California’s biggest utilities want future net-metered rooftopsolarsystems to earn less for the energy they feed to the grid and solar customers to pay extra charges to cover the costs of serving them grid power.
California’s solar industry has a different idea: keep things the way they are -- and don’t believe utilities when they say they and their non-solar customers can’t afford it.
In filings this week, key solar groups The Alliance for Solar Choice (TASC), the Solar Energy Industries Association (SEIA) and Vote Solar have asked the California Public Utilities Commission to retain key features of the state’s net metering regime, including full retail payments for the power that rooftop solar systems feed back to the grid.
That’s in stark contrast to Monday’s proposals from utilities Pacific Gas & Electric and Southern California Edison, which ask the CPUC to lower payments, impose new charges, and make other changes that would reduce the economic payback of future net-metered solar systems.
Both sides say that their proposals fit with the intent of AB 327, the 2013 state law that ordered a successor net-metering program, to start in mid-2017, which will balance sustainable solar economics with fairly sharing costs across solar-equipped and non-solar customers alike.
Utilities say that today's net-metering regime unfairly slants compensation toward rooftop solar, given fast-falling solar costs and innovations in third-party financing from companies like SolarCity and Sunrun, and will impose billions of dollars of cost shifts to non-solar customers if not changed.
But Robert Harris, policy director for TASC member Sunrun, said that the utilities’ proposals overstate the costs and downplay the benefits of rooftop solar, and would unfairly stack the deck against healthy solar growth.
“I do think that the utilities are sort of asking for everything that they could possibly want, in recognition that they’re not going to get all of it," said Harris in a Tuesday interview. “There’s no rational reason you would need all of these different concepts, even assuming all of their premises are valid.”
That issue of premises is a complicated one. Solar groups and utilities alike are putting their proposals through a CPUC modeling tool, which requires them to make certain assumptions about how costs and benefits will play out over the next decade or so.
What's more, the CPUC’s recent changes to residential rates, including flattening the state's longstanding tiered monthly charges, adding minimum monthly bills, and switching all residential customers to time-of-use rates by the end of the decade, could fundamentally alter the way these policies end up playing out in the real world.
We’ve already covered how PG&E and SCE are justifying their proposals. Here’s how the solar industry is justifying theirs.
Staying the course vs. complicated and costly changes
Compared to the complicated changes being proposed by utilities so far, the new solar industry proposals are simple: change almost nothing about net metering.
As SEIA and Vote Solar say in the first sentence of their filing, their goal is “a successor tariff that continues net energy metering (NEM) at the retail rate under the same structure and rules which have been so successful in California to date.”
TASC’s proposal is almost identical, except for “one modest change” -- adding so-called public purpose program (PPP) charges, a small monthly fee assessed to pay for utility programs like energy efficiency and conservation, to future net-metered customers’ bills.
PG&E and SCE, by contrast, want to pay net-metered customers quite a bit less for the power they feed back to the grid, by paying a rate based on the cost of generating power. That's similar to a proposal floated by Hawaiian Electric earlier this year.
But these reduced rates don’t take into account the value that net-metered solar provides, Harris said. That could come from reduced transmission and distribution grid costs, or replacing the power that would otherwise need to come from new natural-gas-fired power plants.
PG&E noted that a typical solar customer would see a relatively small reduction in monthly bill savings, from 60 percent under today’s rules to about 50 percent under its proposal. But for companies like SolarCity and Sunrun, small reductions multiplied across tens of thousands of customers can add up to big financial impacts.
Even more problematic are the new charges the utilities want to impose on net-metered customers, Harris said. Specifically, PG&E has proposed a $3 per kilowatt-per-month demand charge, based on the one moment during each month that a customer’s energy use reaches its highest peak, while SCE has proposed a $3 per kilowatt-per-month “grid access charge” based on the size of the solar system being connected to the grid.
Both utilities say the charges are justified, because they take into account the fixed costs of serving solar-equipped customers with grid power. They’re also less onerous than those charges being proposed by utilities in states such as Arizona.
But Harris said they would add unnecessary complexity and confusion to the solar proposition. “Imagine a salesperson sitting at a kitchen table trying to discuss this, how difficult it would be,” he said.
“It’s discriminatory as well,” he added, since it’s targeted solely at net-metered customers. What’s more, the CPUC’s recent rate reform “has imposed minimum bills on all customers going forward” of up to $10 per month, which should “take into account the cost shift” issue that’s also being used to justify the new solar-only charges, he said.
How rate reform could upend the cost-benefit equation for solar
That brings up another key problem that TASC has with the utilities’ proposals: the proposition that net-metered customers are pushing up rates for everyone who doesn’t have rooftop solar.
“We would have to start with the premise that there’s a need to address some kind of imbalance -- and our analysis shows that there isn’t,” he said.
That’s because the CPUC’s rate reform package passed last month makes some critical changes in how costs are shared between different classes of customers, he said. Specifically, it does away with the state’s longstanding four-tier monthly rate structure, which imposes much higher kilowatt-hour charges on residential customers as their consumption increases over the course of month, and replaces it with a flattened, two-tier rate, with no more than a 25 percent increase between the two tiers.
This change comes with an underlying shift in philosophy that’s important in the context of net metering, Harris said. Steeply tiered monthly rates made for attractive net-metered solar customers, since solar helped reduce monthly consumption that would drive them into the highest-cost tiers.
But that was a problem for a rate structure that relied on revenues from high energy-consuming customers to support low energy-consuming customers, he said. In other words, under monthly tiered rates, heavy electricity consumers who installed solar and reduced their bills “were paying their costs; they just weren’t paying for everyone else’s,” he said.
But under the coming flattened-tier structure, that’s not going to be true any longer, as TASC contends in its proposal.
“TASC modeling results show that recent changes to rates adopted in R.12-06-013 will significantly reduce impacts to non-participating customers when compared to prior Commission studies," wrote the organization.
That leads TASC to predict that keeping net metering as it is will come at a far lower cost to non-solar customers than utilities have predicted. SEIA and Vote Solar’s analysis comes to a similar conclusion, yielding a benefit-cost ratio that’s positive for all ratepayers, including those who don’t have solar, and predicting billions of dollars of net benefits where utilities are predicting billions in net costs.
The CPUC has until the end of the year to craft a policy that can square these seemingly disconnected views of the benefits and costs of rooftop solar. With California leading the nation in rooftop solar, and pushing ahead with policies that will closely integrate distributed energy with utility grid planning and investment, there’s a lot at stake.