Understanding the Rack Price
Impact of California’s Carbon Cap
and How the Changes Will Affect
Your OPIS Report
California Cap-and-Trade Background
• Cap-and-trade impacts rack fuels suppliers on
January 1, 2015
• Each gallon of fuel sold across the rack will
acquire a carbon emissions obligation
• Compliance Instruments - California Carbon
Allowances
Webinar Contact Information
• If you have problems accessing the web page
for the session presentation, please call our
conference department at 888-301-2645 or
email registrar@opisnet.com
• OPIS will provide a recording of this webinar to
all attendees
OPIS Methodology
California Carbon Allowance (CCA)
Assessment
California Cap-at-the-Rack (CAR)
Assessment
Overview
On Aug. 1, 2014, OPIS began publishing two new
assessments that, together, provide price
discovery for the cost-per-gallon impact of the
program at the rack level
• OPIS California Carbon Allowance Assessment
• OPIS California Cap-at-the-Rack Assessment
California Carbon Allowances (CCAs)
• Cap-and-trade compliance instruments obtained
through public CARB auctions or by trading in
the marketplace
• Current year and previous year vintage CCAs
can be used to comply with your carbon
obligation
• 1 CCA = 1 mt of supplier’s carbon obligation
Cap-and-Trade Compliance
• CO2 Equivalent of more than 25,000mt per
year
– 73,000 bbl (3.06 mil gal) of CARB RFG
– 58,000 bbl (2.44 mil gal) of CARB Diesel
• Second Phase Compliance Dates
– November 2016: 30% of the 2015 carbon obligation
– November 2017: 30% of the 2016 carbon obligation
– November 2018: 70% obligations from 2015 and 2016,
as well as 100% of the 2017 carbon obligation
OPIS CCA Assessment
• OPIS full-day pricing methodology applied to
California Carbon Allowances traded in market
• Products - Current Year and Previous Year
Vintages
• Timing - Prompt and Forward Price Discovery
• Min. Volume - 10,000
• Pricing - $/Metric Ton
OPIS Cap-at-the-Rack Assessment (CAR)
• Daily CPG price impact of cap-trade program on
products delivered at the rack
– CARB RFG Gasoline
– CARB Diesel ULSD No. 2
– Biodiesels
• Based off of OPIS CCA Current Year Vintage,
prompt timing assessment and the calculated
carbon dioxide equivalents (Co2e) for each fuel
gallon
CO2e/gal Values
OPIS CAR Calculation
• CPG = OPIS prompt timing, current year, CCA
assessment mean $/mt x CO2e/gal of obligated fuel
• Biomass derived fuels have a compliance obligation
under the California cap-and-trade program
• CAR gasoline prices (CARB RFG) = 90% gasoline
grade’s CO2e/gal x the prompt CCA assessment + 10%
ethanol CO2e/gal x the prompt CCA assessment
• CARB diesel = CARB diesel CO2e/gal x the prompt
CCA assessment
OPIS CAR Assessment Examples
Prompt OPIS California Carbon Allowance Price Assessment ($/mt)
Vintage
Timing
Low
High
Mean
Current Yr.
PMT Sep’14
11.85
11.87
11.86
OPIS CAR Calculation 1 gal Summer CARB RFG:
CAR = (((0.00909 x 0.9) x 11.86) + ((0.00022 x 0.1) x 11.86)) x 100
CAR = 9.73cts/gal
OPIS CAR Calculation 1 gal CARB diesel ULSD No. 2:
CAR = (0.01024 x 11.86) x 100
CAR = 12.14cts/gal
Biodiesel CAR Assessment
Prompt OPIS California Carbon Allowance Price Assessment ($/mt)
Vintage
Timing
Low
High
Mean
Current Yr.
PMT Sep’14
11.85
11.87
11.86
OPIS CAR Calculation 1 gal B5 Biodiesel:
CAR = (((0.01024 x 0.95) x 11.86) + ((0.00001 x 0.05) x 11.86)) x 100
CAR = 11.54cts/gal
OPIS Rack Reports will provide a CAR price for each
different biodiesel blend percentage.
CAR Winter and Summer Gasoline Prices
Air Basin
Summer
Winter
Mojave Desert
March 1
November 1
North Coast
May 1
October 1
Sacramento Valley
April 1
November 1
Salton Sea
March 1
November 1
San Diego
March 1
November 1
San Francisco Bay
April 1
November 1
San Joaquin Valley
April 1
November 1
South Central Coast May 1
November 1
South Coast
November 1
March 1
OPIS West Coast Spot Market Reports
OPIS California Carbon Markets
• Publishing CCA and CAR prices in the West Coast
Spot Market Reports since August 1, 2014
• OPIS will launch CAR prices in California Rack
Reports during Q4 2014
• OPIS USWC Methodology:
http://www.opisnet.com/about/methodology.aspx
How will the OPIS CAR be used
in rack prices?
OPIS has been surveying California
Suppliers
In the Posted Price
• Some suppliers have indicated they
will pass along the assessed CAR
value as a cost factored into their
posted price
Line Item on Invoice
• Other suppliers have indicated they will show
the CAR value as a line item fee on their
invoices
• Several suppliers who originally indicated they
will show CAR value as line item are
reconsidering and may include the CAR value
in the CPG posted rack price
ALL CALIFORNIA
RACKS ARE
IMPACTED
OPIS CCA/CAR Benchmark
• The CA Fuels Marketplace may or may not
reference OPIS Benchmark to show
transparency
• OPIS has learned the OPIS CAR assessment
will be an acknowledged benchmark
• Other suppliers will use the actual cost for the
CCAs they buy/trade and use their own
calculations to pass along the CPG cost of
CAR
When does OPIS make the CAR available?
• The CAR is updated with the first 6 to 6 file that
is sent out after the West Coast Spots are
published
• CAR will be carried through on reports until next
Spot Publish Day
Normalization – What is it?
•
•
Ethanol tax credit in 2005
Normalization lasted just 8 month before all suppliers began passing
along the credit in the same manner
• If all suppliers pass the fee along the same way, OPIS will not
normalize in any way
– Many customers see this as the optimal alternative
• OPIS reports will DEFAULT to Non-Normalized
• All OPIS standard published reports, normalized and nonnormalized will include our California Cap-at-the-Rack Assessment
(CAR)
Non-Normalized/Non-Adjusted
• OPIS reports would not change from their
current layout and would reflect the prices
posted by suppliers even when some suppliers
include the CAR value in the posted price, while
others pass the CAR on as a line item on
invoices
Report Example: Non-Normalized
CAR In Price Example
•
•
•
Reports will adjust the prices of suppliers who pass the value of the
CAR on as a line item on invoices so that the price in the OPIS
report reflects the amount the supplier is posting, PLUS THE OPIS
CAR Assessment
If suppliers make their own CAR assessment available when they
send out their rack postings, we will use their individual CAR values
instead of the OPIS CAR Assessment
Benchmark Averages will reflect the OPIS normalization and supply
contracts may need to be adjusted to index this method
Report Example: CAR In Price
Normalization
OPIS Contract Averages and other OPIS
Reports
• We need to stress that not all players will choose to use
the same type of normalization
• Consider the contractual challenges
• Other impacted reports
• OPIS Newsletter
• EBIS
Government Contracts
Something to consider - will government contracts
accept the CAR value?
•
•
•
•
•
State of California
DLA
Transit Districts
City and County Municipalities, School Districts
Others
Your Fuel Contracts Managing the line item Cap and Trade fee
•
•
•
•
All fuel supply contracts that reference an OPIS index
benchmark need to be reviewed
Most government contracts spell out what taxes and
fees they will pay; any other fees usually must be
included in your mark-up and most agencies will not
allow you to add any other fees to the fuel invoice
You may need to request a contract amendment to
change the OPIS index benchmark to the report that
has the CAR price added to the suppliers rack posting
Even if you are allowed to charge the fee as a line item,
you may still need to amend your contract
State Fuel Contract Wording
(State Of California Department Of General Services Procurement
Division Contract User Instructions - Page 11, May 2014)
User Instructions:
• These taxes shall be listed separately on invoices and
shall not be a component of the differential price. Any
and all Charges, Levies and or Fees not listed shall be
listed a component of the differential price.
• All Differential prices quoted shall be: Exempt from:
Federal Excise Tax. State of California will furnish
applicable exemption certificate upon request from
supplier.
• Exclusive of: State Sales Tax, Local Sales Tax, California
Motor Vehicle Fuel Tax, Leaking Underground Storage
Tank Tax, Oil Spill Liability Trust Fund Tax.
Wrapping It Up
• OPIS Subscribers should be prepared for the
changes
• Will contract partners be willing to use
normalized benchmarks?
• How to request normalization for your OPIS
reports
OPIS Contact Information
• Dolores Santos
OPIS West Coast Fuel Supply Expert
T: 240-848-8640
DSantos@opisnet.com
• Lisa Street
OPIS Senior Editor, U.S. West Coast
T: 747-333-8792
LStreet@opisnet.com
• Tanya Feyereisen
OPIS Director, Rack Product Development
T: 301-287-2531
TFeyereisen@opisnet.com