The request to the California Independent Systems Operator may signal pending enforcement of the Mandatory Reporting Rule.

The California Air Resources Board (ARB) has served the California Independent Systems Operator (CAISO) a subpoena requesting records of interstate electricity transactions. The subpoena comes in the midst of confusion among market participants as to the target and scope of certain ARB greenhouse gas emissions reporting requirements, and in the wake of ARB’s increased enforcement of these requirements.

The Subpoena

ARB’s subpoena requires CAISO to provide documentation of all import, export, and power wheeling transactions “relative to the physical border of California” during calendar years 2008-2012. The request requires CAISO to break down the information to show aggregate market activity as well as the activity of individual power marketing entities. ARB’s subpoena further requires annual production of this information for each year until 2022.

ARB’s Mandatory Reporting Rule

ARB requires reporting of greenhouse gas emissions pursuant to its Regulation for the Mandatory Reporting of Greenhouse Gas Emissions (the Mandatory Reporting Rule or MRR). Obligated entities must comply with annual reporting and verification requirements. To date, the MRR has required the annual submission and verification of market activity for calendar years 2008-2012 – the same years covered by the subpoena. Failure to timely and accurately submit and verify annual reports may result in fines and penalties that may accrue for each day of noncompliance.

The MRR applies to certain “Electricity Importers” and “Electricity Exporters,” but there has been significant market uncertainty regarding the definition of “Electricity Importer” since the MRR went into effect in 2009. In particular, many market participants have expressed confusion as to whether and to what extent intrastate or even extra-territorial electricity transactions may trigger MRR reporting requirements. In response to concern from the regulated community, ARB has redefined and clarified the meaning of “Electricity Importer,” “Electricity Exporter” and related concepts on several occasions, but some market participants continue to question whether they fall within the MRR’s purview.

ARB’s Recent Enforcement Actions

The subpoena now comes on the heels of several recent ARB enforcement actions involving the MRR. In mid-July, ARB announced that it had reached settlements with nine companies for alleged noncompliance with the MRR. ARB alleged that the entities failed to supply complete reporting and/or verification information by applicable deadlines. Pursuant to the terms of each settlement, ARB assessed fines ranging from $10,000 to $120,000, and ARB required the settling parties to develop plans to satisfy its future reporting and verification requirements.

Implications and Next Steps

Following its recent MRR-related enforcement activity, the CAISO subpoena indicates that ARB is interested in the power marketing sector’s compliance with the MRR. Specifically, in light of the historical contention around the coverage of “Electricity Importers,” it appears that ARB may be investigating whether out-of-state market participants have been complying with the MRR.

CAISO has notified market participants that it will provide responsive information to ARB unless it receives a court order or other such document prohibiting CAISO’s disclosure. The subpoena requires a response from CAISO by August 31, 2013, and CAISO has indicated that it will comply with the subpoena unless it receives a court order by 4:00 p.m. (Pacific Time) on August 30, 2013.