PG&E's Solar-Friendly A-6 Tariff: August 2016 Update
Solar-Friendly A-6 Tariff Eligibility Extended to March 31, 2017
In August of 2015, the CPUC ruled that PG&E’s solar-friendly A-6 tariff would be available to all new customer accounts with less than 500 kW annual peak demand through December 31, 2016. After that date, the A-6 tariff would be closed to new accounts with greater than 75 kW annual peak demand. Any account on the A-6 tariff at the closure date can remain on the tariff as long as the account meets the previous applicability requirements.
In May, 2016, PG&E submitted Advice Letter 4740-E-B to the CPUC requesting to change the December 31, 2016 deadline to March 31, 2017, delaying closure of the A-6 tariff to new accounts with greater than 75 kW annual demand for three months. The CPUC accepted this proposal in July, 2016.
Why Small to Medium-Scale Commercial Solar Customers Benefit
This delay in closure of the A-6 tariff until the end of March 2017 is good news for PG&E small to medium commercial customers considering implementing solar PV projects in 2017. Even if a project is not completed and interconnected prior to the March 31 deadline, a customer can transition an account with less than 500 kW annual peak demand to A-6 prior to the deadline, in anticipation of the solar PV system coming online.
Transitioning to A-6 Early Has Short-Term Cost, Long-Term Value
Transitioning an account to A-6 prior to interconnecting the solar system will increase the cost of energy until the PV system is interconnected. For a typical PG&E commercial customer expecting to offset most of their annual energy bill with solar on the A-6 tariff, Sage’s conservative rule of thumb is:
Each month that an account is transitioned to the A-6 tariff before the solar PV system is interconnected will require up to two months of solar PV system operation to offset the increased cost.
For example, if you transition an electrical account to A-6 in March of 2017 and your solar PV system comes on line in August of 2017 (a 5-month period), the first ten months of energy savings from solar PV operation may be consumed paying off the extra energy costs incurred in the five months before the PV system was interconnected.
Up-front loss of value from early transition to the A-6 tariff is significant, but the financial performance of the PV system on the A-6 tariff over time vs. other tariffs is worth the upfront investment.
The Future of the A-6 Tariff
We often hear that the A-6 tariff has been “grandfathered” for customers with greater than 75 kW of maximum annual demand that are on the tariff by March 31, 2017, the date it will close to these accounts. That is not the case. Customers on the A-6 tariff as of March 31 can remain on the tariff until the matter is addressed in a future rate case, according to the August CPUC ruling referenced above. There has been persistent talk of a 5-year grandfathering period, but neither PG&E or the CPUC has proposed that.
In PG&E’s 2017 General Rate Case Phase II and subsequent Testimony submitted to the CPUC June 30, 2016, PG&E proposes radically altering the Time Of Use (TOU) periods for non-residential customers. This includes all customers that are eligible for the A-6 tariff. They also propose changing A-6 rates to accommodate the new TOU periods. However, PG&E does NOT suggest retiring A-6 or adding demand charges to the tariff. For this reason, we believe the A-6 tariff will exist in its current form – energy charges but no demand charges – for at least the next few years. However, we anticipate TOU and rate changes that will impact the value of solar PV systems. We will have a more detailed discussion of these proposed changes in a future post.
Want to learn more about how to finance your next solar energy project? Read more from our CEO, Arno Aghamalian, in the Washington Post.
Questions about your solar project? Call Sage.