In its first move since hitting “pause” on the California Public Utilities Commission’s (Commission) consideration of a controversial December 2021 proposed decision (Proposed Decision or PD) that would have overhauled the existing net energy metering (NEM) tariff for California’s solar customers, the presiding administrative law judge (ALJ) issued a ruling on May 9 to reopen the record and invite party comments on a limited scope of issues.
The Commission adopted California’s existing solar tariff, known as NEM 2.0, on January 28, 2016 in Decision (D.) 16-01-044. Customers opting into this tariff pay a one-time interconnection fee (less than $150 for systems under 1 MW and $800 for systems over 1 MW). Customers taking service on the NEM tariff are automatically opted into a time-of-use rate plan and are subject to select non-bypassable charges (NBCs) that are used to fund general customer programs such as contributions to the wildfire fund, nuclear decommissioning, and the public purpose program, among others. NEM customers receive a bill credit for any excess generation produced by their system and exported to the electric grid, which credits may be used to offset customer energy costs. Under NEM 2.0, any excess generation credits are applied to the customer’s bill at the same retail rate (including generation, distribution and transmission charges) the customer would have paid for the energy consumption.
In 2020, the Commission opened a rulemaking proceeding (R.20-08-020) to evaluate NEM 2.0 and to develop its successor tariff, NEM 3.0. Particular concerns were raised regarding equity issues and cost-shifts between NEM customers and those taking service under standard tariffs, especially with the reported misalignment in the rate of compensation to NEM customers for excess generation versus the value of the energy delivered. (See E3 Report, Alternative Ratemaking Mechanisms for Distributed Energy Resources in California, January 28, 2021, for a detailed evaluation of NEM 2.0, available at E3 Successor Tariff Report.)
The Commission issued a proposed framework for NEM 3.0 in December 2021 that introduced a significant Grid Participation Charge of $8/per kilowatt of installed solar and lowered the compensation rate for excess generation, among other significant changes. The Proposed Decision was widely condemned by the solar industry and viewed as putting a halt on solar rooftop installations, contrary to the State’s clean energy policy goals.
After end-of-year turnover in the Commissioner’s office, the Proposed Decision was pulled from consideration during the January 2022 voting meeting. In a February 3, 2022 procedural communication, the assigned ALJ explained that the newly-appointed Commission President Alice Reynolds “has requested additional time to analyze the record and consider revisions to the Proposed Decision based on party comments.”
May 9 Ruling to Reopen the Evidentiary Record and Take Party Comments on a Limited Basis
In a May 9 ruling (Ruling), ALJ Hymes seeks party comments to explore three elements of the Proposed Decision: (A) the “glide path” approach, which establishes a transition plan for customers on the existing NEM 2.0 tariff; (B) which NBCs should apply for gross consumption under the tariff; and (C) how the tariff should intersect with existing community solar programs. Parties are invited to comment on fourteen questions comprised from each of these three issues detailed below.
(A) Glide Path Approach
The “glide path” refers to the process for transitioning customers from the existing NEM tariff to a successor tariff. The December 13 Proposed Decision included a residential customer glide path approach in the form of a Market Transition Credit (MTC), which is a fixed dollar per kilowatt ($/kW) of solar system size, provided as a monthly electricity bill credit. The MTC would apply in addition to the electricity bill credits provided to a NEM customer for exported energy, which the PD proposes to calculate on hourly Avoided Cost Calculator (ACC) values. The PD proposes to apply the MTC to residential customers for the first four years on the NEM 3.0 tariff, but the MTC credit would step down by 25% for customers over a four-year period.
The Ruling requests party comments on another glide path proposal submitted in the proceeding, known as “ACC Plus.” Under the ACC Plus proposal, customers would receive a fixed cents per kilowatt-hour export adder in addition to the ACC-based hourly export credits, and this adder would step down over time. Parties are invited to comment on whether the ACC Plus glide path should be adopted as an alternative to the MTC approach and to explain why. For example, parties are directed to consider whether the ACC Plus glide path approach is “a more effective approach in ensuring that customer-sited renewable distributed generation continues to grow sustainably.” Altogether, the Ruling poses nine sub-issues for consideration and comment regarding the preferred glide path approach.
(B) NBCs on Gross Consumption
The Ruling seeks party comments on a proposal from the Sierra Club to collect NBCs on each NEM tariff customer’s gross consumption, including both imports and behind the meter consumption, which differed from the NEM 2.0 tariff that customers currently pay on billed imports only. Parties are requested to comment on how this measure should be implemented, should the Commission choose to apply such a gross consumption NBC, with regard to the following considerations: (1) whether the Commission should collect gross consumption NBCs on all customers or only a subset of customers (e.g., nonresidential only, or non-low-income, etc.); (2) which NBCs should be recovered if collected (e.g., Public Purpose Programs, Competition Transition Charge, DWR Bond Charge/Wildfire Fund, PUC Reimbursement Fee, Power Charge Indifference Adjustment, etc.); and (3) what process the Commission should adopt for determining whether and how additional electric program or securitization charges should apply to NEM tariff customers as NBCs.
(C) Community Distributed Energy Resources
The Ruling seeks party comments comparing the benefits of the Commission’s existing Community Solar Green Tariff (CSGT), which allows for residential customers in disadvantaged communities to benefit from local solar projects and receive a 20 percent bill credit, with a new community solar tariff program modeled off of the NEM 3.0 Tariff structure. The Ruling further requests comment on whether the Commission should adopt a policy that any community solar program or tariff guarantee a certain level of bill savings for low-income participants and/or renters to increase participation and ensure consumer protections. Comparisons to other states may be appropriate.
Opening comments in response to the Ruling are due on June 10 and reply comments may be filed by June 24. Any comments submitted on topics beyond this discrete list of issues will not be considered by the Commission.