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California Approves New Net Metering Guidelines and ‘Aligns’ Fees

February 1, 2016 By Cheryl Kaften

The California Public Utilities Commission (CPUC) voted 3-2 (Rulemaking 14-07-002) on January 28 to preserve solar net energy metering in the Golden State – enacting a successor tariff known as NEM 2.0 that the commission stated would continue the existing net metering structure “while making some adjustments to align the costs recovered from NEM successor customers more closely with those from non-NEM customers.”

Commissioners Mike Florio and Catherine Sandoval said they opposed the proposal at the last minute when an electricity transmission fee that appeared in the footnotes of the order was eliminated, according to the Los Angeles Times – a move that they said made the overall arrangement “too rich for the solar industry.”

The decision represents a win for rooftop solar installers and customer-generators statewide, as well as environmental advocates – all of whom had importuned the CPUC to keep payments at the retail rate for excess rooftop power fed back into the grid; while utilities had lobbied for a lower level of remuneration, as well as monthly fixed fees and demand charges.

In response to the final decision, Bryan Miller, senior vice president of Public Policy & Power Markets at residential installer Sunrun and president of The Alliance for Solar Choice, commented, “[We commend ] the commission for upholding net metering and protecting solar choice for Californians.”

How We Got Here

California first established its NEM program under Senate Bill (SB) 656 (Alquist), Stats. 1995, ch. 369, in 1995, and codified in Section 2827 of the Public Utilities Code. From 1996 to date, customers with eligible on-site generation facilities installed behind their meters (customer-generators) that have met certain technical requirements have been able to participate in the program.

NEM allows a customer-generator, such as those who have installed solar photovoltaics on-site, to receive a financial credit for power generated by their system and fed back to the utility. The credits are valued at the “same price per kilowatt hour” (kWh) that customers would otherwise be charged for retail electricity consumed.

Net credits created in one billing period carry forward to offset customer-generators’ subsequent electricity bills. At the end of every year, the credits and charges accrued over the previous 12-month billing period are “trued-up.”

To date, customer-generators also have been exempt from interconnection application fees, supplemental review fees, and costs for distribution upgrades other than the direct costs to safely interconnect to the grid.

Holding the Line

In making the current decision, the CPUC declined to add more charges to the bills of existing customer-generators – including the non-bypassable charges that fund low-income and efficiency programs in California. Indeed, existing customer-operators will be exempt from all new charges for 20 years from the date when they installed their solar systems and connected to the grid.

In creating a successor program to the existing NEM program, the CPUC was directed by Assembly Bill 327, passed in October 2013, to ensure that customers pay their appropriate share of costs while encouraging a sustainable customer-sited renewable distributed generation program.

The CPUC said that its decision “attempts to strike a balance between these requirements.” Costs for NEM successor customers (new customer-generators) include:

  • A one-time interconnection fee (likely to be about $75 to $150). This fee, which represents the costs for a utility to review and ensure that a NEM system interconnects safely to the grid, has historically been borne by all utility customers, including non-NEM customers. The CPUC decision finds that these interconnection costs can be paid by NEM successor customers, themselves, without jeopardizing the economics of the NEM installation. Customers participating in the Single-family Affordable Solar Homes program are exempted from paying the fee.
  • Non-bypassable charges that all utility customers pay. Non-bypassable charges are used to fund low-income and efficiency programs. They are the equivalent of approximately 2 cents per kilowatt-hour (kWh) of energy consumed. Historically, NEM customers only have paid for non-bypassable charges, if, over the course of a year, they consumed more electricity from the grid than their installation produced. The commission found that NEM successor customers should pay for non-bypassable charges on all energy they consume from the grid, regardless of the amount of energy they have exported to the grid.

What’s more, new customer-generators will face a Time of Use (TOU) rate, starting in 2019. The CPUC order mandates the state’s utilities to file applications by January 1, 2018, for default TOU rates to take effect beginning in 2019. The differentials between peak and off-peak rates will be determined by the commission as it deliberates on the TOU proposals the utilities will file.

There is an exception for San Diego Gas & Electric (SDG&E) residential customers during the period before SDG&E’s time-of-use rates are adjusted, which will be done in SDG&E’s current General Rate Case Phase 2.

Comments and complaints

Said CPUC President Michael Picker, the commissioner assigned to the proceeding, “Our course is not for the rooftop solar industry or for the utilities or the community clean energy aggregators. Our decision today is another big step toward giving California consumers more choice, more control, and more responsibility over energy and climate change issues. It’s a big step, but it’s only one of many.”

SolarCity CEO Lyndon Rive released the following statement about the CPUC outcome: “Today’s decision by the Public Utilities Commission will empower Californians to contribute to a cleaner, more affordable, more resilient, and more distributed grid. It will give us the time to prove distributed energy’s full benefits to the grid and all ratepayers, while continuing to deploy clean energy and creating jobs today.

Since December we have seen a paradigm shift on the world’s approach to electricity, with the Paris climate agreement, extension of the federal Investment Tax Credit, and now a decision from California that will continue the successful net metering policy while ensuring rooftop solar users begin to provide valuable services to the grid. This new paradigm is one in which our most important goal is to deploy renewable energy as fast as possible. SolarCity looks forward to working with everyone to exceed the world’s expectations on how fast we can do it.”

However, the Golden State’s three major investor-owned utilities (IOUs) – San Diego Gas & Electric (SDG&E), Pacific Gas & Electric (PG&E), and Southern California Edison (SCE) – were dissatisfied with the outcome.

In response, SDG&E issued the following media statement: “San Diego Gas & Electric strongly supports renewable energy, including rooftop solar, but also we strongly believe that the growth of rooftop solar should not penalize customers who do not own a home or are unable to afford or accommodate rooftop solar.

“Today, the California Public Utilities Commission (CPUC) ignored state law and the clear direction from the state legislature, which called for them to reform Net Energy Metering to ensure the benefits are balanced with the costs of the program. While we are still evaluating the decision, it appears to largely maintain the current program, penalizing the 95 percent of our customers who don’t have solar by adding an extra $300 on their utility bills by 2025.

“We are encouraged by and applaud the two CPUC commissioners and consumer advocates who recognize that today’s decision is flawed and will only further penalize the majority of our customers and grow the cost shift. This decision will likely be celebrated by vendors profiting from today’s decision, but moving forward it becomes increasingly important for all parties to work together to develop a modern solution to this outdated program–one that complies with state law and balances everyone’s interests.”

The successor NEM program will take effect for new NEM customers after the utilities’ existing NEM program participation caps are met, or July 1, 2017, whichever occurs first.

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