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HomeMy WebLinkAbout9 Joinder Agreement for CFR Program TRUCKEE � � AGENDA ITEM # 9 Public District MEETING DATE: December 7, 2022 TO: Board of Directors FROM: Steven Keates, Conservation & Customer Service Senior Analyst Michael R. Salmon, Chief Financial Officer SUBJECT: Execute Joinder Agreement for Clean Fuel Rewards Program Ile APPROVED BY Brian C. Wright, General Manager RECOMMENDATION: a) Authorize the General Manager to execute the Joinder agreement to the statewide Clean Fuel Rewards Program as required by CARB due to participation in the LCFS program. b) Authorize the General Manager to deposit $6,086 to the CFR program by January 31, 2023 and 2% of District base LCFS credit revenues annually for the term of the Joinder agreement. BACKGROUND: In March of 2017 the District established an account with the California Air Resources Board's (CARB) Low Carbon Fuel Standard Reporting Tool Credit Bank & Transfer System (LRT-CBTS). The original staff report summarizing this process is provided as Attachment A. In 2022 the Board approved monetization of the District's accumulated credits as well as ongoing credits on a quarterly basis (the staff report covering LCFS monetization can be found in Attachment B). This staff report included a discussion on Page 1 of 4 forecasted valuation of District LCFS revenues (which staff estimate will amount to approximately $45,000 per year) as well as a comprehensive treatment of CARB's requirements for how the revenues are to be spent. Spending Requirements In its LCFS guidance document 20-03 (included as Attachment C) CARB provides guidance on its requirements for spending proceeds from the sale of credits. The District is considered a Load Serving Entity (LSE) within the LCFS framework and its associated spending requirements are defined starting on page 4 of the guidance document. These spending requirements are explained in detail in the February 2, 2022 staff report (Attachment B). What is pertinent to this staff report is that the spending requirements include a mandated annual contribution to the statewide Clean Fuel Rewards (CFR) program. Section 95483(c)(1)(A) of the Low Carbon Fuel Standard Regulation establishes that all utilities participating in the LCFS program are required to contribute a portion of their base LCFS credits (which are initially given to the utility by CARB) to the CFR program. Being a small publically owned utility, the District's contribution requirements are 2% of its annual base credits starting at the end of 2023. Clean Fuel Rewards Program The CFR is a statewide program which provides a point of sale discount (rebate) for new electric car purchases (e.g. at the dealership/showroom).' The program launched in November 2020 and is administered pursuant to a governance agreement which establishes the CFR program's design and implementation — including responsibilities for program administrators and Large EDUs. The District is considered a Small Publically Owned Utility by the governance agreement which limits the District's responsibilities to the aforementioned LCFS credit contributions. The District's specific requirements are outlined in Appendix A of the governance document to include: 1) A one-time deposit of $6,086 by January 31 st 2023. 2) 2% of base LCFS credits issued to TDPUD from CARB (calculated annually in arrears and deposited by March 31 st of the following calendar year). It should be noted that the District can withdrawal from the contract at any time with or without cause — though in so doing would also need to withdrawal from the LCFS program. 1 More info can be found at https://cleanfuelreward.com/caIifornia-ev-rebate-program. Page 2 of 4 Joinder Agreement As previously mentioned, due to its participation in the LCFS program, the District is required to contribute a portion of its revenue revived from LCFS credit sales to the CFR program. To facilitate this contribution, the District is required to execute a Joinder agreement which makes the District party to the aforementioned CFR governing agreement. This agreement is effective until such time that either CARB terminates the CFR program or the District elects to withdrawal from the CFR program (and by extension the LCFS program). PURPOSE: The purpose of this staff report is to provide the Board with sufficient information regarding the District's requirements due to its participation in the LCFS program as to make a decision on whether or not to sign the CFR Joinder agreement. FISCAL IMPACT: Expenditures resultant to the District's participation in the CFR program through this agreement are 2% of its revenues generated through sale of its base LCFS credits which are received from CARB quarterly. While the specific valuation of these credits are subject to significant uncertainty due to volatility in the LCFS credit market and electric vehicle sales, staff estimate approximately $45,000 annually in revenues. CFR expenditures are therefore estimated to be $900 annually with a one-time "Initial Funding" payment of $6,086. The above expenditures result from the sale of LCFS credits which, for the 2022-2023 budget cycle are unbudgeted revenues deposited in a restricted account. When these expenditures are made, funds can be transferred from the LCFS restricted account to general fund operating account. For 2022 and 2023, the recommended transfers are expected be $6,986. Staff have already developed programs which will meet CARB requirements (including contributions to the CFR) and worked the associated expenses into the budget for the 2022-2023 budget cycle. Indirectly, the District will see incremental increases in revenue due to the load growth associated with transportation electrification advanced by the LCFS revenues. ATTACHMENTS: Several attachments are provided in support of this staff report: Attachment A 2017 Staff report to the Board requesting registration into the LCFS program Attachment B February 2022 Staff Report requesting monetization of LCFS credits Page 3 of 4 Attachment C CARB guidance document on LCFS spending requirements Attachment D The CFR Program Governance Agreement Attachment E The CFR Program Joinder Agreement Page 4 of 4