California commission issues revised proposal to cut paybacks to rooftop solar customers

California’s future rooftop solar producers could receive less payback for the electricity they sell to the grid, if a proposed decision from the state’s utilities commission goes on to win final approval. 

The proposal, issued by the California Public Utilities Commission (CPUC) on Thursday, would revamp the state’s “net energy metering” (NEM) solar tariff, which has enabled households to get credit on their electricity bills at retail rates and offset monthly energy expenses.

While existing solar customers would be able to maintain this arrangement for 20 years, future customers would face different terms: rates that are tied to how much electricity is worth at a given time of day. They’d also be subject to a fixed monthly fee.

“Since implementing net energy metering over 20 years ago, California has witnessed the evolution of the customer-sited rooftop solar industry,” Administrative Law Judge Kelly Hymes, who issued the proposed decision, wrote in its introduction.

Crediting this shift for the installation of more than 12 gigawatts of clean energy, Hymes stressed that “the needs of the electric grid in California require additional evolution.”

The proposed decision, which will come up for a vote at the state utility commission’s Dec. 15 meeting, seeks to improve the pricing structure while crediting customers for the electricity they export based on its value to the grid, a statement from the commission said.

The proposal would harness an additional $900 million of state legislature-approved funding in upfront incentives for residential solar adopters who also install battery storage. Of that total, 70 percent — $630 million — would be set aside for low-income customers.

Thursday’s proposed decision has been the subject of much contention, with environmental groups largely protesting changes to the net billing structure, arguing doing so would slow California’s transition to a clean energy-based grid.

Proponents of the changes — which include the state’s major utilities — argue that the current system puts lower-income households at a disadvantage, as they are paying higher rates to offset the solar subsidy.

Prior to releasing the Thursday’s proposal, Hymes issued a ruling withdrawing a December 2021 version, which she described as “addressing most of the scoped issues.”

If the latest proposal wins approval, new solar customers would be required to take part in an “electrification time-of-use” plan — or pay varying prices to import electricity from the grid at different times of day.

Such import prices would be highest during the “peak” period between 4-9 p.m., according to a billing explanation for customers. Eligible customers would also need to pay a monthly charge of around $15.

The explanation justifies these “small charges” as a mechanism for maintaining the electric grid and helping low-income Californians afford electricity and access clean energy programs.

Customers who installed rooftop solar panels prior to the decision’s adoption would receive their original net billing terms for 20 years from the time their system began operating, according to the proposal.

Meanwhile, households that connect solar systems to the grid after its adoption — but before the end of 2027 — would receive time-of-use prices based on what was predicted before they installed their systems.

Hymes touted the pricing mechanisms’ potential for promoting the installation of storage systems so that customers can export electricity during the evening hours.

Californians today are highly reliant on greenhouse gas emitting sources in the late afternoon and evening, according to Hymes. Updating the billing structure, she contended, would optimize grid use, increase reliability and promote affordability across all income levels.

The current net energy metering scheme “negatively impacts non-participating ratepayers; disproportionately harms low-income ratepayers; and is not cost-effective,” she added.

Compared to the December 2021 version, the new proposal eliminates a controversial “grid participation charge” of $8 per kilowatt and replaces a $600 million equity fund with $630 million set aside for low-income adopters.

The Affordable Clean Energy for All coalition — which has long been advocating for net metering reform — expressed disappointment with the new terms.

CPUC’s proposed decision “fails to make the meaningful reform necessary to ensure that all electricity customers, those with rooftop solar and those without, pay their fair share of the costs for electric grid reliability,” the coalition said in a statement.

The coalition includes about 120 organizations, representing low-income families, small businesses, community groups and major utilities like Pacific Gas & Electric, Southern California Edison and San Diego Gas & Electric. 

“Under this proposal, low-income families and all customers without solar will continue to pay a hidden tax on their electricity bills to subsidize rooftop solar for mostly wealthier Californians,” said coalition spokesperson Kathy Fairbanks.

Environmental organizations that had opposed the December 2021 version of the decision likewise expressed their dissatisfaction.

“The latest proposal will still make it more expensive for working-class families to adopt rooftop solar,” Ken Cook, president of the Environmental Working Group, said in a statement.

Cook described “the monopoly utilities” and their supporters as having “all the power,” stressing the changes are “just a minor strategic retreat.”

“The utilities and their lapdog regulators at the commission have no intention of relinquishing control to customers and communities by allowing competition from residential solar to thrive,” he said.

Laura Deehan, state director for Environment California, voiced similar concerns that the revised proposal is “will still make transitioning to solar power more expensive.” 

“At a time when California needs rooftop solar to flourish, it’s risky to cut a key incentive without having a viable alternative in place,” Deehan said in an emailed statement. 

“California’s decision-makers need to make rooftop solar as affordable and accessible as possible so that every household with solar potential can realistically make the choice to go solar,” she added.

Updated: 7:32 p.m.