US: SCE launches request for California carbon offsets

27 January 2014 14:01 Source:ICIS

Southern California Edison (SCE), one of the three big investor-owned utilities, announced plans on Friday to seek carbon offsets to meet its compliance obligation under the cap-and-trade programme.

In its request for offers, SCE said it was seeking bids between 25,000 to 1m offset credits. Any potential bidders must also assume the invalidation risk because of California’s Air Resource Board (ARB) rules and get double verification of all offsets to reduce the invalidation period to three years.

SCE plans to complete its transactions by 25 March, according to its time line.

A trader said the utility was attracted by the anticipated approval of the use of coal mine methane, which is expected to be approved by the ARB this spring. Some market participants believe the increase supply of offsets from that protocol could drop prices to the $4-5 range (€2.96-3.70), making it an more attractive option compliance entities.

Traders said SCE’s move likely would not have a major impact on the current carbon market, because the amount of offsets acquired by the utility would not reduce overall demand on the market.

SCE is the last of the three investor-owned utilities to submit requests for orders to the public. Pacific Gas & Electric (PG&E) recently bought offset credits from ClimeCo, and San Diego Gas & Electric (SDGE) submitted its request for offers late last year.

Compliance entities, including investor-owned utilities, have been hesitant to use offsets due to the low prices of California carbon allowances. Allowances have been trading in the mid-$12.00/tonne (€8.77/tonne) range while offsets are selling between $8.00-10.00/tonne per offset.

By Dan X. McGraw