In a proposed decision on net metering in December, the California Public Utilities Commission largely got it right. The proposed decision builds on the legislature’s and governor’s climate leadership, maintaining net metering with a strong 20-year grandfathering provision, while ensuring fairness to utilities, customers and solar companies.
The proposal requires solar customers to pay a one-time interconnection fee, contribute more to public programs (an increase in “nonbypassable charges” or NBCs), and transition onto time-of-use rates, which will help facilitate greater use of renewable energy in the state. If accepted, the commission would revisit its decision in 2019 after rate changes and grid modernization efforts run their course.
This re-evaluation will allow technology and new regulatory structures to evolve to realize even greater customer and grid benefits from solar.
In response to the commission’s proposed decision, utilities are trying to circumvent the state’s nearly two-year-long regulatory deliberations by putting forward an unjustified and procedurally improper last-minute proposal.
The utility proposal would impair the industry’s sustainability and create new risks, such as customers’ loss of Investment Tax Credit eligibility. To add insult to injury, the utilities launched a campaign criticizing the solar industry. Thankfully, the commission’s last meeting showed just how hollow the utilities’ campaign is.
Unlike the utilities’ AstroTurf campaign, solar was supported by a broad array of real people. A diverse group of representatives from environmental justice groups, ratepayer advocates, Hispanic leaders, business associations and other organizations made the trek to the commission where they stood up to defend net metering. We trust that the commission will see the utilities’ proposals for what they are: an anti-competitive effort to stifle rooftop solar growth.
However, even if the commission rejects the utilities’ proposals, we’re not out of the woods on net metering in California. The commission has to get the details right, and there a few areas of concern: maintaining the 20-year grandfathering of the net-metering tariff as currently proposed, getting the list of nonbypassable charges right, and requiring time-of-use rates for solar customers on a prospective basis only, rather than requiring customers to switch to unknown rates a year or two after interconnection.
Grandfathering of new customers for 20 years is critical to continued growth of the industry. Customers can realize savings on their electricity bill because they finance their solar systems over 20 years or more. A shorter grandfathering term will expose customers to an uncertain rate regime halfway through the finance period, requiring them to guess at the economics of going solar. Investors will be left guessing how the projects they would finance will work once they get halfway through their terms.
The solar industry supports a move to time-of-use (TOU) rates, but getting the transition wrong could cause significant customer backlash and prevent adoption. Particularly problematic is a clause in the proposed decision that forces NEM 2.0 customers interconnecting in 2016 and 2017 to move to TOU rates in 2019. We do not yet know what the TOU periods and rates will be in 2019, and the commission is in the process of revising those rates -- potentially in ways that are less favorable to solar customers.
As written, the proposed decision would force potential solar customers to consider a large, long-term investment without the ability to determine the value of that investment. Backlash under this scenario is a real risk. The commission should eliminate the mandatory aspect of this requirement to avoid market confusion that could hinder both the rooftop solar market and the move to TOU rates.
Finally, while the solar industry is committed to paying its fair share of costs to maintain the grid, including nonbypassable charges, those charges should be fair and non-discriminatory. We agree that all customers should pay the Public Purpose Program Charges (which fund low-income and clean energy programs), nuclear decommissioning and DWR bond charges.
Solar customers already pay for NBCs on their net energy usage. Under the proposed decision, solar customers would pay on all of the energy they consume from the grid, and we support this change. The commission’s proposed decision, however, appears to inadvertently include “new system generation” charges and transmission charges in the definition of NBCs. These charges are outside the scope of -- and irrelevant to -- customers with on-site generation.
What’s more, those are costs that rooftop solar systems reduce for the state, because distributed solar obviates new system generation and transmission lines. Without these two charges, NBCs will be 2 cents to 3 cents per kilowatt-hour, and with them, it will be 3.5 cents to 5 cents; this is a significant difference. The commission’s own comments in the press and in statements appear to confirm that the inclusion of new system generation and transmission charges were simply an error in a footnote.
California has always led on clean energy. After lengthy consideration, the commission’s proposed decision is wise to maintain net metering. We are confident that the commission will do the right thing and reject the utilities’ last-ditch effort to circumvent CPUC process and its many months of deliberation.
However, details matter. In order to maintain a sustainable solar industry that is fair to utilities, customers and solar companies alike, the commission must make fixes to the time-of-use requirements and nonbypassable charges in the proposed decision, while maintaining 20 years of grandfathering for new customers.
Sean Gallagher is the vice president of state affairs for the Solar Energy Industries Association.