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Net Metering Gets 20-Year Reprieve

03/28/14

  11:33:00 am, by Jim Jenal - Founder & CEO   , 1161 words  
Categories: Solar Economics, Commercial Solar, Residential Solar, Non-profit solar, Energy Storage, Net Metering

Net Metering Gets 20-Year Reprieve -- UPDATED

CPUC Logo

UPDATE - On January 28, 2016, the CPUC issued their final decision on the successor tariff for net metering (known as NEM 2.0).  You can read our analysis of that decision and the upcoming changes here.


When Governor Brown signed AB327 last October, one thing was clear: net metering as we presently know it was going to go away, we just didn’t know how soon. Now, thanks to a ruling yesterday by the California Public Utilities Commission (CPUC), we know: 20 years.  Here’s the scoop.

Background

Around the country, utilities have been pushing hard against net metering—the tariff under which solar customers receive credit for surplus energy production (say during the day when no one is home or on a weekend when a commercial facility is dormant) that offsets energy consumed from the grid (for example, at night).  The solar customer’s bill reflects the “netting out” of those two quantities (total energy exported versus total energy imported from the grid) and the customer only pays for the difference.  If the solar customer is a net energy producer (quite rare), the utility has to cut the customer a check for the surplus.  (Unless you are an LADWP customer, sorry.)  Last year’s bill sought to end the squabbling and provide certainty to solar customers.

CPUC’s Ruling

Under the law, the CPUC is required to devise a replacement for the current net metering arrangement, but yesterday’s ruling does not disclose what that will be.  Instead, the ruling establishes a sundown provision for customers who are either currently, or will become net metering customers under the current rules before July 1, 2017 (at which time the present net metering rules will be closed to new participants).

Solar system owners will be entitled to operate their systems under the net metering rules for a full 20 years from the year in which they interconnect their system.  That, decided the CPUC, will provide sufficient time for solar customers to recoup their investment.  However, solar customers can transition to the new rules, whatever those may turn out to be, sooner at the customer’s election.  The year of interconnection is determined by the date on the Permission to Operate letter received from the utility, and the twenty-year term ends on the last day of the twentieth year.

System Modifications

What happens to systems that are modified after July 1, 2017?  Does the new portion of the system get its own 20-year net metering extension or is it simply subsumed into the term for the original system?  The CPUC split this into two possible scenarios: repairs or modifications that did not increase system capacity by more than 10% of the original design will operate under the original 20-year term, neither resetting or ending it.  But system changes beyond the 10% limit will either have to be metered separately, or the entire system will have to be transitioned to the new tariff structure.

Change of Ownership or Location

The next question to be resolved was what happens if the system is sold or relocated?  After all, many solar customers purchase systems expecting it to increase the value of their home—but if the sale eliminates the net metering agreement, that added value could be lost.  The utilities, of course, disdained any such concerns, arguing that the net metering term should be tied to the original owner only.

Fortunately, the CPUC sided again with solar system owners. Thus, systems will remain under net metering for the full twenty-year term, regardless of changes in ownership, as long as the system remains at the original location.  However, if the system is physically moved to a new location, the CPUC deems that to be a new interconnection and the old net metering agreement would no longer apply.

Energy Storage Systems

The decision yesterday also took an important step in addressing the impact of adding energy storage systems to an existing solar system operating under the twenty-year net metering rule.  The CPUC ruled that “to the extent that energy storage systems are considered an addition or enhancement to a renewable electrical generation facility utilizing a NEM tariff, we find that they should be treated in the same way, and subject to the same transition period, as the underlying renewable generation system to which they are connected.”

IOU Reporting

The July 1, 2017 deadline is an absolute cutoff, but the actual end of new net metering agreements can actually be reached sooner if the utility in question has reached its “net metering cap.” The CPUC previously set the cap at 5% of the utility’s “non-coincident aggregate peak load.”  To allow perspective solar customers to know if their utility is going to hit that peak before the July 1, 2017 deadline, the CPUC ordered the three IOUs to report to the Commission (and on the utility’s website), on a monthly basis, their progress toward that cap.

Required Disclosures

Finally, the ruling addressed whether solar installers should be required to provide prospective clients with disclosures about the ruling, specifically as to the duration and limitations on existing net metering agreements.  According to the decision, IREC and SEIA opposed such a requirement on the grounds that it exceeds the authority of the CPUC.  As a legal matter, that may well be true, but SEIA’s position strikes a sour note.  Frankly, the solar industry is in serious need of mandated, standardized disclosures on everything from system components, warranties, energy yield, true costs, etc., to say nothing of issues surrounding the changes to net metering.  SEIA should be producing model documents for its member installer companies to use and drafting model legislation to mandate their use.

In any event, the CPUC punted the requirement issue for installers, saying:

Solar installers have a legal [citing Business & Professions Code § 17500] and ethical responsibility to disclose to their customers the terms that will apply to renewable distributed generation systems for the foreseeable future, including the applicable tariffs as well as the timing and terms for transition to a successor tariff. Such disclosures provide customers with the information that they need to make educated decisions about their future electric service. Because of this, we expect solar installers to provide honest and complete disclosures on the NEM transition, and we encourage customers to report to the appropriate authorities any misleading or fraudulent information that may be provided to them. At the same time, we require the large IOUs to post information on the NEM transition clearly on their Web sites along with other information about NEM terms, eligibility, and progress towards the statutorily mandated transition trigger level.

Of course B&P section 17500 is entirely generic and provides no guidance as to what disclosures solar companies should provide to their potential clients.  Clearly this is an area that requires legislation and California, as the most mature solar market in the country, should be leading the way here. 

As for Run on Sun, we will revise our Return on Investment materials to reflect a 20-year window instead of the 25-year model we have used previously.  Hopefully that will provide clients with a more accurate estimate of their true ROI.

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2 comments

Comment from: Kay Wong  
Kay Wong
what is a ROI ^^
07/06/15 @ 21:10
Comment from: Jim Jenal - Founder & CEO
Hi Kay - ROI = “Return on Investment” and it is typically reported in two ways: time to payback (as in years before you break even on your investment) and Internal Rate of Return. Hope that helps! Jim
07/07/15 @ 05:13


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Jim Jenal is the Founder & CEO of Run on Sun, Pasadena's premier installer and integrator of top-of-the-line solar power installations.
Run on Sun also offers solar consulting services, working with consumers, utilities, and municipalities to help them make solar power affordable and reliable.

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