California commission overhauls rooftop solar proposal

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The California Public Utilities Commission today released a long-awaited overhaul of its proposal to regulate rooftop solar installations, removing an unpopular new fee but reducing how much utilities would pay homeowners for supplying power to the grid.

The revised proposal comes after the CPUC earlier this year abandoned a controversial plan that solar advocates warned would undermine the state’s efforts to battle climate change.

The measures to overhaul management of California’s residential solar program have languished for more than a year. The CPUC’s challenge is to encourage more rooftop solar production while not disproportionately saddling low-income residents with higher energy bills.

Ramping up solar power to replace fossil fuels is considered critical to cutting greenhouse gases in California. State law has set a target of  90% zero-carbon energy by 2035 and 100% by 2045.

The revised proposal addresses some — but not all — of the concerns raised by solar supporters. Power companies say it’s not difficult to discern the governor’s fingerprints on the changes. Newsom, who appoints the CPUC’s five members, twice weighed in, suggesting the original proposal needed to be revisited. 

“The changes are stark,” said Kathy Fairbanks, a spokesperson for Affordable Clean Energy For All, which represents 120 organizations, including Pacific Gas & Electric, Southern California Edison and San Diego Gas & Electric. “It’s clear there was some influence.” 

The CPUC will hear oral arguments at a public meeting next Wednesday and is scheduled to vote on the measure on Dec. 15. If adopted, the new rules would take effect next April.

The revised rules would:

• Remove a proposed $8 per kilowatt monthly fixed charge, a so-called solar tax, on new residential systems. 
• Reduce utilities’ payments to homeowners for excess power they sell by as much as 75% compared to current rates. The change would not apply to residents with existing solar systems.
• Fund $900 million in new incentive payments to help purchase rooftop solar systems, with $630 million set aside for low-income households.
• Encourage the installation of solar panels plus battery storage.
• Set lower rates in an attempt to shift consumers’ use of power to the times of day that improve grid reliability.

The CPUC is required under state law to update its net metering rules, which triggered a prolonged, complex and politically thorny process.

Bernadette Del Chiaro, executive director of the California Solar & Storage Association, said the 75% reduction in credits to new solar customers means utilities will pay residents less for the power their rooftop systems provide to the grid. 

The proposed rules “would really hurt,” she said. She estimated that new customers would be paid a base rate of  5 cents per kilowatt-hour for power they generate but don’t use, compared to about 30 cents now.

 Del Chiaro said the newest proposal “needs more work or it will replace the solar tax with a steep solar decline.”

The solar industry is pleased that the monthly fee was removed. They said the surcharge would have discouraged installation of solar panels and damage the growing clean-energy sector.

The state’s utilities, however, are disappointed that there aren’t changes that would better manage the shared costs of residential solar.

“We expected the [Commission] to do more. It’s frustrating,” said Fairbanks of Affordable Clean Energy For All.

Fairbanks said the amended proposal does not address what is known as “cost shift,” referring to solar customers not paying their fair share of costs associated with delivering residential power and the impact on the function of the electric grid. The utilities say those costs are now spread unfairly among all ratepayers.

More than $3 billion was passed on to non-solar customers in 2021, according to the CPUC’s Public Advocate’s Office. The new proposal “went backward” in addressing that gap, Fairbanks said. Rooftop solar customers “ have been getting a sweet deal for decades.”

The original proposal largely reflected the interests of the state’s three largest utilities. It was attacked by the solar industry, clean energy and consumer advocates and environmental justice organizations.

The timing of the proposal was awkward: As the state was ramping up its renewable energy ambitions, Newsom reiterated that rooftop solar power was “essential” to meet California’s clean-energy  goals. The state’s popular incentive program has put solar panels on 1.5 million roofs of residences and small businesses.

The policy, called Net Metering, was implemented in 1995 and established a framework for large utilities to buy excess energy from homeowners and supplement power to the grid. The program was bolstered by incentives that brought down the upfront costs of purchasing the systems.

The new proposal cites the evolution of clean energy and its impact on the electric grid. Officials say the rule would align state policy with a grid that is bloated with solar energy during the day and overburdened with demand for power when the sun goes down.