CPUC Postpones NEM 3.0 Decision After Hearing from Rooftop Solar Customers

San José Clean Energy (SJCE) and the City of San José see rooftop solar as an important tool that residents and commercial customers can use in the fight against climate change. We are pursuing an aggressive Climate Smart San José goal of becoming the first city in the US to install 1 gigawatt (1,000 megawatts) of rooftop solar by 2040.

In December 2021, the California Public Utilities Commission (CPUC) proposed a new set of rules — known as Net Energy Metering (NEM) 3.0 — for how PG&E and other investor-owned utilities (IOUs) must compensate rooftop solar customers for the energy their panels produce and how much they should pay to access the grid.

The solar industry and most environmental advocates have expressed concerns that the proposed CPUC changes would halt rooftop solar adoption and set California back in achieving its climate goals. Overall, the proposed rules would result in 70-80% lower compensation for energy exported to the grid from solar systems and large IOU charges for rooftop solar customers (~$40-60 per month), lengthening investment payback periods to 16 to 18 years.

In their press release, the CPUC wrote that “NEM must be modernized to incentivize customers to install storage paired with rooftop solar to help California meet its net peak shortfall and ensure grid reliability.” Through the proposed rules, the CPUC asserts it is creating “more accurate price signals that will provide more value to the electric grid.”

We believe that reaching a 100% clean energy, electric future in California will require aggressive deployment of rooftop solar and home energy storage and utility-scale renewable energy paired with short and long-duration storage (learn more about our $1 billion in investments in the latter).

What San José Clean Energy Is Doing About NEM 3.0

We are advocating for our current and future rooftop solar customers to the CPUC as an official party to their Net Energy Metering proceeding. On January 7, SJCE filed comments on the CPUC’s Proposed Decision opposing proposed changes that disincentivize the adoption of rooftop solar and storage, especially among low-income customers and vulnerable communities.

Given the prevalence of solar in San José, we want to make sure our customers are aware of the CPUC’s proposed changes. San José Clean Energy solar customers would be impacted by new NEM 3.0 utility charges because they remain PG&E customers for electric delivery.

Current Status

In early February, the CPUC postponed their vote on the proposed NEM 3.0 rules indefinitely. We will keep our customers updated on the final vote and adopted rules. Once the CPUC adopts new NEM 3.0 rules, they would go into effect one year later.

Who This Impacts

While the changes to solar customer rates, fees, and credits for exported solar power would apply to new rooftop solar customers, the CPUC proposes to decrease the earlier CPUC grandfathering period protecting existing solar customers from 20 years to 15 years. Once an existing solar customer has had their system operating for 15 years, they would be switched to NEM 3.0 compensation rates, TOU rates and monthly IOU charges, with details depending on their customer class and location.

Summary of Proposed Changes

  • PG&E’s average customer compensation for solar production would decrease by 70-80% to about 5 cents per kWh for residential customers. The new compensation rate would be fixed for five years and then change annually and would vary on an hourly and monthly basis and by climate zone, making it difficult to calculate how much savings solar customers could earn from their rooftop solar systems.
  • On top of this, most residential solar customers would have to pay a new monthly IOU “Grid Participation Charge” of $8 per kilowatt (kW)/month, or about $40-$60 per month for the average-sized solar system.
  • Residential customers who move onto NEM 3.0 between 2023 and 2026 could lock in a Market Transition Credit (MTC) for 10 years. The amount of the credit (max $5.25 per kW) would depend on their income level and when they install solar. Over the first four-year period of NEM 3.0, the credit would decrease by 25% each year. So a customer installing solar in 2023 would be eligible for a higher monthly credit than a customer installing solar in 2025. The program sunsets after 2026.
  • Most new residential solar customers would also be put on a new time-of-use rate plan where energy would cost substantially more in the evening, when they are drawing electricity from the grid, to incentivize installation of home energy storage like batteries. This mandatory rate would also include new fixed IOU charges, in addition to the Grid Participation Charge.
  • The CPUC also proposes to create a four-year $600 million equity fund to increase low-income access to solar and storage, though the details are undefined.
  • Existing rooftop solar customers would be eligible for rebates for batteries of $200/kWh, or about $2,600 for the average home system, that are installed between 2023 and 2026. The battery rebate level steps down 25% per year then ends after 2026. To accept the rebate, these customers would immediately be put on NEM 3.0 compensation rates, TOU and utility charges.

More details are in the CPUC’s Proposed Decision.

What You Can Do

The Solar Rights Alliance has put together a list of actions that those who are opposed to the CPUC’s Proposed Decision can take:

  • Sign a petition to Governor Newsom
  • Call the Governor
  • Post on social media
  • Alert your neighbors with solar
  • Give verbal comment to the CPUC
  • Write a letter to your local newspaper