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California — Pacific Gas and Electric Company (PG&E), San Diego Gas & Electric Company (SDG&E) and Southern California Edison (SCE) together proposed to modernize California’s 25-year-old rooftop solar program to support customer equity and help continue California’s success toward a clean energy future.

Submitted to the California Public Utilities Commission, the joint proposal lays out a new approach for compensating future rooftop solar customers who export excess solar energy to the electric grid. This proposal would only apply to future, new rooftop solar customers, not current solar customers.

The heart of this modernization effort addresses an unfair and growing inequity stemming from earlier versions of the rooftop solar Net Energy Metering (NEM) program. This cost shift leads to electricity customers without solar systems paying about $3 billion more annually in their electricity bills to subsidize existing rooftop solar customers.

This represents each customer without solar paying as much as $240 extra every year, or more for some customers with higher energy needs. The subsidy represents the costs of the electric grid that solar customers use, but for which they do not pay. Oftentimes, those left paying these higher costs are lower-income customers.i

This proposal to modernize the 25-year-old NEM program would accomplish the following objectives:

Ensure solar and non-solar customers using the grid pay their fair share for its costs;
Minimize any new, unnecessary bill increases for customers without solar, many of whom are lower income;
Help California achieve its climate change and clean energy goals in a more cost-effective and equitable manner; and
Update the current, outdated structure to align with today’s lower cost of solar energy and changing grid needs.

Joint Proposal from PG&E, SDG&E and SCE

The joint proposal for future rooftop solar customers:

Updates compensation for excess energy created by customers’ rooftop solar systems and exported to the grid to better align with the actual value of power and to more closely resemble what utilities pay for large-scale renewable energy resources.
Offers discounts for lower-income customers to ensure greater access to solar for these customers.
Encourages the adoption of rooftop solar with battery energy storage to increase the ability of customers to support the electric grid at critical times when the sun is not shining.
Includes a monthly grid charge to ensure solar customers are appropriately contributing to costs for maintaining, operating and improving the grid, and for statewide public purpose programs, such as energy efficiency or programs for lower-income customers.
Includes a monthly customer charge to pay for costs related to customer service and support such as call center costs, metering and other services benefitting all customers.

While the $3 billion cost shift from existing solar customers would continue, the joint utility proposal, if adopted, would ensure that this burden does not increase as new customers adopt rooftop solar.

Background on California’s Current Solar Incentive Program

The NEM program was established in 1995 to incentivize Californians to install rooftop solar panels to help jumpstart the solar industry, drive down costs and facilitate the transition to a clean energy future – and it worked.

In 1995, there were 10,000 home-based solar systems. Today, there are more than 1 million.
The cost of solar technology has fallen more than 70%ii since the program began 25 years ago.
Today, 50% of California’s electricity is from clean, renewable sources including 15% from rooftop solar.iii

How the Current NEM Program Works

A customer’s rooftop solar equipment is connected to the electric grid. Solar customers use energy produced by their solar panels during the day when solar power is available and from the utilities at night or whenever their solar system is not generating enough power. Even when their solar panels produce energy, customers rely on the electric grid for power and for exporting their excess solar generation to the grid. Customers with both rooftop solar and battery storage systems are also connected to and rely upon the grid.

Rooftop solar customers receive a credit on their electric bills when their system generates more power than they need, and that power is sent to the electric grid. The original goal of the credit was to help customers pay off their system over a reasonable period.

Since the NEM program was established, solar costs have fallen dramatically:

Today, the credit that rooftop solar customers receive for excess energy sent to the grid is 25 cents per kilowatt-hour, on average.
By comparison, the cost for energy from a large-scale solar farm is 3 cents per kilowatt-hour.
Customers are able to pay for their system in less than five years but continue to receive this subsidy for 20 years.

The result of this high credit is that rooftop solar customers do not pay their full share for use of the grid that they rely on or for state-mandated, public policy programs that support energy efficiency or lower-income customers.

Derick Lila
Derick is a Clark University graduate—and Fulbright alumni with a Master's Degree in Environmental Science, and Policy. He has over a decade of solar industry research, marketing, and content strategy experience.

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