You may have seen headlines recently about net metering (NEM) changes in California. Here at OneRoof Energy, we’ve been tracking NEM policy developments and want to make sure you understand how these policies might impact your solar experience. Although there will be several changes to NEM in California, the industry is well prepared for the transition and expects continued growth.
The discussion on NEM revisions started when Governor Jerry Brown signed Assembly Bill 327 at the end of 2013. The bill required the California Public Utilities Commission (CPUC) to establish a successor NEM tariff that would take effect as soon as utilities hit their NEM caps or on July 1, 2017—whichever came sooner. The CPUC released final decision on January 28, 2016 establishing a successor to NEM (see Docket 14-07-002 Decision 16-01-044).
California NEM 2.0 Changes - What You Need to Know
The NEM successor tariff (NEM 2.0), which will remain in effect until 2019, introduces three changes to the existing NEM rate structure.1 Solar customers who apply for interconnection after the successor NEM tariff takes effect will be subject to a one-time interconnection fee, non-bypassable charges, and time-of-use (TOU) pricing. Any solar customer that applies for interconnection 2 before the utility reaches its NEM cap will be grandfathered into the traditional NEM structure for 20 years.
The one-time interconnection fee should cost less than $150.3 According to the CPUC decision, the interconnection fee “should not have a noticeable impact on the economics of installing a DG system but will allow the utility to recover the costs of providing the interconnection service.” ORE will always consider this cost before creating a solar proposal to ensure that you save money, and ORE will make the payment to the utility on your behalf.
The second change required by the successor NEM program is that solar customers must pay non-bypassable charges on every kWh of electricity they consume from the grid regardless of generation. Under traditional NEM, solar customers would only pay the non-bypassable charges for any electricity they consumed from the grid after subtracting the excess solar generation they supplied to the grid. Under the successor NEM tariff, solar customers must pay roughly two cents to cover the non-bypassable charges for all electricity they consume from the grid, as excess solar generation will no longer offset these shared subsidy costs. These “shared subsidy” costs go towards income-assistance, energy efficiency programs, and other programs that benefit ratepayers.
The last major change associated with the successor NEM tariff is the TOU requirement. All customers using the successor NEM tariff must also enroll in TOU pricing with no option to opt-out. TOU pricing is designed to reflect the true costs of electricity and encourage utility customers to consume electricity during times of lower demand by lowering prices. Similarly, during times of high demand, the utility needs to turn on more power plants and charges higher rates to discourage consumption. California utilities are in the process of publishing default TOU pricing; however, NEM 2.0 solar customers will always have the option to decline the default TOU rates and switch to another available TOU rate.
NEM 2.0 Benefits to Solar Customers
There are several positive takeaways from these changes. First, the shared subsidy charges help fund important public programs that benefit solar customers and non-solar customers alike. For example, a portion of the on-bill charges goes towards repayment of bonds issued by the California Department of Water Resources and helps pay for critical drinking water infrastructure—an important resource for all Californians. Given that solar often offsets the majority of customers’ utility bills, solar customers ended up contributing very little to these public purpose program charges. As solar grew in popularity, many of these programs were beginning to lose funding. The slight change in NEM policy is not expected to have a significant impact on solar savings but will definitely help sustain these important programs.
Another positive take away is that any additional costs that this policy change may impose on solar customers can be offset in most cases by smart energy consumption and TOU pricing. Under any TOU plan, solar customers save money by using your appliances and other high energy consumption devices during the daytime, when your solar panels are producing electricity. In most scenarios, TOU pricing values solar production more than traditional NEM, enabling you to save even more money than you may have under the old pricing structure.
Because SDG&E was so much closer to hitting its NEM cap than the other utilities at the time of the CPUC decision, its NEM 2.0 customers have slightly different requirements with regards to TOU than customers in PG&E and SCE territory. If an SDG&E solar customer applies for the NEM successor tariff after June 29, 2016 but before SDG&E finalizes its default solar TOU rates, the customer can continue to take service on SDG&E’s existing tiered rates or existing TOU rates for five years. However, SDG&E solar customers might consider switching to TOU even before it’s required. The TOU rate currently available for SDG&E solar customers often yields greater savings than traditional NEM. These savings, combined with smart energy consumption, can completely offset any additional costs caused by the new non-bypassable charges requirement.
California has set some of the most aggressive clean energy goals in the country, including the requirement that 50% of utility retail sales come from renewable energy generation by 2031. According to the Executive Director of the California Solar Energy Industries Association (CalSEIA) the transition to NEM 2.0 should not cause any disruptions in the residential rooftop solar industry. In fact, CalSEIA’s Bernedette Del Chiaro even anticipates “growth as more consumers realize that NEM 2.0 isn’t a threat to the economics of solar and that now is just as good to go solar as ever.” OneRoof Energy remains available to answer any of your questions and looks forward to a bright future for California solar.
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1 Under traditional NEM, solar customers receive credits at the full retail price for every kilowatt-hour generated by the solar system and exported to the grid.
2 To apply for interconnection, applicants must submit to the utility a complete NEM application, a signed NEM interconnection agreement, and final electrical inspection clearance from the city/county inspector.
3 As of June 2015, SDG&E will charge $132; PG&E will charge $145; and SCE will charge $75.
