CARB Increasing Actions Against Cap-and-Trade Program Bidding Violations

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All companies subject to the cap-and-trade program should note that the California Air Resources Board (CARB) is aggressively pursuing enforcement against violations of auction protocols and rules.

As an example, CARB recently announced the resolution of four enforcement cases arising from cap-and-trade program allowance auctions. The enforcement action was taken after CARB detected what it determined to be negligent errors in the bidding process and improper disclosures of bidding information by auction participants.

The rules provide that no information about auction participation or bidding can be shared. Note: This includes private contracts with third parties. 

Examples of the violations and penalties imposed:

Southern California Edison (SCE) will pay $75,000 for making public comments about participating in the first allowance auction in November 2012. The cap-and-trade regulation forbids any disclosure to third parties regarding qualification for or participation in an auction, and disclosure of any bidding information. Although none of the conduct appears intended to affect the market or benefit SCE, CARB enforced rules to protect the security of cap-and-trade program auctions.

Luminus Energy Partners QP, LP, will pay a $40,000 penalty for sharing bidding information with an advisor who had not been disclosed to CARB. Auction advisers who have been disclosed to CARB are the only third parties with whom auction participants may share information regarding auction participation.

The City of Riverside will pay $25,000 for submitting bids into an auction that exceeded the financial bid guarantee required by auction regulations. Submitting bids that are not fully backed by a bid guarantee is a violation of California’s cap-and-trade regulation.

Please contact John Larrea at CLFP (john@clfp.com) with questions or comments.

Article written by John Larrea, Government Affairs Director, California League of Food Processors

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