The Details of CPUC’s Disastrous Proposal for Updating Net Metering in California
On December 13, 2021, the California Public Utilities Commission (CPUC) issued a proposed decision updating solar net metering. Their proposal would create major new barriers for Californians who want to invest in rooftop solar and battery storage. Net metering is a foundational clean energy policy that allows customers with onsite solar to save on their electric bill by receiving a credit for the excess clean energy they send back to the grid.
The popular policy has helped make California the national leader in rooftop solar adoption, with over 1.3 million solar roofs installed statewide. The December 13th proposal would reverse solar progress by decimating solar bill savings for future solar customers, as well as changing the rules on existing solar customers.
The proposed decision has been in the works for a while. The CPUC, which regulates the state’s investor-owned utilities, opened a proceeding to update net metering back in August 2020. Stakeholders including Vote Solar submitted and debated a range of proposed policy changes, which the Commission considered as it developed the 187-page proposal. Now over a year later, the CPUC released the proposal.
As an advocate who has worked for years in California rooftop solar policy and who proposed substantial but targeted changes as part of this policy process, I am shocked by how deeply flawed the CPUC’s net metering update proposal is, especially given California’s proud history of clean energy leadership. The proposal stitches together a series of complex and draconian changes that will stifle customer-sited clean energy instead of ensuring it continues to grow sustainably, as the state law requires.
Some of the proposal’s most problematic elements include:
1) The proposal would create a very large new solar-only fee, bigger than any approved for any other regulated utility in the United States. All future residential solar customers who do not meet the proposal’s too-stringent definition of low-income would pay a “Grid Participation Charge” of $8/kW per month, which for the average home system in California would mean a fee of $48/month, every month for the life of the system. Solar-only fees unfairly discriminate against solar customers, charging them for the energy they produce rather than buy from the utility.
In addition, these fees dissuade people from pairing batteries with their solar, and battery adoption is key for reducing emissions from our grid. The $8/kW fee would apply to millions of low-income Californians who want to go solar and whose incomes exceed 250% of federal poverty guidelines, impeding solar access for many of those who need it most. We believe the proposal’s solar-only fee is illegal under federal law (specifically the Public Utility Regulatory Policies Act), because it is a non-cost-based fee assigned only to customers who choose to install onsite clean energy.
2) Instead of reducing the value of clean energy exported back to the grid gradually over a period of years as Vote Solar and many of our allies urged, the proposal immediately and sharply drops the value of clean energy exports by about 80% for all future solar customers, including low-income customers, to the hourly values in the CPUC’s controversial Avoided Cost Calculator. After locking in the ACC values for the first five years after interconnection, the hourly export value for most of the solar system’s useful life would be pegged to whatever the ACC calculates for that year.
This structure creates major uncertainty for customers about the savings they can earn from exporting their excess clean energy back to the grid, making most rooftop solar projects not paired with storage unfinanceable. Essentially, it ensures that solar-only projects won’t be affordable to any but the wealthiest customers who can afford to pay for their system upfront with cash, and it does not give the solar industry time to transition to making solar-paired batteries the standard offering.
3) The sharp reduction in export value noted above applies not only to all future residential solar customers, but also to all future non-residential solar customers, a move that would create a huge new barrier for schools, non-profits, government buildings, and businesses all over the state that want to install solar and storage as clean backup power as well as a means of controlling everyday costs will see associated monthly savings drop sharply compared with today’s policy. Few stakeholders argued that any change to the current policy was necessary for non-residential solar.
4) The proposal attempts to expand solar access to more low-income customers, but it actually does more harm than good overall for low-income customers who want affordable access to solar. Future low-income solar customers’ export value would be immediately reduced by 80%, like all other future residential solar customers. Some groups of low-income customers would receive a monthly “Market Transition Credit” to compensate, although millions of customers who are low- but not lowest-income would be excluded from that credit.
Even for those who do qualify, the low-income credit is set far too low because the solar installed costs used are wrong, which results in payback periods between 13 and 15 years for PG&E and SCE low-income solar + storage customers. The proposal authorizes $150 million per year for four years to be added to existing low-income solar and battery incentive programs which is a positive step, but those funds can only serve a small fraction of the low-income families who need the bill savings and clean backup power that solar + storage can provide.
5) The proposal reverses the Commission’s long-standing protections for existing solar customers, reducing the legacy period under which existing (“NEM 1 and 2”) residential customers can remain on the rules that applied when they chose to invest, from 20 years to 15 years. This applies to all existing residential net metering customers in California except those on CARE (low-income) rates.
We estimate that if this reversal of the legacy period were adopted, 33,000 existing residential solar customers who installed their systems in 2008 would be forced onto the new tariff in 2023, and an additional 46,000 existing residential solar customers would be forced onto the new tariff in 2024.
Such an abandonment of consumer protections would not only reduce existing customers’ solar savings over their system’s lifetime, but it would also erode consumer trust in CPUC-approved policy more broadly. Why should Californians trust that CPUC will honor the new solar policy it is designing, when the agency is retroactively changing its previous rooftop solar rules?
6) Finally, the proposal argues for a “Market Transition Credit,” an untested concept intended to partly subsidize the new solar fees and reductions in export value, aiming to bring the average payback period for a solar + storage customer’s investment to ten years.
In reality, because the Commission insisted on using solar costs that are far lower than actual California installed solar costs and also did not include financing costs, solar + storage payback periods even with the MTC would be between 11 and 18 years for PG&E and SCE future general market (non-low income) residential solar + storage customers, depending on systems size and whether the system was financed.
Taken as a whole, the CPUC’s proposed decision fails disastrously at balancing the Commission’s goals of keeping rooftop solar growing, reducing costs for non-participants, expanding low-income solar access and incentivizing solar-paired batteries. The proposal is way out of step with what the majority of Californians want, which is to make rooftop solar and batteries more affordable, not less. The idea that California’s rooftop solar policy would be more anti-consumer than places like Alabama should be embarrassing for Governor Newsom and other state policymakers to contemplate.
It is extremely disappointing to see the Commission head so far in the wrong direction with this rooftop solar proposal. Clean energy advocates like myself have worked for years to inform the Commission of net metering changes that will benefit all Californians, and most of that painstaking work has been ignored with this proposal.
We urge Governor Newsom and his new Commission President appointee, Alice Reynolds, to take a stand for customer choice, a resilient grid and climate action by going back to the drawing board and crafting a different proposal for how we compensate Californians who choose to install rooftop solar and batteries.
Call Governor Newsom and tell him the CPUC’s proposal is the wrong direction for rooftop solar.