CPUC proposes modernizing net metering in California

California electric companies are supportive of a proposal issued this week by the California Public Utilities Commission (CPUC) to revise the state’s current net energy metering (NEM) rules and create a net billing tariff.

The proposed decision, which is being watched by other states weighing similar policies that impact rooftop solar, will be considered at the CPUC’s voting meeting on Jan. 27, 2022.

“The Proposed Decision adopts more accurate price signals that will promote greater adoption of customer-sited storage, which will help California decrease its dependency on fossil fuels during the early evening hours, when the sun is down and energy demand is high,” the CPUC said in a statement. “The proposal also includes a bill credit for Net Billing customers to ensure customers can pay for a solar plus storage energy system in 10 years or less through electric bill savings. The bill credit is designed to phase out while helping the solar and storage market continue to grow.”

Mohit Chhabra, senior scientist of Climate and Clean Energy Programs at the Natural Resources Defense Council (NRDC), said that solar is now widely adopted across the state, so the new policy will help encourage use of solar at different times of day, which will also encourage growth in energy storage.

“The net metering policy was initially designed to pay customers at close to retail rate for the electricity their solar panels produced,” Chhabra said. “This initially helped both customers and utilities because customers saved money based on what their solar panel produced, and utilities didn’t have to buy as much wholesale electricity in summer afternoons when electric demand was the highest. This was also when solar produced the most. Now, we have an abundance of mid-day solar and our clean energy needs are increasingly evening time needs. We need policy signals to encourage solar and storage and encourage clean energy production and export after sundown. This is what the new policy endeavors to do.”

The new proposal came about from Assembly Bill 327 in 2013 which required the CPUC to reform the NEM system, including rate reform and distribution planning activities. The CPUC made revisions to the NEM program in 2016, known as NEM 2.0, and the new proposal, NEM 3.0, is a continuation of those changes. The proposal says that net metering must be modernized to incentivize customers to install rooftop solar. The main goal of the proposal is to improve grid reliability and accelerate climate goals.

Many original net metering rules were created to help incentivize the installation of rooftop solar, but without sufficient fees to utilities for their use of the grid, a cost that often gets passed on to non-solar customers. A number of states have been considering changes to their net metering rules to help fix that.

NEM 3.0 would adopt a monthly Grid Participation Charge of $8 per kilowatt of installed solar that would be added to residential rooftop solar customers’ bills to capture their fair share of costs to maintain the grid and fund public purpose programs, the CPUC said.

The Solar Energy Industries Association (SEIA) said the CPUC proposal would create the highest solar tax in the country and tarnish the state’s clean energy legacy by making solar and storage more expensive and less accessible to all Californians.

Chhabra, however, noted that the new proposal would significantly mitigate the undue rate impact that current NEM policy has on Californians that do not have solar. “This undue rate impact hinders non-solar customers’ ability to meet their own energy needs affordably and makes it harder for them to adopt electric cars (because expensive electricity means higher operating costs),” he said.

California electric companies are supportive of the bill, as well.

“The Commission’s proposed decision is a meaningful step toward modernizing California’s rooftop solar program. Southern California Edison appreciates the Commission’s sense of urgency because time is of the essence,” the company said in a statement. “Despite continuing to offer subsidies to existing and future customers, the proposed decision will reduce the financial burden on non-solar customers who have subsidized net energy metering by significantly overpaying rooftop solar customers and who cover the costs of using the electric grid that solar customers have avoided. SCE is encouraged by the Commission’s proposed structure and its focus on low-income customers, including creating a $150 million equity fund for future programs.”

Pacific Gas & Electric Co. (PG&E) said the net energy metering reform will help rooftop solar continue growing in California.

“While we are still reviewing the details, the Commission’s proposed decision on NEM is a step in the right direction to modernize California’s outdated rooftop solar program,” PG&E said. “Over time, NEM has resulted in deep inequities between customers with rooftop solar and those without, who are often lower-income customers. Sensible reform is necessary to support customer equity and help continue California’s success toward a clean energy future. This decision aligns with the recommendations of a diverse set of organizations including consumer advocacy groups, environmental groups and the utilities.”

Customers will be able to build their systems up to 150 percent of their historical load to use toward future vehicle or appliance electrification. They will now be billed monthly instead of yearly.

The proposal will also create a $600 million Equity Fund to improve clean energy program access to low-income areas, which would create incentives for distributed storage, community solar in low-income and disadvantaged communities, and other low-income clean energy programs with strong consumer protections. It would also create an exemption from the Grid Participation Charge for low-income and tribal households.

“We view this proposed decision as drawing a fair balance between private industry asks, utility asks, and state mandate. It [does] all the big things right: It keeps solar a lucrative investment because it is designed to give new owners a 10-year payback, minimizes impact on those that don’t have solar, encourages storage to deflect polluting resources in the evenings, and provides direct benefits to lower income communities,” Chhabra said.

Utilities seem to agree the new ruling will be a good compromise that will continue to encourage solar while also allowing for rooftop solar owners to help pay for the grid and enhance solar for all communities.

“Rooftop solar will continue to play a significant role in California’s clean energy future—and PG&E supports solar with 20 percent of the country’s rooftop solar in our service area. As the solar market has evolved, prices have dropped considerably and maintaining high subsidies is no longer necessary. We need to move toward a more sustainable structure that is fair for all customers,” PG&E added in its statement.

“We encourage the CPUC to approve the proposed decision’s advancements supporting customer equity while considering additional changes to further reduce the burden on customers without rooftop solar who are subsidizing those with solar,” the company said.