The public has been getting an earful about pricing of electricity and credits to solar overproducers. The subject has been in the news for over two years, and the public’s interest is rising.
Yet it’s difficult to sort out all the claims and to figure out who the winners and losers are. I’ve been studying the topic and reported on it last April and May in two “Just Sayin’” columns, as well as my opinion piece in the Union-Tribune on Dec. 14.
I’ve revisited the topic and sorted out the issues, who wins, and who gets hurt by changes being ed by the California Public Utility Commission. Two specific policies are being changed. The first one went into effect on April 15, 2023. The second is in review, with a target decision by July 1, 2024.
NET 3.0: This is the third iteration of the Net Electric Metering rules. This applies to solar s only and determines how homeowners with “rooftop” solar will be reimbursed when their system produces more than their draw from the utility.
Earlier versions required the utility to pay oversized solar producers at the same “retail price” that they charge for electricity delivered. Note: this refers only to the electricity generation charges, not the electricity transportation and delivery charges, which are listed separately.
The utilities argue that they should only have to pay the “avoided cost;” that is, how much the utility would have to pay to buy or produce the electricity. This is different from the retail price that SDG&E puts on the product. The UC has ed that argument, and the new pricing rule is in effect for solar owners who activated their systems after April 15, 2023.
Prior owners are grandfathered by the previous rules for 20 years from when their system was put into operation.
While solar s have generally been against NET 3.0, there is reasonable justification for the change in policy. Owners of extra large systems had calculated a return on investment that counted on making money on the overproduction. But there is a reasonable argument that the public should not be in the power generation business and that the pricing policies should draw the line at paying no more than the avoided cost.
What is extremely puzzling, however, is the difference between Avoided Cost and Retail Price (reported to be about 8 cents and 30 cents, respectively). SDG&E says that this difference covers assorted fees, taxes, and public programs. They are adamant that it does not add profit (which is prohibited by law on the electrical generation portion of the bill).
The details have been elusive. The public is entitled to know how these add-ons can almost quadruple the cost.
Income-based pricing for electricity: Assembly Bill 205 was ed by the state Legislature and signed into law on June 30, 2023. A section of that bill instructs the UC to invite proposals and select a revised model for billing for electricity.
Currently, electricity is almost entirely priced on usage. The utilities argue that solar s are not contributing their fair share for the costs of the infrastructure for delivering electricity to the s. AB-205 would establish a base rate that all utility customers would pay, regardless of use. The model reduces the price per KwH so that the average, non-solar customer would come out about even.
However, this would negatively impact solar owners, who could be paying as much as $1,536 a year in fixed charges, without using a single KwH of SDG&E’s electricity (in the model submitted by SDG&E).
AB-205 further stipulates that the new “fixed charges” shall be in three or more steps, based on family income. Very low-income s would have a fixed charge that would replace the special low fees established in two current state programs for low-income families (CARE and FERA). Higher fees would be established for middle-income and high-income families.
In this case, theoretically, non-solar middle-income people would pay about the same as before, with lower KwH charges offsetting the new fixed charge. Higher-income people would be required to carry a larger burden, for the same product (income-based pricing).
This is a paradigm shift in how people are charged for products and services. It is inexcusable for the Legislature to mandate such a huge economic policy shift without an extensive discussion with all stakeholders. Yet, this mandate was slipped into a bill that was primarily dealing with different issues and most of the public and even many of the legislators never had a chance to review and comment.
Winners and Losers: The proposed model, likely to be adopted, will adversely impact ALL high-income families and ALL solar owners. On the winning side will be political liberals who wish to move closer to a progressive “pay what you can” economic model, and the utilities, who will be able to increase their investment in solar production, allowing them to “earn” a greater profit.
SDG&E argues vehemently that the new pricing model is “profit neutral.” However, the combination of NET 3.0 and AB-205 will have the devastating effect of virtually canceling the incentive for homeowners to invest in solar. The utilities will, by design, pick up the slack.
SDG&E wants to be the only producer of solar. They make a profit on the value of their investment.
AB-205 says that the new fixed-pricing model shall not deter from the state mandate to reduce carbon-based generation of electricity or to reverse incentives for homeowner solar. This is ignored by the proposed models. Recent studies indicate that the solar industry will be virtually destroyed, with as much as a 75% loss of solar providers. This will also leave current owners without a source for maintenance of their units.
The proposed plans make no significant changes to the utility charges for low-income families. However, there is a view that since only rich people can afford solar, they can handle the revised pricing model. This is an outrageous form of discrimination and is patently wrong.
The impacts of AB-205 on most electricity customers will be far-reaching, with most of the public coming out on the short end. A model with a much smaller fixed-price billing component would be fairer to most stakeholders, including solar owners and the utilities.
A Rancho Bernardo resident, Levine is a retired project management consultant and the author of three books on the subject.
