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News Analysis

Fortnightly Magazine - February 1 2000

California has a plan to track green electricity, but can it be trusted?

All electricity is the same, but the California Energy Commission wants to change that. It plans a system to authenticate the source of electricity to allow consumers to buy power from specific generators. Standard documents called "Certificates of Specific Generation" would certify financial transactions. Presumably, the plan would help document the authenticity of non-generic electricity products, such as green power.

Nevertheless, the plan raises a host of issues, and it has its detractors, judging from comments heard at a workshop conducted Nov. 2 on power source disclosure:

* Authentication. Demand proof of a chain of transactions?

* Trading. Make tags tradeable, without requiring a paper trail?

* Line Losses. Relevant in measuring and tagging specific resources?

* Generic Disclosure. Fair and impartial for retailers who don't sell a fuel-specific product? An impediment to out-of-state power imports?

* Double Counting. Can the CEC prevent this?

* Geographic Scope. Only in California, or the entire Western Interconnection?

* Consumer Awareness. Do they need to know all the details?

The CEC opened the tagging program to comply with Senate Bill 1305, the Electricity Source Disclosure Program, enacted in California in 1997 to ensure that retail electric suppliers furnish consumers with "accurate, reliable and simple-to-understand information" on sources of electric energy. The law required suppliers to disclose fuel source information in a standard format to be developed by the CEC.

On June 24, 1998, the CEC issued rules for all retail suppliers in California to display a power content label describing their products. The label also must disclose the makeup of generic electricity, to allow consumers to compare the retailer's power content, or resource mix, against what they might otherwise receive. This generic mix is called the "California Power Mix," or "net system power."

Now the CEC staff has written a computer program called GENREPORT, which allows a generator to report its output to the CEC while creating corresponding certificates with sequential serial numbers to aid verification. The certificates ensure that the kilowatt-hours were generated in the correct calendar year by a facility connected to the Western System Coordinating Council grid. If false declarations are made by a generator, then the holder of a certificate has an actionable civil claim.

The Paper Trail: A Chain of Custody?

In essence, the tagging plan tracks the money, not the power. Under any alternative, no retailer need prove an actual physical transmission link between the claimed generation and the use of energy by the retailer's customers. But that still leaves open the question of authentication - designing a system that creates an auditable contract trail and avoids double counting, yet is simple enough to encourage participation.

With tradeable certificates, no chain of transactions need be shown to certify the source of power. The certificate would operate much like "bearer" financial instruments: a certificate in the possession of the claiming retailer would be sufficient to prove the source of power. The bearer need not identify the transactions by which it acquired the certificate, or whether they involved