California First to Enact Cap-and-Trade Program
California became the first state to enact the nation's cap-and-trade program last Thursday after an eight-hour long meeting between industry representatives and the California Air Resources Board. Designed to provide financial incentives to companies in order to curb greenhouse-gas emissions, the system will place a price tag on carbon emissions and allow the state's industries to trade carbon credits.
Set to commence in 2013, the state's largest entities will be regulated first, followed by 85 percent of the smaller pollution emitters by 2015. Stemming from the 2006 global-warming law, signed by Governor Arnold Schwarzenegger, the cap-and-trade program aims to slash emissions to 1990 levels by 2020.
The first part of the plan will include a cap on emissions, allowing businesses to sell their excesses to companies exceeding their carbon allowances. Companies included in the plan will have to pay 10 percent of their initial credits, but able to purchase carbon offsets in order to comply with the eight percent of annual emission obligations.
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As a result of new regulations on carbon emissions, advocates of the plan expect to see a surge of investment in clean energy technology. Many industry leaders, however, argue that the impacts of higher energy costs will hurt jobs, overtax refineries and energy intensive industries and raise overall energy costs.
On the other hand, companies will practically be forced to innovate in order to stay competitive, swelling the renewable energy sector. According to research group Next 10's latest edition of the Many Shades of Green report, green job growth in California outpaces the overall economy by three times the rate of overall job growth. The new regulations are sure to add to the “core green economy” in California, which Next 10 refers to as the businesses that provide products and services that are alternatives to carbon-based energy, reduce pollution and conserve natural resources.
As the state sets a model for others to follow, the renewable energy sector is gearing up for business.
Ofwat allows retailers to raise prices from April
Retailers can recover a portion of excess bad debt by temporarily increasing prices from April 2022, according to an Ofwat statement.
The regulator confirmed its view that levels of bad debt costs across the business retail market are exceeding 2% of non-household revenue, thereby allowing "a temporary increase" in the maximum prices. Adjustments to price caps will apply for a minimum of two years to reduce the step changes in price that customers might experience.
Measures introduced since March 2020 to contain the spread of Covid-19 could lead to retailers facing higher levels of customer bad debt. Retailers’ abilities to respond to this are expected to be constrained by Ofwat strengthening protections for non-household customers during Covid-19 and the presence of price caps.
In April last year, Ofwat committed to provide additional regulatory protection if bad debt costs across the market exceeded 2% of non-household revenue.
Georgina Mills, Business Retail Market Director at Ofwat said: “These decisions aim to protect the interests of non-household customers in the short and longer term, including from the risk of systemic Retailer failure as the business retail market continues to feel the impacts of COVID-19. By implementing market-wide adjustments to price caps, we aim to minimise any additional costs for customers in the shorter term by promoting efficiency and supporting competition.”
There are also three areas where Ofwat has not reached definitive conclusions and is seeking further evidence and views from stakeholders:
- Pooling excess bad debt costs – Ofwat proposes that the recovery of excess bad debt costs is pooled across all non-household customers, via a uniform uplift to price caps.
- Keeping open the option of not pursuing a true up – For example if outturn bad debt costs are not materially higher than the 2% threshold.
- Undertaking the true up – If a 'true up' is required, Ofwat has set out how it expects this to work in practice.
Further consultation on the proposed adjustments to REC price caps can be expected by December.
"While it’s great that regulators are helping the industry deal with bad debt in the wake of the pandemic, raising prices only treats the symptoms. Instead, water companies should head upstream, using customer data to identify and rectify the causes of bad debt, stop it at source and help prevent it from occurring in the first place," she said.
"While recouping costs is a must, water companies shouldn’t just rely on the regulator. Data can help companies segment customers, identify and assist customers that are struggling financially, avoiding penalising the entire customer in tackling the cause of the issue."
United Utilities picks up pipeline award
A race-against-time plumbing job to connect four huge water pipes into the large Haweswater Aqueduct in Cumbria saw United Utilities awarded Utility Project of the Year by Pipeline Industries Guild.
The Hallbank project, near Kendal, was completed within a tight eight-day deadline, in a storm and during the second COVID lockdown last November – and with three hours to spare. Principal construction manager John Dawson said the project helped boost the resilience of water supplies across the North West.
“I think what made us stand out was the scale, the use of future technology and the fact that we were really just one team, working collaboratively for a common goal," he said.
Camus Energy secures $16m funding
Camus Energy, which provides advanced grid management technology, has secured $16 million in a Series A round, led by Park West Asset Management and joined by Congruent Ventures, Wave Capital and other investors, including an investor-owned utility. Camus will leverage the operating capital to expand its grid management software platform to meet growing demand from utilities across North America.
As local utilities look to save money and increase their use of clean energy by tapping into low-cost and low-carbon local resources, Camus' grid management platform provides connectivity between the utility's operations team, its grid-connected equipment and customer devices.