California Public Utilities Commission Protects Net Metering Customers

by Wilson Sonsini Goodrich & Rosati
Contact

A recent California Public Utilities Commission (CPUC) decision will protect the net metering rights of existing distributed generation customers. Under Decision 14-03-041 (Decision), customers taking electric service under a Net Energy Metering (NEM) tariff prior to the earlier of (i) July 1, 2017, or (ii) the date that the customer's electrical utility reaches the NEM program capacity limit will be able to remain on the current NEM tariff for 20 years from the date their distributed generation system is interconnected. The Decision, which applies to California's investor-owned utilities (IOUs), will "grandfather" these NEM customers under the current tariff while the CPUC transitions to a new tariff structure for future NEM customers, often referred to as "NEM 2.0." The Decision will provide certainty to distributed generation developers and is intended to enable customers to benefit from the existing NEM tariff for the expected useful life of their systems.

Background

Current NEM tariffs have been a significant factor driving the growth of distributed solar photovoltaics (PV) in California and in many other states across the country. California's NEM tariff allows customers with distributed generation systems to receive a financial credit on their utility bills for excess electricity fed back to the utility grid at retail rates, functionally allowing the customer's meter to "spin backwards" and offset electricity bills. The current NEM tariff also requires compensation to NEM customers for electricity generated in excess of onsite load over a 12-month period. The majority of NEM customers use onsite solar photovoltaic systems.

The Decision is part of the CPUC's implementation of Assembly Bill 327, signed into law on October 7, 2013. AB 327 requires the CPUC to develop a successor to the existing NEM tariff to be implemented on the earlier of (i) July 1, 2017, or (ii) the date the customer's electrical utility reaches the NEM program capacity limit (the Transition Trigger Date). Each IOU's NEM program capacity limit caps enrollment in the existing NEM tariff at 5 percent of aggregate customer peak demand.1 AB 327 mandated that customers who took service prior to the Transition Trigger Date could remain on the current NEM tariff during a transition period to be determined by the CPUC.

NEM Transition Decision

In establishing the 20-year transition period, the CPUC considered both the expected useful life of distributed generation systems and the reasonable payback period of such systems. While utilities and ratepayer advocates argued that a shorter, 4-to-12-year transition period reflected a reasonable payback period, solar advocates and commercial and public entity customers argued that a 20-to-30-year period correctly took into account the expected useful life of typical solar PV systems as reflected in most power purchase agreements (PPAs) and third-party financing agreements, as well as a reasonable expected return on system investments. The CPUC found that the 20-year period would better allow customers to realize their expected system benefits, promote regulatory certainty, and constitute a fair compromise.

The Decision provided that modifications to existing net metered systems remain eligible for the current NEM tariff for the remainder of the transition period applicable to the underlying system, as long as such modification does not increase the capacity of the system by more than 10 percent or 1kW. With the modification, the system size cannot exceed 1 MW or the customer's annual onsite load. To the extent that energy storage systems considered to be an addition to net metered distributed generation systems are granted exemptions from various interconnection fees and requirements, they will be subject to the same NEM transition period as the underlying system to which they are connected.2 Furthermore, if a solar system is transferred to a new owner, operator, or utility account at the original site of interconnection, it can remain subject to the transition period, but the grandfathering period will no longer apply if the system is moved and interconnected at a new location.

Having reliable pricing models for the life of the asset allows solar developers, investors, and customers to make informed decisions about whether to install, sell, or buy a solar system, rather than guessing at the outcome of legislative or regulatory proceedings. The CPUC's grandfathering period will help to provide this market certainty and give the industry a window of time in which to originate, design, finance, and install projects under the existing NEM program. The Decision further facilitated this planning and market certainty by requiring the IOUs to publish on their websites on a monthly basis progress towards their NEM program capacity limits in MWs. The Decision also expresses the CPUC's expectation that solar installers provide "honest and complete" disclosures on the terms that apply to PV systems, including the applicable tariffs, as well as the timing and terms for transition to the new successor tariff.

Next Steps for California's NEM

Next, the CPUC will be turning its attention to NEM 2.0. In so doing, the CPUC is required by AB 327 to "ensure" that the successor tariff: (1) "ensures" that customer-sited renewable distributed generation continues to grow sustainably and includes specific alternatives designed for growth among residential customers in disadvantaged communities, (2) is based on the costs and benefits of the renewable electrical generation facility, and (3) has benefits to all customers (not only NEM customers) and the electrical system that are approximately equal to its costs.3 AB 327 requires that a new NEM tariff be adopted no later than December 31, 2015. Currently, the CPUC is exploring potential changes to residential rates in light of AB 327, including potential adoption of a fixed customer charge or minimum bill amount, reduction of residential rate "tiers," time-of-use rates, and other policies that could have a significant impact on NEM customers and the economics of customer-sited solar. We expect that the development of NEM 2.0 will be interrelated with the outcome of the CPUC's rate design proceeding and highly contested. It will be important for interested stakeholders to engage and stay informed throughout this process.

1 Under Public Utilities Code § 2827(c)(4)(B), "aggregate customer peak demand" means "the highest sum of noncoincident peak demands of all the [IOU's] customers that occurs in any calendar year," which shall not be less than 607 MW for San Diego Gas & Electric Company, 2,240 MW for Southern California Edison Company, and 2,409 MW for Pacific Gas & Electric Company.
2 On April 15, 2014, the CPUC issued a proposed decision that would exempt energy storage devices that are paired with NEM-eligible generation facilities and considered an "addition or enhancement" to an existing NEM system from certain interconnection application fees, review fees, distribution upgrade costs, and standby charges when such systems are interconnected under the existing NEM tariff. Opening comments on this Decision are due on May 5, 2014, and reply comments are due on May 12, 2014.
3 Pub. Util. Code § 2827.1(b).

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Wilson Sonsini Goodrich & Rosati | Attorney Advertising

Written by:

Wilson Sonsini Goodrich & Rosati
Contact
more
less

Wilson Sonsini Goodrich & Rosati on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.
Feedback? Tell us what you think of the new jdsupra.com!