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Newsom: ‘More work to be done’ on California net metering solar proposal

California Gov. Gavin Newsom
Gov. Gavin Newsom unveils his proposed $286 billion 2022-2023 state budget during a news conference in Sacramento on Monday.
(Rich Pedroncelli / Associated Press)

The California Public Utilities Commission may vote as early as Jan. 27

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Gov. Gavin Newsom indicated revisions will be coming to a controversial proposal that would make dramatic changes to the state’s Net Energy Metering program that affects the 1.3 million Californians who have installed rooftop solar on their homes and businesses.

“That draft plan that was recently released, I just had a chance to review, and I’ll say this about the plan: We still have some work to do,” Newsom said when asked about the proposal that is scheduled to go before the California Public Utilities Commission later this month. Newsom made his remarks Monday during a wide-ranging news conference unveiling specifics of the state budget the governor is sending to the Legislature in Sacramento.

For the record:

6:07 p.m. Jan. 12, 2022This story has been corrected to note that Gov. Newsom has appointed John Reynolds to the California Public Utilities Commission.

When asked another question later in the news conference about the proposal, Newsom said, “Do I think changes need to be made? Yes I do.”

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Newsom’s remarks open the door for making amendments to the existing proposal or for the utilities commission, called the CPUC for short, to write a separate, alternate decision that commissioners could also consider before taking a vote.

Under Net Energy Metering, or NEM, when a rooftop solar system generates more energy than the homeowner or business actually consumes, customers can sell the excess back to utilities via the grid and receive credits on their bills. California has not updated the rules for its NEM program since January 2016.

Rooftop solar installations on homes in the San Elijo Hills area of San Marcos.
Rooftop solar installations on homes in the San Elijo Hills area of San Marcos.
(Charlie Neuman / The San Diego Union-Tribune)

In December, the utilities commission released a 204-page proposal for a net billing tariff that called for a raft of changes. Two of the most notable were:

  • Changing how much solar customers are paid when they send power back to the grid. Instead of receiving the retail rate of electricity, they would get paid at the “actual avoided cost,” which is much lower.
  • Creating a “grid participation charge” of $8 per kilowatt on the solar systems of residential customers. The typical rooftop system is about 5 to 6 kilowatts so the charge would come to about $40 to $48 per month for San Diego Gas & Electric customers. According to the CPUC, the average customer who does not have rooftop solar pays about $100 per month for their access to the grid. The charge would not apply to commercial customers.

The proposed changes elicited intense opposition from the solar industry, many rooftop solar customers and some environmental groups who said it would discourage future customers from making the investment to install solar and financially harm existing rooftop customers.

Newsom’s comments have raised the hopes of the proposal’s critics.

“We urge the governor to use his bully pulpit to push regulators to start from scratch and take no action to curb rooftop solar until they fully examine the real reason why working-class families and communities are paying so much for power, and how they can be put at the forefront of the rooftop solar and storage revolution,” Ken Cook, president of the Environmental Working Group, said in a statement.

California’s investor-owned utilities for years have been calling for changes to NEM, saying the current policy leaves customers who don’t have rooftop solar paying a disproportionate amount of the fixed costs that come with running the electrical system — things like wires, substations and transformers.

This “cost-shift,” they say, means Californians without solar pay about $245 more in electric bills per year than customers who have installed solar on their rooftops.

Others in the NEM 3.0 debate have made similar arguments, including The Utility Reform Network, a consumer group; the Natural Resources Defense Council, a prominent environmental organization; UC Berkeley energy economist Severin Borenstein; and a few legislators in Sacramento who cited equity issues for customers who can’t afford to install rooftop solar.

In a blog posting shortly before Newsom’s remarks, Borenstein of UC Berkeley said he didn’t agree with every detail in the proposed decision. But he said it “would assure that nearly everyone who has already put in rooftop solar still sees substantial net savings overall. The goal isn’t to punish early solar adopters, but to correct the policy path we are on in which the only people left paying for the grid — the grid that all of us are going to be using for a long time — will be renters and low-income customers.”

The California Solar & Storage Association, a trade group opposed to the proposed decision, has dismissed the cost-shift argument, pointing to $4 billion in utility transmission costs and $5 billion in wildfire liability expenses. “Together, these (annual) $9 billion ratepayer costs amount to the real cost policymakers should be concerned with,” the group said last summer.

The proposed decision also calls for:

  • Establishing a $600 million Equity Fund to support clean energy and energy storage programs for low-income Californians. Disadvantaged households would be exempt from paying the grid participation charge.
  • Providing a 10-year payback period for customers who add energy storage to their solar systems. The goal is that by deploying storage, customers will help reduce strain on the grid during the 6 p.m. to 9 p.m. hours when solar production rapidly deceases as the sun sets.

The CPUC’s vote on the proposed decision may come as early as Jan. 27. The commission has the ability to postpone the vote to another date.

The commissioner assigned to the proposal, Martha Guzman Aceves, left the utilities commission last month to accept an appointment by the Biden administration to go to the U.S. Environmental Protection Agency. Newsom has appointed John Reynolds, a former CPUC staffer, to replace Guzman Aceves.

The CPUC had scheduled to hear oral arguments Wednesday on the proposed decision but the parties involved received an email Tuesday afternoon saying the event had been cancelled and will be rescheduled. A new date has not been announced. No specific reason was given for the cancellation but the email said the rescheduled date will allow all the commissioners to participate.

Updates

1:41 p.m. Jan. 12, 2022: This story has been updated to show that oral arguments before the CPUC on the proposed decision have been cancelled and will be rescheduled on a date not yet determined.