Update 1/10/2022: Gov. Gavin Newsom said in a press conference that he believes “we still have some work to do” on the CPUC plan and that he thinks changes need to be made.
On Dec. 13, the California Public Utilities Commission issued its proposed decision on the successor to the state’s solar net-metering program. This proposal is not yet set in stone — it must be heard and voted upon by the commission, which will happen during the January 27, 2022, business meeting, at the earliest.
The proposal shifts from a net-metering to a net-billing structure, allowing the dollar value of credits to be set at a different level than the energy’s import price. As such, CPUC notes it does not refer to this tariff as NEM 3.0, but rather as the Net Billing tariff. The commission also adds a Grid Participation Charge for solar customers and a long-term Market Transition Credit to encourage storage paired with solar systems.
Net Billing Tariff
The Net Billing Tariff will result in lower incentives than the previous net-metering tariff. The commission made the decision to switch to a new plan based on findings that the current net-metering tariff negatively impacted non-solar customers and disproportionately harmed low-income ratepayers. The CPUC report notes that NEM 1.0 and 2.0 created “equity concerns due to the misalignment between costs and value,” which created “revenue under-collections that must be recovered by nonparticipating customers.”
CPUC calls the new program an “improved version of net billing” that provides an export compensation rate “aligned with the value behind-the-meter energy generation systems provide to the grid based on avoided cost values and import rates that encourage electrification and solar paired with storage.” Net Billing customers can oversize their systems by up to 150% of historical load to allow for future home electrification.
The Net Billing values for the first five years following a customer’s interconnection date will be based on a schedule of values for each hour from the most recent Avoided Cost Calculator, which provides avoided cost values for each climate zone.
CPUC says this “lock-in period” is meant to ensure customer-sited solar continues to grow sustainably and enhance consumer protection measures. After those five years, export compensation will be based on average monthly avoided cost values.
Market Transition Credit
The successor tariff also includes a Market Transition Credit, which offers a four-year “glide path” for the industry and encourages customers to pair solar with storage. The Market Transition Credit will allow customers to lock in a 10-year payback period that includes up to $5.25/kW for residential solar + storage and solar-only systems. Customers who are required to install solar pursuant to the new construction requirements under Title 24 Building Energy Efficiency Standards are not eligible for this credit.
The Market Transition Credit is a monthly credit based on a system’s expected generation that is specific to each utility. It will be in effect over four years and will initially be available to residential customers that submit interconnection applications after the NEM 2.0 sunset date and before December 31 of the year the three utilities complete implementation of the successor tariff. Each year after, the credit will decrease by 25% until it reaches zero.
Grid Participation Charge
The commission has also proposed a new differentiated time-of-use rate and grid benefits charge, renamed as the Grid Participation Charge. CPUC says this verbiage “sends a clear message to the customer that they are paying to use the grid.” This will be a fixed monthly charge of $8.00/kW. Low-income and tribal households are exempt from this charge.
Solar industry reaction
The California Solar & Storage Association spent the past year rallying support for continued NEM incentives, including collecting hundreds of thousands of public comments to deliver to the commission and organizing a $1 million fundraising drive.
CALSSA said the CPUC proposal would add a $57 per month solar penalty fee for the average residential solar system. The group noted the $15/month credit for the first 10 years would only partially offset the fee, but California would still have the highest solar penalty fees in the country. In addition, the group said the commission proposed slashing export credits to approximately 5¢/kWh on all solar users, including schools and churches. This is an 80% reduction from the 20-30¢/kWh credited today for residential customers. Further, CALSSA pointed out that the commission reduced the protections for existing solar customers from the previously established 20-year grandfathering, down to 15 years.
The Save CA Solar coalition, which includes CALSSA and more than 600 diverse organizations, issued the following statement on the proposed decision:
“Despite the overwhelming popularity of rooftop solar in California and more than 120,000 public comments submitted in support of net metering, the CPUC proposed a giveaway to investor-owned utilities that would boost utility profits at the expense of energy consumers, family-supporting jobs and California’s clean energy future. Solar advocates around the state are disappointed the CPUC fell for the utility profit grab by proposing the highest solar penalty fees in the nation and drastically reducing the credit solar consumers receive for selling the excess energy they produce to their neighbors.
“The fight is not over for solar advocates. Consumers, affordable housing advocates, faith leaders, environmentalists, conservationists, climate activists, and solar workers and small businesses will continue calling on the CPUC and Governor Newsom to stop the utility profit grab and keep solar growing in California.”
CALSSA’s executive director Bernadette Del Chiaro called it a “clean energy and jobs disaster.”
“With this proposal, California would abandon its long-held position as a clean energy leader, threatening the jobs of tens of thousands of hard working men and women who provide clean, reliable energy for millions of consumers today. Governor Newsom needs to clean this mess up and get California back on track as a solar leader,” she said.
SEIA also issued a statement saying this decision will harm clean energy progress.
“Only the wealthiest Californians will be able to afford rooftop solar, shutting out schools, small businesses and the average family from our clean energy future,” said Abigail Ross Hopper, president and CEO of SEIA. “The only winners today are the utilities, which will make more profits at the expense of their ratepayers. We urge Governor Newsom to act quickly to change this decision — at risk are 65,000 solar jobs, the security of our electricity grid, and the health of California residents and our planet.”
The Coalition for Community Solar Access (CCSA) had proposed to the commission a “Net Value Billing Tariff” (NVBT) that would compensate subscribers to community solar projects based on the value of a project’s generation at the time it’s provided to the grid. It was not included in the proposed decision.
“Today’s proposed decision by CPUC is deeply disappointing as it once again delays action on developing a workable community solar program in California and undermines the state’s distributed energy market,” said Charlie Coggeshall, senior analyst and regional director for CCSA. “Distributed energy – including a viable third-party community solar program — will be crucial to meet the state’s ambitious clean energy goals and create a resilient, low-cost grid that works for all Californians. We urge the Commission to reconsider and reassess the benefits a thriving community solar program can bring to California before it issues a final decision.”
A 30-day public comment period begins now. CALSSA plans to push hard over the next month,and is calling on the solar industry to contact Gov. Gavin Newsom about the proposal as well as sign the group’s Save California Solar petition.
Updated on Dec. 14 with industry reactions
Michael Ritter says
Well, I can see how solar-installed folks are angry. They’re getting burned after good-faith solar investing. The issue IMO is PG&E owes over $10B as it’s emerged from its 2nd bankruptcy. And hedge funds have invested as bankruptcy bottom feeders to receive PG&E’s guaranteed cash flow from over 6.5M customers. That’s traditional life in America for us all regardless of any other consideration.
Parry Jarman says
The Grid Participation Charge of $8.00/kW in NEM 3.0 is a clear violation of Section 5 of the Federal Trade Commissions Act, which bans “unfair methods of competition” under both the Horizontal & Single Firm Conduct.
Horizontal Conduct – It is illegal for businesses to act together in ways that can limit competition, lead to higher prices, or hinder other businesses from entering the market. The FTC challenges unreasonable horizontal restraints of trade. Such agreements may be considered unreasonable when competitors interact to such a degree that they are no longer acting independently, or when collaborating gives competitors the ability to wield market power together. Certain acts are considered so harmful to competition that they are almost always illegal. These include arrangements to fix prices, divide markets, or rig bids.
Single Firm Conduct – It is unlawful for a company to monopolize or attempt to monopolize trade, meaning a firm with market power cannot act to maintain or acquire a dominant position by excluding competitors or preventing new entry. It is important to note that it is not illegal for a company to have a monopoly, to charge “high prices,” or to try to achieve a monopoly position by aggressive methods. A company violates the law only if it tries to maintain or acquire a monopoly through unreasonable methods.
I’ll be working with the FTC to take action to stop and prevent the Grid Participation Charge provision of NEM 3.0 before this goes into effect.
Javid Poornasir says
The founding fathers are rolling over in their grave
Yes, clear violations:
– yields substantial financial injuries to future solar users, but especially to current ones
– puts a hard stop on clean energy (excludes competition) in the least ‘free market’ manner
– can not be easily avoided (consumers are still required to remain on the grid)
– deception, misleading (saying NM 2.0 caused non-solar users to pay)
– deception..? will ‘grandfathered in’ also entail concurrently having multiple new fees & rates?
John Clothier says
Another case where working folks have to bail out those outrageous pensions. Elect Unions got us over a barrel via these govt agencies (also run by union employees, with THEIR agenda to grow)
As several have suggested, instead of these shell games, the largest 21st century incentive should be for 100% disconnection. Our old, overhead distribution lines, being serviced at outrageous cost, are the REAL problem. It can only get worse. On a hot Calif day, maybe half of our electric bill is paying for adding heat to the atmosphere, via transmission losses.
The Calif energy discussions should be about improved insulation and more efficient appliances. Instead of penalizing solar homeowners with patchwork, how about penalizing folks who install home a/c units over 2 tons? Installation of distribution panels over 100A, in new construction, is inexcusable, with today’s insulation and appliance inverter technology.
There should be a large incentive, more than LEED, to development of new tracts that are fire resistant and energy efficient. The microgrid (and distribution underground!) may be the future.
Allan Timko says
In response to SOLARMAN 12/13/21 629pm: “That “up to 150% of historical load”, I believe will be found out to be a lie for many customers. When I first applied with my local utility for a solar PV system, the overall energy out into the grid was ‘limited’ to something like 27% of the transformer feeding the property, so the actual system was smaller than what was first proposed. ” // I do Solar PV Utility Policy Research in 23 States & track over 700 Utilities. What I have noticed over the years is that when the policy is traditional Net Metering, the offset/coverage allowed is 100% of 12mo historical Usage, Then when the policy changes to Worse for the consumer; “BuyAll SellAll” or “Net Energy Metering” credit for excess kWh at wholesale avoided cost, the allowed coverage limit is no longer much of a concern to the Utilities. /// On another note the $8/kW installed Solar PV is outrageous!! ( aka Grid Access Charge) I have never seen any higher. This looks like the same tactic that Utilities use when renewing their Rate Case, They ask for Extreme High amounts, knowing that if they get permission for even 1/3 to 1/2 of that; they will be happy and will have yet another Tariff line item to cry over and jack up next time. // I also feel the timing of the 30day public input (mid Dec to mid Jan) is suspect/odd time of the year. I enjoy all of your posts.
It won’t be too long before better refrigerators and air conditioners will make it unnecessary to hook up to the grid at all. If I were building a new house in California I would wire it primarily for 12 or 24 VDC and have a good size solar array and a lithium iron phosphate battery with a 120 VAC inverter for the loads I couldn’t power from 12VDC. I would also super insulate it and then forget about hooking up to the Utility at all.
Greg Smith says
Good strategies, however, most people cannot adjust their lifestyle to accommodate a DC home running on 120 volts. Regardless, most utilities and muni’s won’t allow a complete disconnection from their grid, and if they do, they still charge an outrageous service fee “in case” the home needs to be reconnected to their grid. Greed is the underlying issue here.
Dorn Hetzel says
The absolute solution for some customers will be to get off the grid entirely, or entirely except for emergency backup… Store solar power in on-site batteries instead of selling it back to the grid. Let them get the behavior they incent…
Robert Brown says
I guess California wants to kill it’s solar program. This is a great way to do it just penalize all the people that have solar.
william fitch says
Another aspect is during high Summer usage, all the distributed RE keeps the utilities from paying super high KWH rates to the grid service providers, the entity all electric utilities have to pay for each KWH they gen and put across the grid.
Ironically, it was the high grid provider rates charged to the utilities during Summer, that initially got the utilities on board for distributed energy. They were more than happy to pay a small amount of money for the establishment of solar PV, to keep them from paying the grid providers 1$ per KWH and up for Summer peaking. But that little spice to flavor their meal do to global warming, has become a mouth on fire that needs to be put out. Welcome to killing solar in CA. This outcome will be used as a “test case” for RE, just like not allowing women the ability to control their own bodies in TX.
If the problem is support for the grid infrastructure, then charge everyone the same connection fee. Perhaps it should be scaled to the size of your connection e.g. 100A service, 200A service…., However, if you are supplying distributed electricity to a distributed load, then you are reducing the needed investment in grid capacity. Sounds like to me that IOU utilities want guaranteed payment for their grid capacity regardless of need.
TOU billing and payment sounds good too, but that increases “grid” costs everyone for the smarter meters.
william fitch says
What they are doing is the same thing the Telecoms did. Convert from a charge by usage model to a pay to play scheme. The solar penalty fee (grid connect charge) is crazy in a world that is trying to promote RE as fast as possible. Distributed production allows them to put off infrastructure changes for high load (Solar reduces it) along with an easier way to make the grid more resilient. All that benefits them from an engineering perspective. But it’s not about engineering is it. Its about the utilities maintaining their profit margins currently under demand destruction by all distributed RE. Profit over everything.
Again, follow the money.
James Cunningham says
What is the docket number for this proceeding so we can leave public comment?
Kelly Pickerel says
Mike Waldyke says
It seems not to be as bad as it was predicted to be. Still, the utilities seem to be trying to get the same net profit out of solar customers as non-solar customers even though solar customers are using much less electricity. They also seem to be trying to make both the money they pay for electricity fed into the grid, as well as what they charge for the electricity used from the grid, as opaque as they can get away with. The rules seem far more convoluted than they have to be. It feels like they’re running a shell game.
“Shell game”, indeed, SCE is starting to roll out TOU rate schedules. One such schedule is the so-called TOU 5 premium schedule. This has off peak rates of $0.19/kWh off peak, and just after solar PV generation roll off from 4PM to 9PM each day the TOU rate will be $0.45/kWh. In Southern California during those 4 months of high temperatures, which often requires homeowners to run their A/C units 24/7. The typical 5 ton A/C unit uses about 1.5kWh per ton. Just during this TOU period, one’s air conditioning is costing them $17 a day plus. Time for a grid interactive inverter and using energy storage to “clip” TOU rate usury.
I am trying to get solar installed before 1/27 but if I can’t I will cancel the order and lose $1000. Better than getting stuck paying more than my current monthly bill under this. They are not exempting medical baseline just Care. I cannot guarantee Care as the program changes. They talk about help for people on Care but it is NOT available, I have looked and always says closed. This is sucked up by developers in low income areas
Utility company already collects money from solar system owners: time differential. Now on top of that, $8/kW monthly connection fee? That is high way robbery. CPUC changes rule without user’s consent. Is this legal? NEM is temporary for sure but existing solar owners signed the ‘contract’, and now CPUC want to go back on their words? The whole proposal is not good for California, not for climate change remediation. It is fair for solar system owner to pay utility company storing excessive solar system generated electricity, but not a flat monthly fee which is high and it is about 1/4 of electricity bill without solar.
Joseph Carrano says
How about taking solar and storage owners off the grid completely. No credits, no usage, no problem. Why do we have to stay connected? You can take your f’n gas meter with you too PG&E. I don’t need that either.
Yeah, but then in the winter where I live I would run out of solar and be freezing. I need the power grid from Dec – March. The rest of the year, I make my own power. But those four months, I don’t have enough, even if I had battery storage. I’d have to add more panels, and I maxed out my best spot already.
Paul Leon says
The headline of this article is wrong. The headline needs to read something more like puc approved plan that will kill solar in California. If you change the article title then we can post this in social media and get more people’s attention with it. This plan will absolutely destroy a solar and take away any Financial benefit
100% agree. I would never have gone solar if I had to pay $8 per KW! I’d owe $60 per month! for nothing.
Mark S Durand says
Time to change the PUC to elected positions.
Brian Berkeley says
Yes! Very good and important comment.
Eddie Needham says
I’m producing more than I use all together, yet I owe the non solar households money? Goodbye solar.
Robert Smith says
Why bother with Net-Metering ?? Install battery storage and use solar to charge during the day and discharge it in the evening.
There is no rhyme or reason to impose these huge monthly charges on solar customers under the guise of collecting grid costs. Many non solar customers pay a lot less than many solar customers. There is no reason why discriminatory charges should be imposed on solar customers. Everyone should be on a TOU rate and a CPP rate, not just solar customers. I am fine with reducing compensation for exports but that should be done gradually. This is a terrible PD, the worst that I have seen anywhere in the US.
Lee Kasten says
NEM was always intended to be a temporary training wheel support incentive. This decision will result in some bruised elbows and knees but it’s not the end of the world.
I think this decision is great! This isn’t a mortal wound for solar in California. It’s a safe bet we’ll continue to see many GWs coming on line in the coming years thanks to utility scale solar. DG solar will eventually recover as it repeatedly has in frontrunner solar markets like Germany, Italy and Spain.
Think of Gandalf the Grey falling down the chasm with the Balrog only to return as Gandalf the White. This is exactly what’s going to happen with DG solar in California. No doubt about it. Five years from now installation costs for DG solar should trend down to $1500 to $2000/kW. We’ll look back on the wastefulness of NEM with a mixture of pride and distain. Did NEM help deploy a lot of solar – yes! Did NEM over stay it’s welcome – yes.
Mark S Durand says
You obviously have a grand imagination.
Mitchell Gronlund says
The only part of the solar industry that will survive this are the massive nationwide companies. The very same companies that currently ruin the industry’s reputation by taking advantage of customers. Say goodbye to your small solar contractors and say goodbye to affordable solar for middle and low income families. Meanwhile, the utilities in California have been making a killing on time of use billing. “Bruised knees and elbows” is so out of touch with reality.
Hans Schulze says
How do I amortize 72$k installation cost at 5c per kwh? ROI is now way past the useful lifetime of my panels and controller. The initial calculations were based on 100% recovery at 19c or higher, in Palo Alto. Yes, we (Palo Alto) buy our own power, but its even more expensive than rest of Bay area, albeit from green credited sources. CPAU guidelines will still affect PA rates.
This was clearly written by a pge employee
“CPUC calls the new program an “improved version of net billing” that provides an export compensation rate “aligned with the value behind-the-meter energy generation systems provide to the grid based on avoided cost values and import rates that encourage electrification and solar paired with storage.” Net Billing customers can oversize their systems by up to 150% of historical load to allow for future home electrification.”
That “up to 150% of historical load”, I believe will be found out to be a lie for many customers. When I first applied with my local utility for a solar PV system, the overall energy out into the grid was ‘limited’ to something like 27% of the transformer feeding the property, so the actual system was smaller than what was first proposed. The past pundit of the rote IOU electric utilities is net billing should be the ‘wholesale’ electricity price which is about 1/3rd to 1/5th, the ‘net metering’ cost of residential electricity. Then to ‘layer’ a ‘connection charge’ for solar PV adopters is usury as those copper wires from the utility were paid for when the individual property was (developed) then turned over to the utility as “their” asset. This “net billing” ignores the avoided costs and the worth of a distributed energy generation resource that the utility doesn’t have to pay or maintain as an asset, so how is it these utilities want to foist a “connection fee” onto any solar PV adopter is asinine.