On Dec. 13, the California Public Utilities Commission issued its proposed decision on the successor to the state’s solar net-metering program. This proposal is not yet set in stone — it must be heard and voted upon by the commission, which will happen during the January 27, 2022, business meeting, at the earliest.

The proposal shifts from a net-metering to a net-billing structure, allowing the dollar value of credits to be set at a different level than the energy’s import price. As such, CPUC notes it does not refer to this tariff as NEM 3.0, but rather as the Net Billing tariff. The commission also adds a Grid Participation Charge for solar customers and a long-term Market Transition Credit to encourage storage paired with solar systems.

Net Billing Tariff

The Net Billing Tariff will result in lower incentives than the previous net-metering tariff. The commission made the decision to switch to a new plan based on findings that the current net-metering tariff negatively impacted non-solar customers and disproportionately harmed low-income ratepayers. The CPUC report notes that NEM 1.0 and 2.0 created “equity concerns due to the misalignment between costs and value,” which created “revenue under-collections that must be recovered by nonparticipating customers.”

CPUC calls the new program an “improved version of net billing” that provides an export compensation rate “aligned with the value behind-the-meter energy generation systems provide to the grid based on avoided cost values and import rates that encourage electrification and solar paired with storage.” Net Billing customers can oversize their systems by up to 150% of historical load to allow for future home electrification.

The Net Billing values for the first five years following a customer’s interconnection date will be based on a schedule of values for each hour from the most recent Avoided Cost Calculator, which provides avoided cost values for each climate zone.

CPUC says this “lock-in period” is meant to ensure customer-sited solar continues to grow sustainably and enhance consumer protection measures. After those five years, export compensation will be based on average monthly avoided cost values.

Market Transition Credit

The successor tariff also includes a Market Transition Credit, which offers a four-year “glide path” for the industry and encourages customers to pair solar with storage. The Market Transition Credit will allow customers to lock in a 10-year payback period that includes up to $5.25/kW for residential solar + storage and solar-only systems. Customers who are required to install solar pursuant to the new construction requirements under Title 24 Building Energy Efficiency Standards are not eligible for this credit.

The Market Transition Credit is a monthly credit based on a system’s expected generation that is specific to each utility. It will be in effect over four years and will initially be available to residential customers that submit interconnection applications after the NEM 2.0 sunset date and before December 31 of the year the three utilities complete implementation of the successor tariff. Each year after, the credit will decrease by 25% until it reaches zero.

Grid Participation Charge

The commission has also proposed a new differentiated time-of-use rate and grid benefits charge, renamed as the Grid Participation Charge. CPUC says this verbiage “sends a clear message to the customer that they are paying to use the grid.” This will be a fixed monthly charge of $8.00/kW. Low-income and tribal households are exempt from this charge.

The California Solar & Storage Association spent the past year rallying support for continued NEM incentives, including collecting hundreds of thousands of public comments to deliver to the commission and organizing a $1 million fundraising drive. SPW will update this post with CALSSA’s reaction when it’s available.

SEIA issued a statement saying this decision will harm clean energy progress.

“Only the wealthiest Californians will be able to afford rooftop solar, shutting out schools, small businesses and the average family from our clean energy future,” said Abigail Ross Hopper, president and CEO of SEIA. “The only winners today are the utilities, which will make more profits at the expense of their ratepayers. We urge Governor Newsom to act quickly to change this decision — at risk are 65,000 solar jobs, the security of our electricity grid, and the health of California residents and our planet.”

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