CPUC Net-Metering Proposal Draws Fire and Support Among Commenters

"We have two new Commissioners, one of whom has not started yet," CPUC spokesperson Terrie Prosper said in an email to California Energy Markets. "Comments from parties on the Proposed Decision have just been received for this extremely important policy matter. We will provide more information once a schedule has been determined."

Both of the new commissioners, including the agency's new president, were appointed by Gov. Gavin Newsom. The governor on Dec. 23 appointed John Reynolds, former chief of staff to current CPUC member Genevieve Shiroma, to replace Martha Guzman Aceves on the commission. Newsom on Nov. 22 named his senior energy advisor, Alice Reynolds, to replace Marybel Batjer as president of the five-member CPUC following Batjer's resignation, which was effective Dec. 31.

Batjer, who served less than three years, tendered her resignation in September amid controversy surrounding communications that she shared with the governor's office during the time the CPUC was approving Pacific Gas & Electric's bankruptcy exit plan in 2020 (see CEM No. 1669). The CPUC is regarded as an independent agency, as reflected in a document on its website.

Turnover at the commission has occurred among both staff and commission members. The proceeding, which had been assigned to Guzman Aceves, was reassigned multiple times. Batjer took it over on Dec. 20 following Guzman Aceves' departure. It was reassigned to new CPUC President Alice Reynolds on Jan. 11. On Jan. 12, a hearing for oral arguments on the matter was rescheduled to "allow all five Commissioners to participate," according to the rescheduling notice. John Reynolds has not yet started at the commission.

The "Net Energy Metering Revisit" rulemaking, known as NEM 3.0, was initiated in August 2020 and is based on an earlier CPUC decision [R20-08-020] (see CEM No. 1633). The roughly 200-page proposed decision, issued Dec. 13, is intended to provide incentives for both residential and commercial customers to invest in distributed energy resources without passing the costs of the current net-metering policy—which compensates DER customers with a 1:1 per-kWh retail rate for energy their systems serve back to the grid—on to non-DER customers.

The CPUC said the NEM program needs an update to provide incentives for installing solar paired with storage and to ensure there are "more accurate price signals" to promote greater adoption of customer-sited storage. One of the lauded provisions in the proposal is a $600-million equity fund designed to give low-income residents access to clean distributed energy resources (see CEM No. 1672).

Thirty comments from official intervenors have been published by the CPUC since Jan. 7, including from unions, energy trade and environmental groups, investor-owned utilities, the Public Advocates Office, and organizations ranging from Walmart to the California Farm Bureau Federation.

Critics of the proposal say ongoing concerns are not sufficiently addressed in the document and characterize as egregious the grid-access fees that would add, on average, about $57 a month to existing DER customer bills, which opponents say unfairly penalizes them.

Solar industry commenters such as the California Solar and Storage Association predictably do not support the proposal. CalSSA said the proposed grid-participation charge violates anti-discrimination provisions in the Public Utility Regulatory Policies Act of 1978.

"If the PD is adopted, it will be a potent weapon in the hands of utilities across the country seeking to snuff out customer-sited solar," CalSSA said in Jan. 7 comments. "It rewrites California's climate change policy to one aimed at slowing down the pace of rooftop solar installations—a seismic shift where California treats customers with distributed energy resources . . . with more adversity than states like Alabama and Wyoming, where few customers have installed solar."

But CalAdvocates and the Natural Resources Defense Council say the NEM proposal does not violate PURPA, because it is state ratemaking that is not under federal jurisdiction.

"The [grid-participation charge] is not an additional fee imposed only to solar customers to recover additional costs of service. Rather, the GPC is a fee that aims to collect costs that are common to both solar and non-solar customers that are otherwise collected through volumetric rates," NRDC said in its comments. "The record has strong evidence of the negative impacts that occur when those costs are not collected from solar customers." NRDC said it generally supports the proposal, with some modifications, such as inclusion of a community solar tariff and a comprehensive definition of low-income customers.

Many comments on the proposal from rooftop-solar owners enumerate the cost of their systems and the time by which they expected a return on their investment under the status quo. Several said they saved for years to afford solar and undertook the investment assuming the financial terms of the current net-metering policy would remain in place.

"The net metering program is why most people install solar panels," PG&E customer Leslie Johnson of Woodside said in a comment. "The only reason to approve the current proposal is [to] reward a company that has shown that it is incapable of actually providing us with reliable and safe electricity," Johnson wrote. "I also do not see how this can possibly help towards the 100% renewable energy goal. It is a disincentive to install solar if the fees are too high."

"This is not the time for the Commission to implement economic disincentives to the installation of solar in new housing," the California Building Industry Association said in its Jan. 14 reply comments. The proposed decision, according to the group, would eliminate the use of the most popular method of compliance with the California Energy Commission's solar mandate. The "lease" option is used for more than two-thirds of the new homes being built in California, the group estimates.

As written, additional costs would tack on more than $15,000 to the price of a new home, CBIA said. As decarbonization increases, new homes will consume roughly three times the electricity that the typical mixed-fuel home with no electric vehicles uses today, according to the group. It advocates for the removal of the grid-participation charge from the decision.

In Jan. 14 comments, Walmart pointed out that the grid-participation charge does not apply to nonresidential customers with behind-the-meter generation resources—one thing the proposed decision got right, it said. The retail behemoth, which has solar, fuel-cell and wind generation on its California facilities, called the proposal "uneconomic" for nonresidential customers because it relies on the Ratepayer Impact Measure test to determine cost-effectiveness rather than the Total Resource Cost or Participant Cost tests.

"One thing is crystal clear from parties' comments on the PD," the state's investor-owned utilities said in joint comments. "Parties unanimously agree that there is a substantial subsidy embedded in the current Net Energy Metering . . . framework that is borne by non-participating customers, and that [2013's] AB-327 requires reform."

All parties, including the joint IOUs, are committed to achieving California's statutory energy and environmental policy goals, including zero-carbon electricity by 2045, the utilities said. They said they share concerns about the rooftop solar market but that those concerns are unfounded with respect to the proposal, which they called "a step in the right direction of accomplishing those goals affordably and equitably."

Numerous items in the proposed decision give other stakeholders pause. Among them is the lack of a community solar tariff for DERs.

"Our proposal in the CPUC proceeding would provide low-income customers with up-front rebates sufficient to ensure a 10-year payback on new stand-alone rooftop solar systems," Matthew Freedman, staff attorney for The Utility Reform Network, said in an email to CEM. Any ratepayer funds used to subsidize rooftop solar should prioritize extending it to communities that have traditionally lacked access to DERs, he said.

Social media comments and press releases attributed to celebrities are fanning discontent and obfuscating issues, according to some of the parties. Many say an abundance of these efforts originate with the rooftop-solar industry.

"Unfortunately, the public messaging by the solar industry has been misleading because it ignores the substantial impact of current NEM policy on the rates of all customers, including the vast majority of low- and middle-income families who don't have rooftop solar," Freedman said. "Absent major reforms, NEM is not scalable to accommodate the next decade of rooftop solar installation without threatening the affordability of basic electricity service for all customers."

About 45 percent of Californians are renters who are generally excluded from NEM because they can't install solar on properties they don't own, Freedman said. A community solar tariff would allow those customers to opt into shared facilities that are more cost-effective and provide value both to subscribers and to all customers, he added.

Former California Gov. Arnold Schwarzenegger in a Jan. 17 op-ed published in The New York Times decried the proposed decision, surmising that, if implemented, it would cause reductions in new rooftop-solar installations throughout the state. Schwarzenegger pointed out that while the CPUC is independent, Newsom appointed four of its five commissioners, and the governor's opinion on the issue matters, Schwarzenegger said.

The former governor and movie star also touted his administration's goal, achieved in 2019, of getting solar panels installed on 1 million roofs in the state. Currently, 1.3 million roofs on California homes, businesses and government structures have solar panels, generating roughly 10 GW, he wrote.

High-profile viewpoints have come from basketball legend turned "solar evangelist" Bill Walton and actor-activists Edward Norton and Mark Ruffalo.

Walton, in a Jan. 12 "open letter" distributed in a news release issued by Stellar Solar, called on Newsom to intervene in the commission's process. His comments reflect a position that the CPUC is not an independent agency, but rather the governor's tool.

"The CPUC, appointed, not elected, is responsible to you, Gavin, The Governor. And you to us," he wrote.

Norton, in a lengthy Twitter post, said that "California utilities like PG&E want to maintain their monopoly & look for every opportunity to kill rooftop solar which liberates customers from their control."

Dual rallies Jan. 13, during which solar industry workers, existing rooftop-solar customers and supporters marched and demonstrated outside CPUC offices in Los Angeles and San Francisco, reflected larger discontent with the proposal statewide.

Those who oppose the revisions are focused on lobbying Newsom, suggesting that his intervention is needed to either redirect the commission or overturn the CPUC's proposed decision before any final arguments are made or votes are cast. Newsom said publicly recently that there is still some work to be done on the proposal.