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Tradable Renewable Energy Credits

The Commission authorized the use of tradable renewable energy credits (TRECs), or REC-only transactions, as an additional compliance tool for the RPS program. RPS-obligated retail sellers can buy, sell and trade RECs separately from their underlying energy and use those tradable RECs for compliance with the RPS.

Documents for TREC Compliance and Market Rules

Commission Decision (D.) 10-03-021, as modified by D.11-01-025, sets the rules for using TRECs for RPS compliance. In addition, D.11-01-026 applies the TREC usage limit rule to ESPs. Note: for summaries of the rules adopted in these decisions, see the Ordering Paragraphs and the Appendices. Other sources relevant to TRECs include the decision adopting a definition of a REC (D.08-08-028), the CEC’s RPS Eligibility Guidebook, and the WREGIS Operating Rules.

Frequently Asked Questions

What is a tradable renewable energy credit (TREC) transaction?

  1. A transaction in which an entity procures only a REC (and not the underlying energy) from another entity, or
  2. A transaction conveying both RECs and energy that does not meet the Commission's criteria for bundled RPS procurement transactions.  These REC-only transactions currently include all procurement from generators of RPS‑eligible energy for which the first point of interconnection with the WECC interconnected transmission system is not a California balancing authority, and the transaction does not make use of dynamic transfer arrangements in a California balancing authority area.

Are any TRECs “grandfathered”, so that they are classified as bundled RECs even though they meet the TREC classification criteria?

  • For all RPS-obligated retail sellers, all generation delivered before March 11, 2010 will be considered bundled.
  • For all RPS-obligated retail sellers, all generation delivered after March 11, 2010, regardless of when the associated contract was approved, will be classified as TREC or bundled pursuant to the classification scheme identified above.

Which RECs can be traded?

  • All TRECs must be associated with RPS-eligible energy generated on or after January 1, 2008.
  • All TRECs must be tracked in WREGIS to be used for RPS compliance.
  • The RECs from bundled contracts currently delivering RPS-eligible energy may be unbundled and traded separately from the associated energy, subject to the exceptions below.
  • The RECs from bundled contracts scheduled to deliver RPS-eligible energy in the future may be unbundled and traded on a forward basis separately from the associated energy, subject to the exceptions below.
  • Exceptions:
    1. RECs associated with RPS-eligible energy delivered under procurement contracts signed prior to 2005 with California RPS-obligated LSEs or publicly owned utilities cannot be traded unless the contract explicitly assigns ownership or disposition of the RECs.
    2.  RECs associated with RPS-eligible energy delivered to California utilities under procurement contracts pursuant to the Federal Public Utility Regulatory Policies Act of 1978 with qualifying facilities signed after January 1, 2005 cannot be traded.

What are the RECs banking rules?

There are two aspects to this answer:

  • Trading: In order to be used for RPS compliance, RECs may be retained in WREGIS active sub-accounts for no more than three calendar years (inclusive of the year in which the electricity associated with the RECs was generated) after the electricity associated with the RECs was generated.
  • Banking: Once RECs are retired in WREGIS for RPS compliance, they may be banked and used for RPS compliance in any future year.

Are there any RECs usage limits?

  • The large IOUs and all ESPs meet up to 25% of their annual RPS procurement target (APT) with TRECs. 
  • This limitation will terminate December 31, 2013.
  •  Caveat for IOUs: If an IOU TREC contract was approved before March 11, 2010, then the IOU can use deliveries from that contract even if its deliveries (either alone or combined with other approved contracts) exceed the usage cap. If that occurs, however, the IOU can not use any TRECs from contracts not yet approved for compliance in that year, and must bank the TRECs to a future year.
  • Caveat for ESPs: If an ESP TREC contract was signed before January 13, 2011, then the ESP can use deliveries from that contract even if its deliveries (either alone or combined with other contracts signed before January 13, 2011) exceed the usage cap. If that occurs, however, the ESP can not use any more TRECs for compliance in that year, and must bank the TRECs to a future year.

How much will retail sellers pay for TRECs?

  • TREC contract prices are market based and negotiated between the buyer and seller. The CPUC’s confidentiality rules generally do not allow us to make contract prices public (see D.06-06-066).
  • However, TRECs for which an IOU pays more than $50/TREC may not be used for RPS compliance.  This price cap will terminate December 31, 2013.
  • The temporary $50/TREC price cap does not make a TREC priced at or below $50 reasonable.  A utility will still have to provide sufficient information in its advice letter filing to demonstrate that the TREC contract is reasonable.

What are the delivery rules for TREC transactions?

  • The CEC decides whether a TREC contract will satisfy RPS delivery rules. 

Can RECs from DG facilities participate in the RPS?

  • In D.07-01-018, the CPUC determined that system owners of facilities that serve onsite load (e.g. facilities receiving incentives from the California Solar Initiative or Self-Generation Incentive Program) own their RECs. That means that a facility owner can either make green claims (e.g. “our company is powered by solar”) if it retains the RECs, or the owner can seller the RECs so another entity can make green claims. The CPUC does not regulate who the facility owner sells its RECs to, but it may sell to an IOU under the CPUC’s TREC rules.
  •  The CEC has the authority to determine whether RECs from DG facilities are eligible for the RPS program, and if so, how they will be tracked and verified. See the CEC’s RPS Eligibility Guidebook for more information.

How are RECs tracked?

In the Western region of the U.S., RECs are tracked using the Western Renewable Energy Generation Information System (WREGIS). WREGIS was launched in mid-2007. For more information about WREGIS, please see the WREGIS website.

Ongoing TRECs Rules Implementation

Pursuant to D.10-03-021, Energy Division staff must make a recommendation about whether transactions using firm transmission should be considered bundled or REC-only. Staff initiated this inquiry with a workshop on April 23, 2010. Stay tuned for more information.

Definition of a REC Decision

On August 21, 2008, the CPUC adopted a Decision on the definition and attributes of a REC. This decision says that a REC represents one megawatt-hour of renewable energy that was generated and delivered by an eligible renewable energy resource. It also clarifies that a REC includes all renewable and environmental attributes associated with the production of electricity from the eligible renewable energy resource, including any avoided emission of greenhouse gas pollutants.

REC Contact Information

Sean Simon

sean.simon@cpuc.ca.gov

415-703-3791




Last Modified: 1/24/2012



 
 
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