California utilities commission sued for gouging rooftop solar payments


A coalition of three environmental groups have filed a lawsuit against the California Public Utilities Commission (CPUC) for instituting a rulemaking decision that rapidly and sharply slashes payments to rooftop solar owners for exporting clean energy to the grid. 

The Environmental Working Group, the Protect our Communities Coalition and the Center for Biological Diversity filed a petition with the California Court of Appeal to review the state’s new Net Energy Metering 3.0 policy. 

In December 2022, CPUC decided to pass NEM 3.0, reducing payments for exported solar energy by up to 80%. 

The petition said the rulemaking violates the state’s climate laws and improperly evaluates the many benefits of small-scale, distributed solar on rooftops, while ignoring the billions of dollars utilities spend on transmission infrastructure that drives increased rates. Benefits of rooftop solar include reduced greenhouse gas emissions, resilience to extreme weather and power outages, and avoided land use impacts by decreasing the need for utility transmission infrastructure which also keeps electricity bills down.

The lawsuit directly names the three large investor-owned utility companies, Pacific Gas and Electric Company, Southern California Edison, and San Diego Gas and Electric Company, as the real parties in interest.

The decision adopted an investor-owned utility-developed avoided cost calculator to set rates. NEM 3.0 was implemented on April 15, and has worsened the return on investment for rooftop solar, particularly when not paired with energy storage. 

The state was the tip of the spear for the rooftop solar industry across the United States, representing about 50% of the market, and now that spear is blunted. Wood Mackenzie and the Solar Energy Industries Association (SEIA) project that new residential solar installations in California are expected to decrease by nearly 40% through 2024, after doubling in 2020 to 2022.

“The commission’s misguided new policy violates California’s climate laws and will stifle rooftop solar growth, especially for working-class families,” said Roger Lin, an attorney at the Center for Biological Diversity. “It’s outrageous that the commission is slow-walking our renewable energy transition when we need to be racing toward it.”

The petitioners said NEM 3.0 contained numerous legal errors and false assumptions, and that the Court must reverse the decision, grant review, and remand the issue with instructions to comply with the legislatures requirements to fully and properly evaluate NEM’s costs and benefits.

Why cut solar? 

The petition highlights methods utilities are using across the country to block rooftop solar as distributed energy resources threaten the utility profiteering. A report from the Center for Biological Diversity evaluates rooftop solar and net-metering benefits and why corporate utility companies are trying to kill these programs.

The rulemaking decision was justified based on an analysis that suggested non-rooftop solar customers were subsidizing their neighbors that decided to invest in the clean energy transition.

However, this utility-forwarded cost shift argument has been debunked. Lawrence Berkeley Laboratory found that 47 states have a negligible solar power cost shift. Most states have solar penetration levels far below 10%. Until you hit that level of penetration there’s no cost shift altogether, yet states across the country are following California’s footsteps in slashing net metering.

Even at penetration levels of 10% or higher, the national laboratory found that the “shift” is only 5/1,000 of a cent per kilowatt-hour. Sixteen state-level analyses have come to the same conclusion that the cost shift is negligible.

“If the goal is to keep prices low, there are other pieces of the puzzle that affect rates far more than net metering,” Galen L. Barbose, a research scientist at LBNL, echoing a study by LBNL which put this in context. “Carbon pricing, operating outdated plants—those are the issues utilities and regulators should be focused on.”

More trouble ahead

What’s more, the state’s Public Advisor’s Office (PAO), following state procedures that require it to equitably balance the resource cost demands of the major investor-owned utilities, has recommended a fixed utility bill fee for all Californians based on income.

PAO’s recommendation assigns customers with fixed monthly fees between $22 per month and $42 per month, while some utility proposals under review would assess fees as high as $128 per month for California residents. This proposal would even apply to rooftop solar customers who consume zero electricity from the grid.

“In just about every case, if you are a low electricity user today, with a relatively low bill, you are going to see a higher bill once this plan is in place,” said Ahmad Faruqui, economist-at-large, grid controls expert, and California resident. 

“Customers will be very irritated,” said Faruqui. “They will be paying more for electricity not because their behavior changed but because California is changing the rules.”

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