Utilities commission delays vote on controversial California solar proposal

In an unsurprising move, the California Public Utilities Commission has postponed a vote on a controversial proposal that would dramatically change the way the state’s 1.3 million rooftop solar customers get compensated when their systems produce more electricity than they consume.

The commission had originally scheduled a vote on Jan. 27 but the agenda for next Thursday’s meeting had no item listing the proposed decision on what’s colloquially called NEM 3.0, or more formally, the Net Energy Metering tariff.

A new date for a vote has not yet been announced. It is not unusual for the commission, known as the CPUC for short, to push back a vote on a matter that is complicated or has generated considerable attention — and NEM 3.0 qualifies on both counts — to a later date.

Earlier this month during a news conference outlining details of the state budget, Gov. Gavin Newsom said of the proposal, “We still have some work to do.” Later in the briefing, Newsom said, “Do I think changes need to be made? Yes, I do.”

Newsom’s remarks have fed speculation that amendments may be made to the 204-page proposed decision or that a separate, alternate proposal may be written that commissioners could also consider.

“We have two new commissioners, one of whom has not started yet,” a CPUC spokeswoman said in an email to the Union-Tribune on Thursday. “Comments from parties on the Proposed Decision have just been received for this extremely important policy matter.”

The commission has a new president, Alice Reynolds, who took over just before the start of the new year. Reynolds had been the Newsom administration’s senior energy adviser. Another vacancy is set to be filled by Newsom’s appointment of former CPUC staffer John Reynolds, who is no relation to Alice Reynolds.

Under net energy metering, when a rooftop solar system generates more energy than the homeowner or business actually consumes, the excess can be sent back to the utilities via the grid and customers receive credits on their bills. California’s NEM rules have not been updated since January 2016.

Last month, the CPUC proposed a slew of changes, that included:

• Altering 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. The charge would not apply to commercial customers.
• 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 proposed tariff would affect all existing residential customers after 15 years of their interconnections. For example, customers who had their systems connected 10 years ago would have the proposal applied to them in five years. The tariff would not apply to low-income customers.

The proposal has been denounced by the solar industry, many rooftop customers and environmental groups, saying the added charges would undercut California’s growth in rooftop installations and extend the payback period for existing customers.

More than 1,000 solar workers and opponents of a proposed decision before the California Public Utilities Commission march in downtown Los Angeles on Jan. 13.

(FREDERIC J. BROWN / AFP via Getty Images)

Last week, protesters gathered in front of the CPUC’s office in Los Angeles and the commission’s headquarters in San Francisco, calling for the proposal to be rescinded.

High-profile figures have also come out in opposition. Former Gov. Arnold Schwarzenegger wrote an opinion piece in The New York Times, saying the tariff “should be stopped in its tracks.” Hall of Fame basketball player and San Diego resident Bill Walton sent a letter to Newsom calling the proposal “ridiculous.”

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.

The debate echoes a similar decision made last fall by the publicly-owned utility in the state’s capital city.

The Sacramento Municipal Utility District, or SMUD, reduced the credit for new solar customers who send electricity to grid from 12 cents per kilowatt-hour to 7.4 cents. Also, customers who install solar after March 1 will pay a one-time fee of $475 to connect their solar panels to SMUD’s system. As reported by The Sacramento Bee, customers with existing systems will continue to receive the higher credit through 2030 and won’t have to pay the one-time fee.

Solar advocates urged SMUD’s board of directors to reject the changes, but the board voted 7-0 to accept them. The new rules take effect in March.