7 Del. Admin. Code § 1147-11.0

Current through Register Vol. 28, No. 1, July 1, 2024

Section 1147-11.0 - CO[2] Emissions Auction

11.1 Purpose

The purpose of this section is to provide for the administration and implementation by the Department of CO₂ Allowance Auctions and programs to promote the purposes of the CO₂ Budget Trading Program.

11.2 RESERVED

11.3 Multi-State Auctions

11.3.1 The Department shall participate in a multi-state CO₂ Allowance Auction or Auctions if the Department determines, in consultation the Delaware Public Service Commission that:

11.3.1.1 A multi-state auction capability and process is in place for the Participating States;

11.3.1.2 The multi-state auction can provide benefits that meet or exceed the objectives of the auction and purposes of the Account, as described in this Regulation, and;

11.3.1.3 The multi-state auction process would be consistent with the process described in this regulation.

11.3.2 Should the Department, in consultation with the Public Service Commission, find that these conditions have not been satisfied, the Department may conduct a Delaware State auction or auctions pursuant to this regulation or may take such other action as the Secretary deems appropriate.

11.3.3 Proceeds associated with the sale of all of State of Delaware's CO₂ Allowances, whether sold in a multi-state or a Delaware State CO₂ Allowance Auction shall be generated and appropriated as provided for in 7 Del C Chapter IIA Regional Greenhouse Gas Initiative and CO2 Emission Trading Program.

11.4 Implementation of CO₂ Allowance Auctions

11.4.1 The Department may design, implement and administer CO₂ Allowance Auctions in the event a regional auction is not held or does not meet the needs of the Department or this regulation. The Department shall make every effort to participate in a regional auction if at all possible.

11.4.2 Implementation and administrative support functions for any auction conducted pursuant to this Regulation and with respect to the administration of the Account may be delegated by the Department to a contractor deemed qualified by the Department to perform such functions, provided that such designee shall perform all such functions under the direction and oversight of the Department.

11.5 Commencement, Frequency and Quantity of CO₂ Allowance Auctions

11.5.1Commencement: The Department or its agent shall participate in or conduct CO₂ Allowance Auctions to sell such allowances pursuant to this regulation. The initial auction shall be conducted at such time and manner as determined by the Department in consultation with the Delaware Public Service Commission.

11.5.2Frequency: CO₂ Allowance Auctions will be held as often as practical and necessary to effectuate the objectives of the CO₂ Program.

11.5.3Calendar: The Department or its agent shall maintain a calendar of anticipated auction dates on its Website. The calendar shall indicate the auction format and the number of allowances and allocation years of allowances to be auctioned at each auction. The Department or its agent may periodically revise the calendar, provided that the information relevant to the next scheduled CO₂ Allowance Auction shall be fixed no later than 45 calendar days prior to such auction. The calendar shall include the dates of at least the next four (4) CO₂ Allowance Auctions and may also include the anticipated number of allowances to be auctioned at each Auction. The Department or its agent may periodically modify the anticipated dates of Auctions listed on such calendar.

11.5.4Quantity: Prior to the end of each Control Period, CO₂ Allowances for such Control Period will be made available for sale. CO₂ Allowances will be made available for sale by allocation year. Up to 50% of the allowances from an allocation year may be made available for sale in advance of the respective allocation year; such allowances may be made available for sale up to four (4) years in advance of such allocation year. Specific quantities of CO₂ Allowances that will be offered for sale will be included in each Notice of CO₂ Allowance Auction.

11.5.5Lot Sizes: The Department shall make CO₂ Allowances available for sale in lot sizes of 1,000 allowances, except where available supply requires a smaller lot size.

11.5.6Reserve Price: In administering Auctions, the Department may employ the use of a Reserve Price and the Department shall publish or announce such reserve price prior to each CO₂ Allowance Auction.

11.5.7Unsold Allowances: Unsold CO₂ Allowances may be made available for sale in subsequent auctions or after consultation with the Public Service Commission.

11.6 Action Format

The initial auction shall be conducted as a Single Round Sealed-Bid Uniform Price Auction. The Department, in consultation with the Delaware Public Service Commission, may employ a Single Round Sealed-Bid Uniform Price Auction or an Ascending Price, Multiple Round Auction in subsequent auctions or such other auction design as determined by the Department.

11.7 Participant Eligibility and Limitations

11.7.1 The owners or operators of CO₂ Budget Units located in the State of Delaware shall be eligible to participate in all auctions.

11.7.2 Categories of bidders that may be eligible to participate in auctions include but are not limited to:

11.7.2.1 Owners or operators of CO₂ Budget Units within a Participating State

11.7.2.2 Owners or operators of a generation source located outside of the Participating States,

11.7.2.3 Brokers,

11.7.2.4 Environmental groups,

11.7.2.5 Financial and investment institutions, and

11.7.2.6 Other market participants.

11.7.3 The Department, in consultation with the Delaware Public Service Commission, may preclude or limit the participation of any one or all of the categories of bidders. Notification of eligible categories of bidders will be included in each Notice of CO₂ Allowance Auction.

11.7.4 Any party wishing to participate in a CO₂ Allowance Auction will be required to open and maintain a compliance or general account pursuant to the provisions in Section 6.0.

11.7.5 Limitations: Participation in any auction may be limited to the level of financial security provided.

11.7.6 The Department may institute a purchasing and/or bidding limitation in each auction. In no instance shall this limitation be greater than 25% of the allowances available in an auction not including the CCR. Any such limitations shall be included in the Notice of CO2 Allowance Auction.

11.7.7 Any applicant or bidder that has been found to have violated any rule, regulation, or law associated with any commodity market or exchange may be denied eligibility or precluded from participation in CO₂ Allowance Auctions.

11.8 Participation Requirements

11.8.1Qualification: Any party wishing to participate in a CO₂ Allowance Auction or Auctions shall submit an application for qualification in the form and manner provided in the Notice of CO₂ Allowance Auction to the Department or its agent on or before the application deadline date specified in the Notice of CO₂ Allowance Auction. As a part of their application, applicants will be required to provide information and documentation relating to their ability and authority to execute bids and honor contractual obligations. Such documentation may include but may not be limited to:

11.8.1.1 Information and documentation regarding the corporate identity, ownership, affiliations, and capital structure of the applicant;

11.8.1.2 Declarations as to the beneficial ownership of any allowance that may be acquired through the auction;

11.8.1.3 The identification of any indictment or felony conviction of any member, director, principle, partner or officer of the applicant or any affiliate or related entity;

11.8.1.4 The identification of any previous or pending investigation with respect to any alleged violation of any rule, regulation, or law associated with any commodity market or exchange.

11.8.1.5 Evidence demonstrating that such applicant has opened a general or compliance account as provided for in the provisions in Section 6.0 and identification of relationships with any other account holder.

11.8.1.6 Applicants may be denied qualification based on the information provided or upon information as to such applicant obtained independent of the application process.

11.8.2 The Department or its agent will review each application for qualification and make determinations as to qualification to participate or otherwise submit bids in CO₂ Allowance Auctions. Failure to provide any information required by the Notice of CO₂ Allowance Auction may result in the application being declared incomplete or otherwise deficient. If an application for qualification is determined to be incomplete or otherwise deficient, the Department or its agent shall notify the Applicant and state the reason therefore. The Department may offer an opportunity for the applicant to remedy their application by the deadline pursuant to the Auction Notice. Qualified applicants will be notified by the Department or its agent pursuant to the Auction Notice.

11.8.3 Parties found qualified for participation under subsection 11.8.2 will be qualified for subsequent CO₂ Allowance Auctions, and will be qualified to participate in such auctions within the financial security limitations of subsection 11.8.8; provided that there has been no material change to the information provided in the application, that the party is within one of the categories of eligible bidders described in the Notice of CO₂ Allowance Auction for such auction, and such party meets all other requirements for participation. Any party found qualified shall notify the Department of any material change in the information provided in the application for qualification by the date on which qualification applications for the next auction are due. Such notification shall state the date the change occurred and describe the change in sufficient detail to enable the Department or its agent to determine if a change in the qualification status to participate in future auctions is warranted.

11.8.4 The Department may require parties previously found qualified to up-date and re-file applications for qualification on an annual basis or as requested by the Department.

11.8.5 The Department may suspend or revoke previously granted qualification of any party if such party fails to comply with this section and/or the provisions.

11.8.6 Bid Submittal Instructions. All bids shall be in a form prescribed by the Department, which shall be made available electronically on the CO₂ Allowance Auction Website, as appropriate. All bids submitted will be considered binding offers for the purchase of allowances under the rules of the auction, and this regulation.

11.8.7 If the Department determines that a bidder has provided false or misleading information, or has withheld pertinent information in its application, or has otherwise failed to comply with any material provision or has violated any part of the auctions rules, the bidder may be prohibited from participating in any future CO₂ Allowance Auctions.

11.8.8 To receive approval to participate in any specific auction, otherwise qualified bidders will be required to provide financial security in the form of a bond, cash, certified funds, or an irrevocable stand-by letter of credit, in a form acceptable to the Department. Financial security shall be provided in a form and manner as described in the Notice of CO₂ Allowance Auction.

11.8.8.1 Parties who have posted financial security may request return of their financial security at any time prior to or following any CO₂ Allowance Auction, and the Department shall return said financial security provided that the Department has no current or pending claim to such security as a result of a failure of the party to comply with these regulations or to pay the full amount of its accepted bid when due.

11.8.8.2 Financial security may be forfeited to and retained by the Department or its agent in the event the bidder's offer is accepted in a CO₂ Allowance Auction and the bidder fails to tender payment of the full amount when due.

11.9 Notice of Auctions

11.9.1 A Notice of CO₂ Allowance Auction ("Notice") shall be published on the CO₂ Allowance Auction Website no later than 45 days prior to the date upon which each auction may be conducted. Such Notices may be transmitted electronically to parties requesting such notification provided they have submitted an electronic-mail address to the Department or its agent.

11.9.2 Each Notice will provide a specific description of all auction participation requirements, and shall include but not be limited to information including the date, time and location of the CO₂ Allowance Auction, the categories of bidders who will be eligible to bid, the quantity of CO₂ Allowances to be auctioned, the auction format, amount and type of security required, any participation limitations, information regarding settling and clearing of allowance payments, instructions as to qualification applications, a standard allowance purchase and sale contract, other pertinent rules of the auction, and provide a point of contact for further information.

11.10 Auction Reporting and Transfer of CO₂ Allowances

An independent monitor such as a certified public accounting firm or similar entity shall observe the conduct and outcome of each auction and issue a report to the Department or its agent in accordance with professional auditing standards addressing whether the auction was conducted in accordance with the rules and procedures in the respective Notice of CO₂ Allowance Auction. Upon receipt and approval by the Department of the report and upon payment in full by successful bidders, the Department shall transfer or have transferred the corresponding CO₂ Allowances to each successful bidder's applicable compliance or general account.

11.11 Auction and Secondary Market Monitoring

11.11.1 In advising the Department or its agent, the professional independent auction monitor will monitor each CO₂ Allowance Auction and develop and apply data collection methods, metrics, and analytic techniques, and thresholds for identifying any bidding behavior or activity that may have a significant impact on the efficiency and performance of such auctions, including, but not limited to:

11.11.1.1 Collusion,

11.11.1.2 Market power, and/or

11.11.1.3 Price manipulation.

11.11.2 The independent auction monitor shall also monitor allowance market data and information known to the Department including allowance transactions and associated pricing reported in the CO₂ Allowance Tracking System, and other relevant data and information to ensure fair competition, efficient pricing, and protection against collusive or manipulative behavior in the CO₂ Allowance Auctions and the CO₂ Budget Trading Program.

11.12 Antideceptive Practices.

It is unlawful for a bidder to use or employ any manipulative, misleading, or deceptive practice in connection with its prequalification application or purchase of allowances from the Department, including but not limited to any practice that is in contravention of any applicable federal or state law or regulation.

11.13 Publication of Results

Within 10 days of the Transfer of CO₂ Allowances provided for under subsection 11.10, the Department or its agent shall publish on its website the auction clearing price and the total amount of Allowances sold in such Auction.

7 Del. Admin. Code § 1147-11.0

12 DE Reg. 674 (11/01/08)
17 DE Reg. 644 (12/1/2013)
22 DE Reg. 511 (12/1/2018) (Final)