New CPUC Chief Faces Barrage of Anger Over Solar Rooftop Pay Changes

By Published On: January 14, 2022

Alice Reynolds’ first meeting as the new president of the California Public Utilities Commission was dominated by three hours of clashing public response to the controversial proposed decision to both lower payments for electricity from solar rooftops sent to the grid and raise monthly charges. But this Net Energy Metering 3.0 proposal won’t come up for a vote before the end of the month, at the earliest.

The opposing sides repeated their arguments for and against the NEM reform proposal during the CPUC’s remotely held Thursday meeting. Solar advocates and owners of PV systems reiterated that the proposal would damage the distributed solar market and with it the state’s efforts to decarbonize. Proponents, largely represented by utility workers, said the current payment scheme is too high, saddling those without the systems with unfair costs. They also pointed out that the rooftop solar industry does not pay union wages.

Simultaneously, outside the CPUC’s San Francisco headquarters and in Los Angeles, advocates of small solar systems were protesting.

Elsewhere, Severin Borenstein, UC Berkeley Haas School of Business professor and newly-reappointed member of the California Independent System Operator Board, said a key problem highlighted by the NEM proposal is how “the ballooning subsidies have induced residential solar firms to go big on selling more dumb systems, without storage or grid communication.” He pointed out in a blog this week that “[t]hose installations now do little to reduce grid costs” or greenhouse gas emissions in California, but are still the vast majority of new systems.

The role of the “Avoided Cost Calculator”

Central to the tug of war over the cost of rooftop solar is what is known as the “avoided cost calculator” (ACC). The calculator considers avoided costs for key attributes like energy, reliability, infrastructure, and emissions, representing an average avoided per MWh marginal costs in all California climate zones.

The CPUC’s convoluted 2021 avoided cost calculator update quantifies the costs avoided by using distributed energy resources. But the avoided cost or benefits applied to local solar is the lowest it has been in a decade, Arne Olson, Senior Partner with Energy and Environmental Economics, the commission’s ACC consultant, told the CPUC last July.

Some argue that the calculator undervalues reductions in natural gas power.

According to CPUC Energy Division Director of Cost, Rates, and Planning Simon Baker, the avoided costs calculator will establish a level playing field for valuing all distributed energy resources and is part of the commission’s effort to contain California’s rising electricity rates.

Insiders expect there will be an alternate decision that doesn’t lower payments for solar power sent to the grid as far, nor raise monthly costs for rooftop home and business owners as much.

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