At the end of 2014, the distributed generation capacity in California totaled 5,200 MW of capacity, with an additional 3,700 MW of authorized and pending power to come online shortly, according to the California Energy Commission (download available here). Generally, the distributed generation in California is on-site solar photovoltaic under a net metering contract. The goal of installing 12,000 MW of renewable distributed generation by 2020, set by Governor Jerry Brown, along with other state policies, especially net metering, has been enormously helpful in transforming the market. But this revolution of the electricity market has presented California with new challenges – increasing the integration of renewable power.
In 2013, state legislation, AB 327, required the California Public Utilities Commission (CPUC) to review net metering rules to determine the path forward once the total amount of net-metering customers’ solar output reaches 5% of a utility’s aggregate customer peak demand, or on July 1, 2017. This policy is often referred to as “Net Metering 2.0.”
The utilities (San Diego Gas & Electric, Pacific Gas & Electric, and Southern California Edison) opposed the expansion of net metering in 2013 when the cap on the policy was changed, and we will soon begin to see what policies utilities push in order to reduce the economic reward for distributed generating customers. The deadline to submit proposals for “Net Metering 2.0” was July 2, 2015, and Pacific Gas & Electric has already signaled it wants to replace net metering with a feed-in tariff structure. AB 327 requires that the new net metering policy be adopted no later than December 21, 2015.
The net metering 2.0-policy debate is not the only one in California. The CPUC has also, in a unanimous vote, approved a proposal to reform the state’s electric rate structure for residential customers, which has serious implications for solar power. For instance, the approved proposal will flatten the rate structure and change it from a four-tiered system to a two-tiered system, as proposed by the utility industry.
However, the plan does benefit the future deployment of distributed generation. Greentech Media’s Jeff St. John notes that the CPUC approved plan did not include a fixed fee of $10 a month, per the utility industry’s request. The CPUC, however, is proposing a minimum bill charge. Shayle Kann, senior vice president of research for Greentech Media, says, “A minimum bill is generally preferable for solar and, for most solar customers, will have a minimal but non-zero impact on their bill savings.”
In addition, the CPUC has proposed that a time-of-use rate system to be functional by 2019. The system would be incorporated into the two-tiered rate structure and power would be most expensive during peak demand periods in the late afternoon and would be cheapest at night.
“The commission basically handed the utilities exactly what they have been lobbying for,” said Evan Gillespie, director of the Sierra Club’s My Generation campaign, which encourages the use of renewable power. “It jacks up bills for low-income customers, lets energy hogs off the hook, and will slow the transition to clean energy.”
Debate since the passage of AB 327 has garnered much attention from the utility industry and its allies. This year, Energy & Policy Institute uncovered documents that exposed Edison Electric Institute’s internal discussions on net metering. A 2014 EEI briefing book, titled “Grid Talk: 2014 Advocacy and Engagement Forum on Distributed Generation,” reveals Martha Rowley, Regulatory Analysis Manager at EEI, tracked updates in the states.
Plus, the American Legislative Exchange Council (ALEC) annual meeting was hosted in San Diego this year, where the Energy, Environment and Agriculture Task Force discussed and debated multiple solar energy items and model bills. EEI is a member of ALEC and worked on the model bill that penalizes net metering customers. Southern California Edison is also a member of ALEC.