The CPUC issued a ruling on May 9, 2022 re-opening the official record of the NEM 3.0 proceeding, doubling down on the solar tax and continuing to cling to the highly flawed “Avoided Cost Calculator” for determining the value of solar energy - both of which could be very damaging to the market.
Equally important to the questions that were asked are the questions that were not asked, namely about fixed charges that would be additional to monthly fees and retroactive changes to NEM 1.0 and 2.0 customers. As far as we can tell, both those items remain on the table. The 14 questions posed yesterday are broken down into three categories: 1) A Solar Tax; 2) A Glidepath; and 3) Low-Income Community Solar.
A Solar Tax Still on the Table for Both Residential and Commercial Solar
The CPUC has clearly not gotten the message that taxing solar energy is a bad idea, is highly unpopular with voters, and runs counter to California’s decades-long history of supporting energy conservation and efficiency.
Whether in addition to or in place of the Grid Participation Charge proposed in December it is unclear, the new ruling seeks input on the idea of charging fees on self-consumption. The Commission is contemplating charging solar users, commercial and residential, a per kilowatt-hour fee for energy that is generated on-site and consumed behind the meter. The fee could cover any, or all, of the following 11 categories:
Public Purpose Programs (e.g. energy efficiency incentives and CARE)
Wildfire liability
Legacy charges from utility sale of power plants 25 years ago
Nuclear Decommissioning
New System Generation
Reliability Services
PUC Reimbursement Fee
Energy Cost Recovery Account
Wildfire Hardening
Local Generation
Departing load charge (Power Charge Indifference Adjustment)
Combined, these charges would amount to 5 cents/kWh if all eleven categories were included, or around $600 per year for a typical residential system, or $1.8 billion if applied to the 150,000 new solar customers signed up each year over the life of the system. Further, there is no guarantee that the charges wouldn’t increase in years to come. The CPUC specifically asks how they would go about adding more charges in the future.
No matter the size of the fee, the concept is wrong-headed. California spends billions of dollars every year incentivizing energy efficiency and conservation. The California Energy Commission touts how these programs reduce electricity consumption by more than 70,000 gigawatt-hours per year, saving ratepayers more than $100 billion dollars in electricity costs over the past forty years.[1] Bravo, California! It is good to use less electricity, right?
Apparently not when it comes to solar. Here, if a solar user becomes one of the most advanced energy efficient consumers in the state by generating their own electricity right on-site, they are not doing enough and are going to be charged a fee for that electricity.
With the electrification of buildings and transportation, California is going to see electricity sales skyrocket in the next decade. By 2030, California will consume an additional 33 terawatt-hours of electricity if we meet state electrification goals.[2] Even if distributed solar were to continue apace, it will not come close to covering that increased demand. And, as we all know, solar consumers are more likely to electrify, increasing their overall use of electricity.
There is a long-standing tenet of good public interest policy: don’t tax good behavior. This idea violates that rule.
The Glidepath
Eight of the fourteen questions concern the “glidepath” which is code for how quickly the Commission can reduce the value of solar electricity exported to the grid without harming the market. And while it is good that the Commission acknowledges their legal obligation to ensure that distributed solar continues to “grow sustainably”[3], you could fit a nuclear power plant in the space between how the utilities define “sustainable growth” and how anyone with common sense would define it. And it remains undefined here.
CALSSA proposed in March 2021 that the Commission keep export credits tied to retail rates but slowly inch downward as a percentage of retail over the course of eight years. This declining credit structure would incentivize and allow for the development of the energy storage market while giving consumers a predictable value for their solar investment. Instead of that structure, the Commission continues to focus on the flawed “Avoided Cost Calculator,” developed and run by utility-consultant E3.
The Commission updated the “ACC” just last week. The updates fail to take into consideration the increased price of natural gas or to consider the full extent of increased demand due to electrification. And they turn a blind-eye to the challenges the utility-scale industry faces building projects in the next few years. Such flaws lead to a falsely low “value of solar” that then forms the basis for rock bottom solar export values. The Commission is considering an ACC plus some adder, to be determined, to dampen the blow of going down to ACC right away. If the “plus” is large and sustained across many years, perhaps “sustainable growth” can be achieved but the likelihood that the Commission could muster the political will to truly make up for the deficiencies in the ACC values when they just approved flawed values last week without hesitation is a longshot.
We Must Drive Deeper Equity in Solar
In promoting California’s distributed generation market among low-income customers and in communities of concern, CALSSA proposed that the Commission adopt a “NEM 2.0 Plus” approach along with changes to virtual NEM. We have long advocated (dating back to 2015) that customers on ratepayer assistance (e.g. CARE) receive full-retail credit for their exports, not discounted credits per their reduced rate. This would make rooftop solar more cost-effective for working families, not less. But the Commission seems to be looking at the low-income market as something to inflict a little less pain on (compared to the mainstream market), instead of how to incentivize it further than it is today and drive deeper equity. The questions being asked today are: How do we make NEM-3 less bad for low-income ratepayers compared to the general market? Instead of asking: How do we make NEM-3 an even better deal for low-income ratepayers, further driving adoption and equity in the market? The new ruling also puts forward some vague questions about community solar which the Commission has tried to establish many times already but has never moved past utility opposition.
CALSSA will get to work on Opening Comments due June 10 and Reply Comments due June 23. After that, the Commission would be expected to take time to consider the comments, incorporating them into a revised proposed decision, before scheduling a vote. If the Commission moved uncharacteristically fast, the revisions could be out as early as late July and a vote late August.
[1] California Energy Commission, Energy Almanac 2020
[2] CPUC, “Utility Costs and Affordability of the Grid of the Future,” p. 84, February 2021.
[3] Language in AB 327 passed in 2013.