Proposed Changes To California Net Metering Tariffs Under Review By CPUC (California Public Utility Commission)

Summary:

The Public Utilities Commission of the State of California (“CPUC”) is considering proposed rule changes to the state’s current net energy metering tariff (“NEM 2.0”). In what has been described as a “controversial proposal”, the proposed successor net energy metering tariff (“NEM 3.0”) represents a shift from net metering to net billing. Under the proposed rule, “imports and exports will be calculated based on instantaneous netting of consumption and production and will be trued-up on an annual basis.” These changes would affect all residential, commercial, industrial and agricultural customers. Residential customers are incentivized to transfer to NEM 3.0 to reap the benefits of the Market Transition Credits described above. Similarly, there are storage incentives to transitioning: existing customers who voluntarily transfer to NEM 3.0 are eligible to receive a storage rebate of $0.20/watt hour (available for 4 years, decreasing by 25 percent each year). The proposal, which was originally scheduled for a commission vote on January 27, 2022, has been delayed as it was not included on the CPUC's meeting docket of February 10, 2022. (Source: Foley and Lardner, LLP)

Additional Discussion:

The solar industry is strongly opposed, arguing that the proposed rule will make rooftop solar more expensive and will result in fewer solar installations as a result. Industry is also opposed particularly to the retroactive provisions of NEM 3.0. Alternatively, utilities and non-solar ratepayers are in favor, as their view is that NEM 2.0 disproportionally burdens non-solar ratepayers by pushing electricity costs and grid maintenance costs onto those without solar panels (since solar panel owners get paid by the utility at the retail rate for electricity). They also express equity concerns with NEM 2.0, as higher-income residential customers are more likely to have solar installations.

The proposed net billing tariff contains the following elements:

• Export Compensation Rates. Rates would be based on hourly averaged “Avoided Cost Calculator” values, which have been historically used to measure cost-effectiveness (not compensation).
• Market Transition Credits. The proposal would provide the following market transition credits for residential interconnections prior to the end of 2027, decreasing by 25% annually:
  • Residential:
    • PG&E low-income: $4.36/kW per month for 10 years
    • PG&E non-low-income: $1.62/kW per month for 10 years
    • SCE low-income: $5.25/kW per month for 10 years
    • SCE non-low-income: $3.59/KW for 10 years
    • SDG&E: no incentive provided
    • Other Customer Classes: no incentive provided
• Highly Differentiated Time-of-Use Rates.
• Grid Participation Charges.
  • Residential customers (excluding low-income customers) would be assessed a new monthly “Grid Participation Charge” of $8/kW of installed solar capacity. Other customer classes would not be assessed this fee.

Link:

• https://www.foley.com/en/insights/blogs/renewable-energy-outlook