some utilities, thanks in part to TID’s efforts to pursue renewable energy through the 136.6 megawatt Tuolumne Wind Project in Klickitat County, Wash. and the 1.2 megawatt fuel cell operated in partnership with the City of Turlock. The draft document also allows for utilities to offset 8 percent of their emissions thorough projects such as planting forests.

TID will pursue hedging some of the requirements by purchasing offsets, Farrar said, but regardless of what the district does cap-and-trade will be costly.

“No matter what happens, I think it will be expensive for us,” Farrar said.

 

The TID Board of Directors on Tuesday also:

·         Reviewed the proposed 2011 budget for TID’s Water Operations, Construction, and Maintenance Division. The budget calls for $11.3 million in operations and maintenance expenditures, down from the $11.5 million budgeted for 2010 and the estimated $12 million that will actually be spent.
The proposal includes an increase in fleet maintenance and weed, moss, rodent control costs, truing up the budget to reflect actual costs. The budget also recommends the effective reduction of two unfilled positions, both water distribution operators.
The irrigation capital expenditure plan calls for $2 million in capital projects, including $1.2 million for gunite rehabilitation of cracked canals. At that rate, it would take the district 50 years to repair the entire canal system, but irrigation revenues do not support additional work on the infrastructure.
TID General Manager Casey Hashimoto said the district may hold a workshop on irrigation rates to discuss the need for capital improvements with customers.
The TID Board of Directors will consider adopting the final 2011 budget on Dec. 7.

·         Reviewed the proposed rates TID would charge for miscellaneous services in 2011, which would remain largely unchanged. The hourly labor rate charged to individuals who damage district property would increase by 3.75 percent, per union contracts. Equipment rates would be unchanged, but a committee will be formed in 2011 to review those rates and develop a new policy, as the rates currently do not cover TID costs.
The TID Board of Directors will consider adopting the rate changes on Dec. 7.

·         Held a public hearing to discuss proposed rate changes for consumers who generate their own energy, and for lighting customers. There was no public comment on the change, which was detailed in the Turlock Journal on Nov. 17 in the article, “Energy efficiency mandates, fewer funds, increased assistance demand put TID directors between a rock and a hard place.”
Those rate changes, which do not include an increase for normal residential or business customers, will go before the TID Board of Directors for final approval at their Dec. 7 meeting.

·         Approved the 2011 budget for the Walnut Energy Center Authority and the Tuolumne Wind Project Authority. Both budgets are largely unchanged from a year ago, save for a projected decline in wholesale wind sales and an increase in potential WEC energy sales.

To contact Alex Cantatore, e-mail acantatore@turlockjournal.com or call 634-9141 ext. 2005.

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