The California Public Utilities Commission (CPUC), the entity responsible for regulating the investor-owned electric and gas utilities in California, launched a proceeding to re-evaluate the current net energy metering (NEM) program and decide upon a new NEM program, to be established as NEM 3.0.

Simply put, NEM is the program that allows rooftop solar customers to be compensated for the excess electricity they send back to the power grid.  NEM, paired with solar financing and ratepayer funded incentives, has allowed solar to become increasingly accessible to low-and-moderate income families across California.

California investor-owned-utilities (IOUs), Pacific Gas and Electric, San Diego Gas & Electric and Southern California Edison have submitted a joint proposal that calls for drastic changes to NEM that would make solar energy more expensive, increase the amount of time it takes for customers to pay off the system and ultimately has the potential to eliminate the California solar market.  

For a deeper dive on NEM in California, please visit our blog on the history of NEM.

A total of 17 party proposals were submitted to the CPUC for consideration early this year.  Each proposal is required to demonstrate the cost effectiveness of their proposal as well as adhere to the guiding principles put forth by the CPUC.  These guiding principles include:

Proposals were submitted by:

*The commission is expected to vote on the revised proposed decision on December 15.  No later than 120 days after the adoption of this decision, the Commission will implement a tariff sunset on NEM 2.0, after which time no additional solar customers will be permitted to take service under the NEM 2.0 tariff.  If a customer is seeking NEM 2.0 status, it is imperitive that they have a complete interconnection application filed with their utility no later than 120 days after the adoption of the CPUC's final decision.
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On June 24, 2021 the CPUC voted to approve major updates to the calculator that will be used to evaluate every NEM proposal, called the Avoided Cost Calculator.  These major updates undercut the value of solar by two-thirds compared to the 2020 version of the calculator.  The calculator was developed by the E3 consulting firm which is the same consulting firm used by utilities that regularly puts out products that are biased against distributed generation.
 
The commissioners voted unanimously to approve the updates despite the fact that the calculator uses an entirely new and untested model for predicting how wholesale energy pricing will behave in the future.  These updates were labeled as minor, and as such did not go through a robust public process where stakeholders can engage and vet the new model.  Over 7,000 comments were made by environmental advocates, homeowners, community groups and climate justice organizations urging the commissioners to not vote to make the updates official until after the new model has been put through a public process. 
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Our local coalition mobilized quickly to ensure that San Diego’s voice and priorities were on the record in this proceeding and successfully advocated for six cities in San Diego County; Solana Beach, Imperial Beach, Chula Vista, Encinitas, Carlsbad and San Diego,  to issue resolutions standing up for solar and urging the CPUC to adopt a decision that allows solar to continue to grow. 

In addition to the six cities in the region weighing in on the proceeding, the Mayor of San Diego, San Diego Community Power and over 40 local organizations have submitted letters to the governor, urging him to step in and stop the utilities and the CPUC from destroying the solar market.

Read more about our growing local coalition here.

The CPUC’s Proposed Decision

On December 13, the highly anticipated net energy metering (NEM) 3.0 proposed decision was released.  It is very clear that the California Public Utilities Commission (CPUC) sided with the investor-owned utilities and proposed to make drastic cuts to the benefits of going solar.  

The CPUC’s proposed decision threatened to:

• Reduce solar credits by 80 percent, from around 25 cents per kilowatt hour all the way down to 5 cents per kilowatt hour.
• Mandate solar customers to pay high and punitive monthly fees.
- An average system in SDG&E territory will carry the monthly fee of about $64 per month.
- An average system in PG&E territory will carry the monthly fee of about $48 per month.
- An average system in SCE will carry the monthly fee of about  $60 per month.
• Take away protections for existing solar customers, which expected 20-years of so-called “grandfathering.” Under current rules, customers who went solar were guaranteed protections  for 20 years. The proposed decision calls for a 25 percent reduction in grandfathering periods for existing customers.
• Slow the adoption of rooftop solar, increasing dirty energy usage, worsening climate injustices and accelerating the climate crisis.

The CPUC re-opened the proceeding on May 9, 2022 in order to collect additional information. There were a total of 14 questions that parties were asked to provide feedback on, covering the topics of a solar tax, a glidepath and low income community solar.

On November 10, the CPUC released their long awaited revised proposed decision. The revised proposed decision includes drastic cuts (75% reduction) to the solar credits customers receive for sharing their excess energy with their neighbors. Although the revised proposal is far better than the proposed decision issued in December 2021, it still carries not only a massive risk to California’s solar and storage market, but will also almost guarantee a decrease in the adoption of solar, making our climate goals that much harder to reach.