California regulators propose to keep retail rate net metering for solar—with a few changes

Dive Brief:

The California Public Utilities Commission (CPUC) issued a proposed decision on Tuesday to preserve retail rate net metering for distributed solar systems in the state while imposing modifications to the program, including the establishment of an interconnection fee and non-bypassable charges.
The proposed decision also includes a provision to move new net metering customers to time-of-use (TOU) rates by 2017, with the goal of moving all customers to TOU rates by 2019.
The decision rejects proposals from utilities to reduce solar remuneration rates and add monthly fixed charges and demand charges on rooftop solar owners. Solar companies lauded the proposed decision, while utilities Pacific Gas & Electric (PG&E) and San Diego Gas & Electric (SDG&E) criticized it.

Dive Insight:

California is home to the largest rooftop solar market in the nation, and this decision could inform how other states wrestling with high solar penetration and cost-shift arguments resolve these issues.

Under the proposed decision, California will end its current net metering program in July 2017 or when utilities hit regulatory caps on net metered systems that limit their combined output to 5% of a utility's peak demand. The push to create a new solar tariff came in 2013 under Assembly Bill (A.B.) 327, which directed the Commission to come up with a new tariff no later than Dec. 31, 2015.

If the proposed decision is approved without changes, rooftop solar users will pay a one-time interconnection fee and "non-bypassable" fees of $0.02-$0.03/kWh on every kWh they use from the grid, regardless of how much they offset with their generation. Non-bypassable charges are used to fund low-income and efficiency programs in California, but historically have not been paid by net metering customers unless they use more electricity from the grid than their PV systems produce.

Utilities will have 30 days from when the proposal is approved to file plans detailing the exact amounts for the fees. The CPUC estimates that interconnection fees will range between $75 and $100 and that non-bypassable fees will amount to an additional $5 each month on solar customers' bills.

Additionally, new net metering customers will move to time-of-use rates, with those interconnecting systems in 2018 required to utilize them immediately. Customers who sign up for net metering before 2018 will be allowed to wait to go on TOU rates until 2019, when all residential customers will be required to adopt them.

The decision appears to be an attempt to strike a compromise between the utilities' cost-shift argument and a push from solar advocates to keep the retail rate net metering credit in place.

"In creating a successor program to the existing NEM program, the CPUC was directed by Assembly Bill 327 to ensure that customers pay their appropriate share of costs while encouraging a sustainable customer-sited renewable distributed generation program," according to a release by the CPUC. "The Proposed Decision attempts to strike a balance between these requirements."

Even so, major California utility SDG&E said the decision fails to adequately address the "growing cost burden" on their ratepayers, which it claims to be about $160 million per year or $100 per monthly family bill.

"Today’s decision fails to recognize what consumer advocates and the utilities have already confirmed: we need to continue to support the growth of solar energy AND new rooftop solar rules that don’t require non-solar customers to pay over $160 million additional per year," the utility said in a statement.

By contrast, solar advocates lauded the decision, despite the modifications.

The proposal "rejects the utilities’ flawed math and misleading rhetoric on the grid impacts of rooftop solar, and it affirms that full retail credit for net metering is the right way forward for California energy consumers," Susannah Churchill, West Coast regional director for Vote Solar, said in a statement.

Earlier this year, the CPUC voted unanimously to flatten its four-tier rate system into two tiers and push for time-of-use rates to reform a rate structure that critics said unfairly burdened large power users.

At the time, utilities hailed the move as a push for fair ratemaking, while solar advocates praised regulators for deferring their decision on monthly fixed charges and said the new rate structure could allow for solar growth if net metering was preserved.

“If net metering remains in place, this decision will continue to allow Californians to go solar," SolarCity Public Affairs Director Will Craven said.

The newly proposed net metering program may be needed well before the July 2017 deadline for its implementation. In September, SDG&E raised the alarm on utilities swiftly approaching the net metering cap before a new policy was in place.

At press time, there were 479.2 MW of net-metered installations in SDG&E's service territory that make up about 3.9% of the utility's peak demand. The program is capped at 617 MW, or 5% of the utility's peak demand. The net metering cap is also quickly being approached in PG&E's territory, with 1,751 MW of net-metered installations making up 3.6% of the utility's 48,177 MW in peak demand. If the utilities pass the 5% cap, the current net metering program for the state will be halted.

The proposed decision is not final and requires a full vote of the CPUC commissioners. The regulatory body is scheduled to vote on the proposed decision on Jan. 28, 2016.