California regulators issue their solar NEM-3 plan

The California Public Utilities Commission (CPUC) issued its much-anticipated plan to revise the state’s current Net Energy Metering (NEM) rules and create a Net Billing Tariff that it said would balance the needs of the “electric grid, the environment, and consumers.”

The proposal will be on the CPUC’s Jan. 27, 2022 agenda for a vote.

The proposed decision determined that NEM must be modernized to “incentivize customers to install storage paired with rooftop solar” to help California meet its net peak shortfall and ensure grid reliability.

The approach would adopt what the Commission said would be “more accurate price signals” to promote greater adoption of customer-sited storage. Increased storage is intended to help the state cut its reliance on fossil fuels during early evening hours, when the sun is down and energy demand is still high.

The California Solar & Storage Association criticized the proposal, saying that regulators appear to have “sided with PG&E and the other large investor-owned utilities” in an approach that “will make rooftop solar and customer-owned batteries more expensive and therefore out of reach of working- and middle-class consumers.”

The association said that an early read of the proposal suggested that the rate paid for solar exported to the grid “appears to be approximately 5 cents/kWh,” down from 20-30 cents/kWh for residential customers. The association said that the proposed plan includes no transition glide path, meaning that the full reduction likely would take effect as soon as NEM-3 is implemented.

Charlie Coggeshall, senior analyst and regional director for Coalition for Community Solar Access, said the proposed decision “is deeply disappointing.” He said in a statement it would delay action on developing a “workable community solar program in California” and “undermines” the state’s distributed energy market.

“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.”

The draft net metering proposal also includes a bill credit for Net Billing customers. The credit is intended to help customers pay for a solar plus storage energy system in 10 years or less through electric bill savings.

The proposal also would carve out an Equity Fund with up to $600 million to improve low-income customer access to distributed clean energy programs.

The proposal would allow Net Billing customers to “oversize” their systems by up to 150% of the customer’s historical load to allow for future vehicle and appliance electrification. It also would require those customers to take service on rates with high differentials between peak and off-peak prices. The Commission said the approach would incent energy conservation or the use of stored solar energy during the peak demand window of 6 p.m. to 9 p.m. when the state hopes to displace electric grid fossil fuel usage.

The proposal also would implement a monthly residential Grid Participation Charge of $8 per kilowatt (kW) of installed solar. The charge is intended to capture residential adopters’ “fair share of costs” to maintain the grid and fund public purpose programs. For a 6 kW system, the fee would likely range from $48 a month for customers of Pacific Gas & Electric to $64 a month for customers of San Diego Gas & Electric, who, along with Southern California Edison customers, would pay an addition fee, according to the California Solar & Storage Association.

The proposal also would create a monthly Market Transition Credit of up to $5.25 per kW for residential solar plus storage and solar-only systems. Customers would lock in this amount for 10 years. During a four-year “glide path,” the credit would step down 25% a year.

Also included in the proposal is a Storage Evolution Fund to provide storage rebates to existing NEM 2.0 customers who transition to the Net Billing Tariff within the next four years. It would transition residential NEM 1.0 and 2.0 customers (except for low-income customers) to the Net Billing Tariff after 15 years of being interconnected to the electric grid. The Commission said the move would incent storage adoption and reduce costs paid by other ratepayers by “billions of dollars.”

Assembly Bill 327 required the CPUC to reform the NEM program, as well as conduct rate reform and distribution planning activities. The CPUC made initial revisions to the NEM program in 2016, resulting in what is called NEM 2.0. The revised proposal, released December 13, is referred to as the Net Billing Tariff.

The proposed revisions may be read here.