The blithering idiocy of lofty goals, solar credits
Fans of rooftop solar panels are angry. Take former governor Arnold Schwarzenegger, for example. He wrote an essay for The New York Times last week in which he raged over a plan by the California Public Utilities Commission to add a new monthly charge to the utility bills of solar customers.
The CPUC’s plan, Schwarzenegger wrote, “would make it too costly for many Californians to embrace solar power.” A new “grid participation charge” would average an estimated $57 per month for customers with solar panels, while “people who power their homes with fossil fuels wouldn’t pay this.” The new charge would also apply to customers who added batteries to their system to store solar-generated electricity.
In addition to the new monthly charge, the CPUC’s plan would reduce the credits that solar customers receive on their bills for the surplus electricity they generate with their rooftop panels and send to the grid, a program known as “net metering.” New customers and some existing customers would see a cut of up to 80% in the credits they receive for generating solar power.
The CPUC could approve the plan as early as Jan. 27.
Like so many problems in California, this one is the result of blithering idiocy from state lawmakers. Back in 1996, the Legislature passed Assembly Bill 1890, which was said to be electricity deregulation, but in fact was a new set of rules and cost-shifting.
AB 1890 required investorowned utilities to continue to provide distribution service to all retail customers and to procure power for customers who chose an alternate supplier instead of direct access from the utility. However, the utilities had built power plants to meet their regulatory obligations to provide sufficient power, and they had expected to recoup the cost by selling electricity. The new law meant they would have fewer customers for that power.
So the Legislature had the bright idea to require customers of investor-owned utilities to pick up the cost of the
“bad investments,” the now unneeded power plants. The utilities would be allowed to recover $28.5 billion in costs by adding a “competition transition charge” to customers’ bills. The initial cost to residential customers of Southern California Edison, for example, was a 40% surcharge on their electricity bills.
AB 1890 also included a 10% rate cut and a temporary rate freeze, but this caused a new set of problems by the summer of 2000, when wholesale prices for electricity shot up in California. Customers of Southern California Edison and Pacific Gas & Electric were still protected by the rate freeze, so SCE and PG&E had to absorb roughly $12 billion in higher costs. Customers of San Diego Gas & Electric were no longer under a full rate freeze, but a floating cap on rate increases had caused SDG&E to get stuck with $450 million of unrecoverable costs. “SCE and PG&E have indicated that they may be forced to declare bankruptcy if they do not receive legislative, regulatory or judicial relief,” a legislative analysis reported.
The Legislature’s response in January 2001 was Assembly Bill 1 X1, the “X” indicating an extraordinary session. The bill authorized a complicated scheme whereby the Department of Water Resources would borrow money, enter into power purchase contracts, and then sell the electricity to California consumers at a capped price.
By 2013, the Legislature had tired of rate freezes and price caps, and Assembly Bill 327 was proposed to lift the restrictions. “According to the author,” a legislative analysis reported, “the energy crisis is over, but laws meant to protect residential rate users are now preventing the CPUC from governing the rate structure and making necessary changes for the thousands of middle-to-low income families struggling to pay high energy costs.”
AB 327 required the California Public Utilities Commission, when it approves changes to electricity rates for residential customers, to make “whatever changes are necessary to ensure the rates paid by residential customers are fair, equitable, and reflect the costs to serve those customers.”
Today, there are 1.3 million solar roofs in California, and the CPUC is making changes.
Just as electricity customers in the 1990s were required to pay for the power plants they weren’t using, solar customers are about to be ordered to pay more to access “the grid,” even if they have solar systems and battery storage. A CPUC study confirmed that rooftop solar incentives such as net metering shift the costs of operating the power grid to non-solar customers, leading to higher electricity rates. This especially affects middle-to-low income people who can’t afford costly solar installations. And that means the CPUC, under AB 327, is required to make “whatever changes are necessary” to make the rates fair, equitable and reflective of the cost of service.
This is all very bad news for the companies that sell solar panels, because it means rooftop-solar customers will not save as much money on electricity bills as before, and it will take years longer to reach break-even on the cost of new solar installations.
It’s “a big step backward,” Schwarzenegger wrote. He warned that California “is already so far behind on meeting its 2030 climate goals that the state isn’t projected to hit them until 2063.”
Before 1996, the CPUC was charged with ensuring that utilities provided sufficient electricity at reasonable rates. California lawmakers threw out that goal in favor of phony deregulation and unattainable climate targets. And we’ve been paying for it ever since.