California Utilities Can’t Vanquish Their NEMesis

Proposed Commission Decision Retains Full Retail Net Metering Without Punitive Fees

The long-awaited proposed decision on the future of rooftop solar in California is out -- and net metering is in. I'll skip the suspense. Under the Commission's proposed decision, released Tuesday:

  • Utilities would be required to retain full net energy metering (or "NEM"). The Administrative Law Judge concluded that retaining the current compensation structure, where rooftop solar customers receive full retail rate credit for the energy they export back to the grid, is necessary to ensure the market for distributed solar continues to grow sustainably, as required by law.

  • The utilities receive none of the punitive fixed charges and confusing demand charges that they requested (for now).

  • Beginning in 2018, new rooftop solar customers will be required to enroll on time of use rates. Under time of use rates, the price that solar customers pay for power, as well as the price they receive for any excess generation sent back onto the grid, will be higher during times of peak electricity usage, and lower during times of less usage.

  • New rooftop solar customers would also begin paying two relatively small fees. First, they'll pay a one-time fee of about $100 to connect their system. Second, solar owners will no longer be exempted from paying public purpose charges, which amount to about 4 cents per kilowatt hour. The charges are used to pay for public programs like CARE, which provides bill assistance for low-income households.  

Two things to note: First, here at the Club we're feeling pretty vindicated, as this slightly-tweaked NEM structure was kind of our idea. We advocated for a fee-free, time-of-use based full NEM tariff -- the only difference was that we suggested the switch to time of use rates occur one year later, in 2019, to allow more time for a transition. Moving to time-of-use rates is a big change and must be done thoughtfully and gradually, but we think it's a move in the right direction.

Time-of-use rates provide significant environmental and grid benefits by providing an economic incentive to reduce peak energy use and invest in technologies like smart thermostats and energy storage that help better align solar generation with the needs of the future, renewables-dominated grid. As more and more renewables come on line, we need price signals that encourage reducing energy needs in the late afternoon and early evening to avoid the need for high-polluting ramping gas plants plants to meet demand as the sun sets.

Secondly, the decision's outright rejection of the utilities' requests for punitive fixed fees and unwarranted demand charges is a relief. Considering that SDG&E, for example, proposed new fixed fees as high as $70 a month, and asked to replace NEM with export compensation of only 4 cents a kilowatt hour, the administrative law judge deserves credit for making small, measured changes to a successful program.  

Coming at the tail end of the Paris climate summit, at a time when Californians are keenly aware of the severity of the climate crisis and the need for decisive action, it is a heartening to see the Commission recognize the value of NEM as a straightforward and effective rooftop solar policy that is an essential part of California’s efforts to address climate change and create an increasingly resilient and distributed grid.