Solar: Utilities Clash Over the Way Net Metering is Calculated

Too high a price for solar power?

A proposal by California Public Utilities Commission President Michael Peevey to change the way that “net metering” is calculated is the latest skirmish in the war between the state’s largest utilities and the fast-growing rooftop solar industry.

Net metering, a popular policy that has been in place in California for 15 years, allows homeowners, school districts and businesses to offset the cost of their electric use with the rooftop solar power they generate and export to the grid. Utilities give solar customers a credit on their monthly bill during sunny months when they generate more power than they use, and those credits can offset higher consumption of utility-generated electricity in winter.

Current state law requires California’s major utilities to make net metering available to customers on a first-come, first-served basis, but the program is capped at 5 percent of a utility’s “aggregate customer peak demand.” That means that as soon as a utility gets 5 percent of its electricity from solar customers, it is no longer required to sign new contracts.

But what aggregate consumer peak demand is, and the method by which it is calculated, are a subject of enormous debate. Under Peevey’s proposal, which is scheduled for a vote May 24, the cap would be effectively doubled to more than 10 percent within PG&E territory. The solar industry has sent more than 47,000 emails in support to the PUC.

“A lot of people care deeply about this,” said Rosalind Jackson of the Vote Solar Initiative. “There’s a ton of support from every corner except the utilities.”

But the consumer advocacy group TURN—The Utility Reform Network—is opposed to Peevey’s proposal; it argues that the solar industry is pushing for an indefinite extension of net metering when real discussions about how to reform the program are needed. Because solar customers tend to be more affluent homeowners, utilities and others have argued that lower-income nonsolar ratepayers are subsidizing solar customers in a way that needs to be revised.

“We’ve been calculating net metering in the same way for 15 years,” said Matthew Freedman, a staff attorney at TURN. “To now suggest that calculating it a new way is what the Legislature always intended is illogical and a real Hail Mary.”

PG&E has 65,000 net metering customers throughout its vast Northern California territory, which accounts for about a third of all rooftop solar installations nationwide. The San Francisco-based utility is adding about 1,000 new net meter customers each month.

Under net energy metering law, PG&E uses the highest peak demand ever recorded within its service territory—the 20,883 megawatts PG&E customers used on July 25, 2006—as its aggregate customer peak demand. That means that 5 percent is 1,044 megawatts.

Peevey’s proposal would change the formula and require utilities to calculate peak load for each individual customer and add them all together, which would raise the cap far beyond 5 percent. Under Peevey’s proposal, PG&E says, its net metering cap would expand to 2,414 megawatts—or 11.6 percent of peak demand.

“PG&E is a strong supporter of solar,” said David Rubin, director of service analysis for PG&E. “Now is the time to come up with an appropriate successor to the current form of net metering, one that is fair for solar customers as well as all of our other customers, who are supporting the solar customers through the rates they pay. The recent decline in solar prices gives us a great opportunity to reduce the subsidies that all of our customers currently provide to those that are installing solar.”