Net Metering 2.0: How Will APS Case Impact California Decision?

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In California, as communities and cities face the threat of drastic changes to their solar policies, the specter of the recent APS rate case in Arizona haunts the upcoming proceedings. Some predict that the fact that the rate increase was even considered spells doom and gloom for California policies. Others forecast that the victory of the solar industry in Arizona foretells a similar victory in California.

Next week the hearings begin, with a decision to be reached by the end of the year. So, the question is, What does the future hold for California solar, and how will Arizona’s impact be felt?

History

California’s net-metering policy is due to be updated by the end of this year. For the last few months, California utilities, including SDG&E, SCE, and PG&E, have submitted proposals to the California Public Utilities Commission (CPUC) that would impose heavy penalties on solar customers. Lyndon Rive, CEO of SolarCity, says these changes would be “catastrophic” for solar in the state.

On the other side, solar advocates find that the current system works very well, and would be content to see it continue with little change.

Considering itself to be the middle ground, but actually more in-line with utility company plans, is the Office Ratepayer Advocates (ORA). Just a few years ago, ORA (then the Division of Ratepayer Advocates, or DRA) supported net metering. Now, their proposal would have greater consequences on solar customers than the APS proposal would have. That is quite a change of heart.

What’s the Problem, Anyway?

Net metering has been portrayed as an unfair benefit to solar customers, or as an incentive. In reality, that has never been the case. Net metering is simply a billing mechanism. As homeowners began providing their own power, the utilities had to come up with a way to account for it. Simply put, net metering is a way to ensure that customers are fairly compensated for the energy they provide to the grid.

The idea that a utility and its non-solar customers subsidize solar net metering customers has been refuted in study after study. At worst, a break-even has been found. However, most studies have found that solar actually benefits non-solar customers. Perhaps a study should be commissioned to determine how much rates would increase for all utility customers if the amount of rooftop solar goes down.

So, Why the ORA Change of Heart?

ORA members were appointed by the governor. Jerry Brown has been generally pro-renewables. He has championed the plan to bring the state to 50 percent renewables by 2030.

In 2012, Joe Como of ORA (then known as DRA) released this statement in a press release which xcan be found on Bloomberg:

“The utilities don’t like net metering because it cuts into their business The benefits that NEM promotes are all good things for California ratepayers. The utility argument that there is a ‘cost-shift’ from NEM participants to non-NEM participants is an overly simplistic statement.  They do not substantiate their claims and don’t consider all of the benefits to net metering.”

 He also made this statement to Greentech Media in 2012:

“The utilities haven’t provided any data on the increased costs,” said the CPUC Acting Director of the Division of Ratepayer Advocates (DRA) Joe Como, whose job is to stand up for the ratepayers the utilities are supposed to be protecting. NEM “cuts into their business and they’re not the ones getting the money,” he added. “They’re never upset when they’re receiving the money.”

ORA’s current proposal, on the other hand, is completely anti-solar. The organization now says this in its filing:

“Currently, as retail rates increase, NEM compensation increases, which is a perverse incentive for a declining cost resource.”

What this means is that the office went from supporting net metering to proposing legislation that would for all intents and purposes eliminate net metering in California.

It would wipe out solar savings completely and add taxes on solar customers of up to $70/month for an average-sized system.

The first step would be a monthly fee of $2, to be implemented when a utility surpasses 5% of its aggregate customer peak demand, or July 1, 2017, whichever comes first. This is likely to happen soon. It comes out to between $12 and $14 per month for an average system of 6 – 7 kW in size.

Step two would be a monthly fee of $5 per kW, to be implemented when the proportion of existing net metering and successor tariff interconnected capacity surpasses 6% of a utility’s aggregate customer peak demand. Again, this could happen soon. The amount in this step would come to between $30 and $35 per month for an average system.

The third step would be a monthly fee of $10 per kW, to be implemented when the proportion of existing net metering and successor tariff interconnected capacity surpasses 7% of a utility’s aggregate customer peak demand. This would come to between $60 and $70 per month for an average system.

So far, there has been no explanation for ORA’s change of heart. The organization’s proposal could be a danger for solar net metering. The CPUC might see this policy as a viable middle option, rather than a plan more severe than the Arizona Public Service plan that was withdrawn last week.

When the hearings begin next week, new issues will arise. We will keep you updated.