The California Public Utilities Commission (CPUC) could soon make big changes to how rooftop solar installations function in the state. Under Assembly Bill 327, enacted in 2013, the CPUC has until December 31, 2015 to “develop a standard contract or tariff” that applies to “customer-generators” who own rooftop solar installations or other distributed generation and are located in the service territories of Pacific Gas and Electric (PG&E), Southern California Edison (SGE), or San Diego Gas and Electric (SDG&E). This “successor” tariff could replace the current system of net energy metering (NEM), which allows rooftop-solar owners to offset their own energy use with the energy they generate and get paid retail rates for the net energy they export to the grid. (The new tariff will not apply to those who already participate in net metering.)
PG&E, SCE, and SDG&E filed comments in early-August, arguing that a new tariff is needed in order to promote sustainable growth for rooftop solar that harmonizes with the entire grid. Utilities claim that the current NEM tariff does not adequately charge customer-generators for fixed costs of maintaining the grid and are proposing monthly grid access charges to address this imbalance. Solar industry associations have filed comments urging the CPUC to keep net metering largely intact, and have said that the utilities’ concerns over cost-shifting are unfounded.
A common feature of the utilities’ proposals would charge customer-generators at the retail rate for electricity they consume from the grid and would pay a lower rate for energy generated on rooftops and exported to the grid. However, solar industry advocates warn that the utilities’ proposals could expose rooftop solar owners to significant tax risk because the proposals could be interpreted as a bifurcation of rooftop energy generation and household energy consumption, in which case customer-generators could potentially be taxed on income they receive from selling energy to the grid without being able to deduct the cost of purchasing energy from the grid.
Another potential wrinkle in this proceeding is that the current NEM tariff caps net metering at 5 percent of a utility’s nameplate generation, and solar installers operating in San Diego are concerned that SDG&E might reach that cap soon, which would bar any new installations until the new tariff is finalized. If utilities don’t reach that threshold, the tariff will become effective July 1, 2017 and there will be no limit on installed distributed generation capacity thereafter.
In any event, we can be sure that this is not the last we will hear about potential restructuring of net metering schemes. Utilities in many states are proposing new rate designs for rooftop solar and distributed generation systems through traditional rate cases and separate proceedings.