California Net-metering Fight Moves to Legislature As Well As Public Utilities Commission
A bill in the California Assembly would radically reduce the value of solar generated electricity for utility solar customers, threatening the financial viability of installed solar and the future viability of the rooftop solar market in California.
The bill, AB 1139, would be particularly damaging to existing solar customers by shortening the time to be grandfathered under the previous rules. Existing customers with third-party-financed systems (such as Power Purchase Agreements and leases), or virtual net metering, would likely lose money by continuing to operate their solar systems. This significantly increases the risk of customers defaulting on these contracts.
Introduced by Assembly member Lorena Gonzalez (D-San Diego), the bill is reportedly sponsored by the International Brotherhood of Electrical Workers, the union for electric utility workers. It could supersede the net metering proceeding currently underway at the California Public Utilities Commission if the Commission does not issue a final decision in the Net Energy Metering 3.0 proceeding by February 1, 2021.
Both AB 1139 and the CPUC’s NEM 3.0 proceeding are efforts to address perceived cost-shifting, an equity issue in which non-solar customers subsidize solar customers, as well as to benefit electric utilities with greater cost recovery from solar customers. AB 1139 was recently reported out by the Committee on Utilities and Energy on a 12-0 vote – current NEM customers would be grandfathered for up to 10 years, instead of five or less, from the date of initial operation. That is far less than the current 20-year grandfathering that NEM 1.0 and NEM 2.0 customers have been expecting based on current regulations.
According to the California Solar + Storage Association (CalSSA), “The bill would retroactively harm those who have already gone solar, including low-income and working-class solar users who are nearing 50% of the annual market, by slapping $50-86 monthly solar fees and lowering the financial value of the rooftop solar energy exported to the grid by more than 80%.” Sage’s independent modeling of the AB 1139 provisions confirms these losses to solar customers.
Many groups are lining up against this bill, including school districts and local government agencies that have invested heavily in solar, and rely on the original NEM and NEM 2.0 tariffs being grandfathered for 20 years to provide operational savings.
AB 1139 would repeal PUC Section 2827, which created and defined Net Energy Metering, and replace it with a new law including the following changes:
All exported energy would be valued at the current wholesale rate (~$0.027/kWh)
Solar customers would pay additional monthly fixed charges based on their tariff and energy usage
Deletes the statutory requirement that NEM ensures the CA solar market “grows sustainably”
Deletes the statutory requirement for CPUC to provide a transition period between successor tariffs (e.g. grandfathering) based on a reasonable expected payback period – 20-year grandfathering of NEM 1.0 and NEM 2.0 customers would be replaced with 5-10-year grandfathering
Requires CPUC to adopt NEM 3 by Feb 1, 2022, and transition all customers onto NEM 3 by Dec 31, 2023
Requires prevailing wage for all solar projects
Stay tuned for our upcoming white paper that models the impacts of AB 1139 compared to the investor-owned utility proposals for NEM 3.0, and alternatives.