California Commission Strikes Balance; Clean Energy and Consumers Prevail

Mostly sunny skies ahead can now be predicted for California’s customer-generated renewable energy future, at least for now. Thursday’s long-awaited landmark decision by the California Public Utilities Commission (CPUC) comes with much good news. Front and center: the CPUC decided to maintain in large part the existing net energy metering (NEM) compensation system, which gives customers credits on their energy bills at the full retail rate for all energy they export to the grid.

The main issue addressed by the CPUC’s decision is how customers with rooftop solar and other distributed generation are compensated for the electricity that they feed back into the grid through NEM. The lengthy, in-depth proceeding commenced in 2014 following the passage of legislation (AB 327) that directed the CPUC to assess the existing NEM policy and make several adjustments.

Among other changes, the successor tariff to NEM attempts to strike a careful balance between the sometimes divergent interests of NEM customers, solar companies, utilities, ratepayer and consumer advocates and other stakeholders, while also keeping with California’s tradition of strong policy support for distributed generation (DG).

Here are some other highlights from the CPUC’s decision:

  • Requires new systems 1 Megawatt (MW) and smaller, excluding systems in the low-income Single-family Affordable Solar Housing (SASH) program, to pay a fixed, up-front interconnection fee based on the utility’s demonstrated costs for interconnection (likely in the range of $75-$100 per system). This policy balances the need for efficiency in processing high volumes of NEM applications with allowing utilities to recover the costs they incur for conducting interconnections.
  • Allows for renewable energy systems larger than 1 MW to net meter, which is required by AB 327, so long as they pay all interconnection fees and necessary system upgrade costs.
  • Requires NEM customers to pay identified “non-bypassable” charges on all energy they consume from the grid. Non-bypassable charges include those used to support public purpose programs. Currently, NEM customers are required to pay non-bypassable charges, but they are allowed to offset them by energy that they export to the grid, which would no longer be allowed.
  • Requires new NEM residential customers to pay time-of-use (TOU) rates, with a limited exception for San Diego Gas & Electric (SDG&E) residential customers, whose TOU rates are still under development. TOU rates are higher during times when energy demand is greatest, particularly hot summer afternoons, and are aimed at incentivizing customers to limit energy consumption during those peak times. A residential customer’s applicable TOU rate will depend on when the customer signs up for NEM, and when the customer’s utility has developed default residential TOU rates, which are required by a separate CPUC decision and anticipated in 2019. Non-residential NEM customers already pay TOU rates in California.
  • Maintains aggregate net metering (NEMA) and expands virtual net metering (VNM) through allowing multiple service delivery points at a single VNM site. NEMA and VNM are critical policies that function to expand consumer access to renewable energy.
  • Requires new safety measures for solar equipment in new systems connecting to the grid. These requirements are somewhat redundant with existing safety requirements under other programs.
  • Declines to impose a litany of other proposed new charges on NEM customers.
  • Requires the CPUC to revisit its NEM policy again in 2019, in line with the target date for default residential TOU rates.
  • Defers the disadvantaged communities alternatives to a second phase of the proceeding.

In the end, although the CPUC’s decision will impose modest new costs on NEM customers, on the whole its policies should contribute to a sunny future for California solar. IREC looks forward to the CPUC’s continued work on “disadvantaged communities” alternatives to help to ensure that all California customers can share in the sun.

Interestingly, by way of comparison, just across the border and just a month prior to the CPUC decision, the Nevada Public Utility Commission took a different direction and voted to impose high fixed charges to NEM customers and greatly reduce NEM compensation by switching from a retail rate to a wholesale rate – a change that initially would also apply to existing NEM customers, this component of the Nevada order is being reconsidered. Theses changes to NEM are expected to have a drastic impact on consumer investments in Nevada, and have already driven the exodus of key solar companies and the loss of hundreds of solar jobs in Nevada.

As more states evaluate NEM policy updates and changes via policy measures and regulatory proceedings in 2016, the California and Nevada experiences will certainly provide an interesting side-by-side comparison of the impacts of NEM policy changes in large, established renewable energy markets. And, one can expect more consumers to tune in and pay attention to these significant decisions on the horizon.

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