SUSANVILLE — Facing mandatory state compliance deadlines, the Susanville City Council voted 3-0 on Oct. 7 to pass Resolution No. 26-6577, authorizing the purchase of Greenhouse Gas Allowances under the California Air Resources Board’s (CARB) Cap-and-Invest Program.
Councilmembers Patrick Parrish and Curtis Bortle were absent from the meeting.
The authorization follows an oversight by city administration and Dan Bergmann, the city’s long-term natural gas consultant. Neither anticipated that delivering natural gas through the city’s distribution line to the Plumas-Sierra Cogeneration Facility would push the municipal utility into a higher regulatory tier, triggering expensive state allowance requirements that threaten a significant financial hit to the city’s gas operations and higher rates for local customers.
Unanticipated Regulatory Trigger
As recently as last August, Bergmann informed the council that Plumas-Sierra was expected to report its own fuel usage directly to CARB. However, state regulations dictate that the City of Susanville—as the system operator—bears ultimate responsibility for compliance.
CARB first notified the city of the compliance issue in February, prompting Bergmann to remind the council in August that “compliance is not optional.” He noted one silver lining: the state is requiring allowances for only the past three years rather than the full operational history of the utility.
According to Bergmann’s analysis, the city’s natural gas deliveries over the past three years breached the state’s 471,000 MMBtu (million British thermal units) threshold. Exceeding this limit reclassified Susanville’s utility as a “large emitter,” exposing it to state mandates.
Multimillion-Dollar Impact & Rate Surcharges
To meet CARB requirements, the city must acquire state-mandated allowances estimated to cost nearly $3.5 million. To cover these expenses, local natural gas customers are slated to face a 9 percent rate surcharge.
The city’s immediate execution plan involves:
- Initial Purchase: Purchasing 65,000 allowances, with at least 8,600 designated as year 2025 vintage or earlier.
- Broker & Auction Purchases: Acquiring 2026 vintage allowances through a broker at an estimated cost between $30 and $33 per allowance—totaling $2 million to $2.1 million for the initial buy. Under Resolution No. 26-6577, staff will proceed before November 2027 to purchase remaining 2026 and partial 2027 allowances at market-determined prices through CARB auctions.
- Reserve Funding: Utilizing the city’s $7.8 million natural gas fund balance to absorb upfront costs for general distribution customers while working to retroactively collect funds owed for the past three years from major users.
Seeking Cost Recovery
Following the council’s authorization, city staff worked alongside Joe Stierer of Yorke Engineering to refine the purchasing strategy.
Under the terms of Resolution No. 26-6577, once the allowance purchases are complete, staff will issue formal billing statements to High Desert State Prison and Plumas-Sierra Cogeneration to recoup each entity’s proportional share of the compliance costs.
