By Rory Carroll
SAN FRANCISCO, March 31 (Reuters) - California residents and small businesses will receive a first-of-its-kind climate credit on their utility bills starting on Tuesday, as the state's ambitious greenhouse gas reduction program begins to affect the pocketbooks of average citizens.
While millions of Californians will see a credit averaging $35 on their April electricity bills due to the state's cap and trade program, oil companies in the state are warning that the program will raise gasoline prices next year.
Under the program, large California utilities are given carbon permits for free by the state but must sell them and use the revenue to protect ratepayers from higher electricity bills.
The state's 15-month-old cap and trade program is a key tool in meeting its lofty climate change goals.
The amount a household receives will depend upon the extent to which its utility company's electricity generation is deemed clean. The lowest payment of $29.82 will go out to customers of Pacific Gas & Electric, which produces 60 percent of its electricity from carbon-emissions free sources like hydroelectric, solar and nuclear.
Small businesses will receive the credit every month, which will be based on the amount of electricity they use.
State officials on Monday urged consumers to use the money to invest in energy efficient home upgrades, including more efficient lights and appliances.
"The Climate Credit is made to households and small businesses to promote a cleaner, more energy efficient California, giving millions of Californians a stake in the fight for clean air and a healthy environment," said California Public Utilities Commission president Michael Peevey.
Residents could also save the money and use it toward higher gasoline prices, which are expected to rise when the cap-and-trade program expands to cover distributors of transportation fuels next year.
At current carbon prices, California drivers would see a 12 cent per gallon increase at the pump in 2015.
Although oil prices hinge on macroeconomic factors like global supply and demand, oil company executives are already poised to put the blame for higher gas prices on the cap and trade program.
Michael Wirth, who oversees Chevron's refining and chemical businesses, said earlier this month the cap and trade program could make it too expensive for the world's No. 2 oil company to continue to operate refineries in California. Chevron runs the state's two largest oil refineries. (Reporting by Rory Carroll)