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Net Energy Metering 3.0 Net Billing Tariff Update

What this article covers:

  • CPUC background

  • May 9th 2022 ruling

  • June 24th 2022 deadline

  • Impact to solar in laymen's terms


CPUC Background

The California Public Utility Commission regulates electric and natural gas services for PG&E and the other "investor-owned" utilities throughout the state. When PG&E wants to, for example, raise their rates, they must submit a formal request to the CPUC for review.


The Commission is appointed and overseen by the Governor of CA and the State Senate which is tasked with confirming appointees. The 5-member board of commissioners serve staggered 6 year terms and come from a wide range of professional backgrounds including economists, engineers, administrative law judges, accountants, lawyers, and safety and transportation specialists.


May 9th 2022 Ruling

Beginning a year and a half ago in August 2020, the CPUC held a series of hearings and proceedings from various utility and solar industry stakeholders to evaluate potential modifications to the Net Energy Metering 2.0 rate structure, commonly referred to as a "tariff". The primary directive was to evaluate the costs and benefits of the NEM 2.0 tariff based on current market conditions.


The ruling, handed down by the presiding Administrative Law Judge overseeing the Net-Energy Metering (NEM) tariff successor proceeding established a deadline of June 24th 2022 for various parties to submit proposals outlining how to provide a gradual transition from the NEM 2.0 tariff to its successor, the Net Billing Tariff.


June 24th Deadline

The relevant part for PG&E homeowners is that between the May 9th ruling and tomorrow June 24th party feedback was submitted to propose a fixed cents-per-kilowatt-hour credit for any customers who have solar installed on their home. The fixed credit would step down over time for new customers eventually arriving at a low fixed credit that represents the avoided cost of electricity.


Impact to solar in laymen's terms

Ok, that was as boring to write as it was to read, we imagine. Let's break it down into terms you and I can understand.

  1. Is NEM 3.0 aka "Net Billing Tariff" real? That's a fair question and there is no doubt a lot of politicking and scare tactics coming from both sides of the aisle. That said, it's clear that the Net Billing Tariff will become the successor to NEM 2.0. While it's hard to pinpoint when, any changes will include grandfathering so that customers who add solar and or batteries before the tariff is instituted will be protected.

  2. Will the Net Billing Tariff lower the value of solar credits? Yes

  3. What is "Avoided Cost of Electricity" mentioned in the ruling? The Net Billing Tariff will start at a fixed cents per kilowatt-hour credit and that value will step down over a period of time to be determined. Eventually, it will land at a credit equal to what it costs PG&E to take your excess solar. If you look at your bill, you'll see "Transmission and Distribution" fees which are the costs to move electricity from the powerplant to your home and experts expect this to be roughly where the credit eventually ends up being valued.

  4. Does this mean I shouldn't go solar or add batteries? While Net Metering credits are helpful in offsetting any PG&E charges that happen during the night, they are no longer essential to making solar save you money.

  5. Will NEM 3.0 kill solar? No, but it will drive adoption of energy storage. Outages related to fires and time of use rate plans mean that batteries are no longer a luxury. They are part of the solution to avoiding PG&E and NEM 3.0 will add to demand. Why? Because PG&E's rates must rise and a solar + battery system is a fixed cost meaning the savings and avoided costs get better and better as time goes on.

 

Editor's Notes


NEM 3.0 is a hot button issue right now with our clients and the solar industry in general. It's worth noting that California is the leading adopter of solar energy, nationwide and that didn't happen by accident. While some may not agree with certain political policies or agendas, it goes without saying that solar gives homeowners an option versus PG&E that is better in every way.


But the incentives that sparked the industry over a decade ago when solar equipment was twice as expensive may not represent the best solution in today's market. And it is a harsh reality that many residents in California, our neighbors, can not get solar for various reasons and a highly imbalanced crediting system for solar would likely just penalize those folks with higher rates.


The future of how we get electricity will absolutely be more "distributed" than it is today or was decades ago. There will be a future where the majority of homes have solar and batteries and PG&E will transform from being both producer and deliverer of power to simply a grid maintenance and back-up option. With the size of PG&E's territory covering nearly 2/3's of the state, maybe they'll be split up into local municipal organizations that can better solve issues like moving power lines under ground and keeping up on maintenance to help avoid fires and disasters.


We can't know for sure what the future will hold but it is without question the best time to get solar while NEM 2.0 grandfathering is available and before solar equipment & labor prices start to rise to reflect the recent inflation we've experienced.



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