On December 15, 2022, the California Public Utilities Commission (CPUC) unanimously voted to eliminate the state’s solar net energy metering (NEM) program. Instead, the CPUC replaces NEM with a “Net Billing Tariff”. The key change is that customers will no longer receive retail credit for solar energy or solar exports put on to the grid. Instead, solar exports will be based on an avoided cost value calculated independently for every hour of the year.
What is the CPUC?
The CPUC is a state agency including five Commissioners that are appointed by the Governor. These commissioners play an important role in regulating California’s Investor-Owned Utility (IOU) companies, including setting the rates that they can charge. This includes setting the rates for solar customers, which impacts the value that solar customers receive from investing in a home solar energy system.
How Will NEM 3.0 Affect Solar Customers?
The NEM 3.0 decision will not only change how export credits are valued but it will also require customers to enroll in highly differentiated electrification or Time-of-Use (TOU) rates. These rates are most expensive later in the day when solar is not producing at its maximum. This will push most new installs to pair the solar system with a battery that will store the solar energy produced in the daytime to be used later in the day when the sun is going down. This will ensure customers maximize the value of the solar system against the newly designed Net Billing Tariff. Other changes include:
● 75% average reduction in export values for solar systems that are not paired with a battery
● Force NEM customers to move to an electrification rate, which will include monthly fixed charges rather than a minimum bill
● Customers who sign up on the Net Billing Tariff within the first 5-years will receive an additional value to their export credits
● All low-income customers, customers living in Disadvantaged Communities (DACs) and all California IOU tribal customers will receive a higher added value to their export credits in an effort to provide greater access to California’s most vulnerable customers
The full CPUC proposed decision can be found here
What Does This Mean?
While the NEM 3.0 decision doesn’t provide the best glide path or timeframe in which the solar industry is primed to install a battery with every solar system, this is not the end of solar in California. In fact, as we here at Freedom Forever, along with all of our industry partners, work to maneuver our way through this trying time, we are confident that we can still deliver energy savings to customers that continue to make them immune to the bloated electricity costs the IOUs perpetually tack on to our utility bills. The NEM 3.0 decision has no bearing on existing customers. They will remain on their existing NEM tariff for the 20-year grandfathering period.