California Regulators Propose Cutting Compensation for Rooftop Solar

For a second time in less than a year, regulators in California moved on Thursday to roll back the compensation that homeowners receive from utilities for the excess electricity their rooftop solar panels send to the electric grid — payments that power companies and some consumer groups have argued hurt poor and low-income households.

The new proposal from the California Public Utilities Commission would cut the benefit for almost all new rooftop solar customers by about 75 percent starting in April. Under current rules, households that send excess power to the grid receive credits on their utility bills that are equivalent to retail electricity rates. The system of credits is known as net energy metering.

The measure, which will be subject to public comment before the commission’s five members vote on it, would also limit solar systems to 150 percent of a building’s electricity load.

Regulators in other states are closely watching how California changes its net metering program. Utilities and solar energy companies have been fighting over energy credits in numerous states. Billions of dollars in investment and revenue are potentially at stake. More generous credits typically encourage people to buy solar panels but can cut into the profits of utilities.

California leads the nation by far in the use of rooftop solar, with about 1.5 million such installations. The utilities commission estimates that those systems have the collective capacity to generate 12 gigawatts of electricity, or the equivalent of 12 nuclear power plants.

In a statement, the commission said the new proposal would make net metering more equitable. Average residential customers of Pacific Gas and Electric, Southern California Edison and San Diego Gas & Electric who install solar panels would save $100 a month on their electricity bill, and average residential customers installing solar paired with battery storage would save at least $136 a month, the commission stated.

As a result of those savings, it said, the average household that installs a new solar or solar and battery system would be able to fully pay off the system in nine years or less.

Compensation would not change for homeowners who already had rooftop solar panels, for at least 20 years from when their system was installed.

As rooftop solar systems have spread over the last decade, the utility industry has criticized use of the technology and called net metering an unjust subsidy. Utilities argue that rooftop solar homes that greatly reduce or zero out their monthly electric bills are effectively forcing households without panels to bear more of the cost of maintaining the electric grid.

But the solar industry has argued that net metering is needed to encourage use of rooftop solar and reduce the emissions responsible for climate change.

“If passed as is, the C.P.U.C.’s proposal would protect utility monopolies and boost their profits, while making solar less affordable and delaying the goal of 100 percent clean energy,” said Bernadette Del Chiaro, executive director of the California Solar and Storage Association.

The commission said in response that utilities do not make money from the sale of electricity. Rooftop solar, though, can help reduce the need to build some utility equipment, cutting into the profit that power companies earn from the equipment.

Although the latest proposal would drastically reduce the value of solar energy credits, a nonprofit organization that is funded by California’s utilities, Affordable Clean Energy for All, said it did not go far enough.

“It is extremely disappointing that under this proposal, low-income families and all customers without solar will continue to pay a hidden tax on their electricity bills to subsidize rooftop solar for mostly wealthier Californians,” said Kathy Fairbanks, a spokeswoman for the group.

Early this year, the commission put aside a December proposal to change net metering after the solar industry and homeowners said it would greatly reduce the use of rooftop solar panels in the state. That proposal would have also imposed new monthly fees on the utility bills of rooftop solar homes, a provision that is not in the proposal introduced on Thursday.

Utility companies and their allies, which on this issue have included the Utility Reform Network and the Natural Resources Defense Council, strongly endorsed the first proposal.

Months after that proposal was scrapped, President Biden signed the Inflation Reduction Act in August, giving both the solar industry and utilities more government support.

The law, along with an earlier bipartisan infrastructure law, offers hundreds of billions of dollars in incentives to energy companies to build large power plants, solar and wind farms, and transmission lines. The Inflation Reduction Act also expands and extends federal tax credits for individuals to buy rooftop solar systems, home batteries and electric cars.


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