RESOURCES

Northern California Public Agency Coalition In Defense of Stable Net Energy Metering

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The Northern California Public Agency Coalition (NCPAC) is coalition of public schools and other government agencies in Northern CA that is joining together to provide input to the California Public Utilities Commission (CPUC) regarding a General Rate Case filing by San Diego Gas & Electric (SDG&E) which could adversely affect existing and planned renewable energy generation projects in California. We are asking for your support in joining this effort.

Background

Today, solar PV, fuel cell, wind energy and other qualified renewable energy technologies receive full retail energy credit for electricity supplied to the grid. This is called "net energy metering" (NEM) and includes all components of electricity cost: generation, transmission, distribution and public good charges. When an NEM customer generates more power than they are consuming, the meter "spins backward." This exported NEM energy includes all the components of energy cost listed above. If you have a renewable energy system connected to the grid, NEM is how you are reimbursed for the power you feed back in.

SDG&E, in an October 3, 2011, General Rate Case filing with the CPUC, has asked to change its rate structures to create a Network Use Charge (NUC) that would impact NEM in two important ways, shifting costs to NEM customers almost exclusively:

By creating a demand charge of $8 per kilowatt (kW) for both maximum imported and maximum exported energy.
By recovering Public Purpose Program (PPP) charges on imported and exported energy.

The effect of this rate restructuring will be specific to each customer, but it is clear that sites with large net metered renewable energy generation systems that offset a high proportion of their electric bill would be most significantly impacted. Many of these large installations are owned or hosted by government agencies. As an example, SDG&E provided an evaluation of the impact of the proposed rate changes on a school district with three school sites that have solar PV installations (Figure 1). SDG&E's own projection is that cost of energy to the school district will increase an average of 87% for the sites with solar PV, while costs for sites without solar PV will increase an average of 8%.

Note that the proposed "Network Use Charge" will impact both self-financed and Power Purchase Agreement (PPA) projects. The host site for PPA projects would pay these new costs for energy exported to the grid.

Why This Matters

There are two reasons this SDG&E rate case matters:

Changing the NEM laws could significantly alter the economics of customer-owned and PPA financed renewable energy generation by lowering the value of energy produced by renewable energy systems. This would severely damage the value of billions of dollars of renewable energy infrastructure already installed, and forestall investment in and development of customer site renewable energy projects and technology. If you already own or are considering installing renewable energy systems to reduce your energy costs, this proposed rate change reduces the financial incentives for owning a system. If your renewable energy project is financed by taxpayers, the value of their contribution will be eroded. It has already caused public agencies in SDG&E territory to shelve or cancel planned solar PV projects¹
This is a rate test case for the state of California and, in all likelihood, the nation. Both Southern California Edison (SCE) and Pacific Gas & Electric (PG&E) are supporting parties in SDG&E's proceeding before the CPUC. If this rate proposal were to be accepted by the CPUC, we are certain that SCE and PG&E would immediately follow suit with similar "Network Use Charge" rate changes of their own. We also anticipate that similar attacks on NEM would be brought forth by utilities in the other 46 states which have net metering laws.

What We Can Do About It

We are forming NCPAC to provide clear input to the CPUC that SDG&E's proposed "Network Use Charge" should be denied on the grounds that it is both illegal and potentially extremely detrimental to public agencies that are already under tremendous financial stress. Our voices will provide strong input to the CPUC in its consideration of SDG&E's proposal, and any similar future proposals, that attacks on NEM are of paramount concern and unacceptable to government agencies. Renewable energy projects have long payback terms that rely on stable NEM value to fulfill their investment potential; these projects have been planned and implemented based on the strong legal protections of NEM that exist in the Public Utilities Code. NEM must remain stable and protected from preemption or amendment. Your organization can join our coalition and help us make this a voice that cannot be ignored.

The Administrative Law Judge assigned to this filing has indicated that there will be a ruling on the legality of SDG&E's rate proposal in February. We intend to submit a letter to the CPUC voicing our opposition to NEM changes proposed by SDG&E before the February decision. We also encourage all coalition members to pass board resolutions that condemn any attempt to change or preempt existing NEM laws. We can provide detailed information for your administration and board, as well as sample board resolutions, and will submit these resolutions to the CPUC.

How to Join the Coalition

If you have questions or want to join the coalition, contact Sage Renewable Energy Consulting:
info@sagerenew.com
(650) 592-7243 - Belmont, CA office
(415) 663-9914 - Inverness, CA office

Legality of Proposed "Network Use Charge"

Based on the following, we believe that the SDG&E proposed NUC is illegal.

NEM was established by the California Legislature and is defined in Public Utilities Code Section 2827. It was and is the intent of the California legislature that rate changes could not affect NEM customers differently than non-NEM customers. Public Utilities Code Section 2827(g) specifically states (emphasis added):

"...Any new or additional demand charge, standby charge, customer charge, minimum monthly charge, interconnection charge, or any other charge that would increase an eligible customer-generator's costs beyond those of other customers who are not eligible customer-generators in the rate class to which the eligible customer-generator would otherwise be assigned if the customer did not own, lease, rent, or otherwise operate an eligible solar or wind electrical generating facility is contrary to the intent of this section, and shall not form a part of net energy metering contracts or tariffs."

Legislative Support for Net Energy Metering

As evidence of current legislative support for full retail NEM, the State Legislature considered and rejected a request by the investor owned utilities SCE and SDG&E to amend California Public Utilities Code Section 2827 to eliminate the "unfair" subsidy provided by the law to NEM / solar customers during the Legislature's consideration of Senate Bill 489 (SB 489) this year. In response, the State Legislature did not amend the current NEM program but acknowledged that NEM is a State subsidy, noting that "the credit provided for wind- or solar-generated power put back into the grid is at the customer's retail cost, which includes not only the replaced generation cost, but also the equivalent costs for transmission, distribution, public good charges, and the utility's rate of return."² Further, the State Legislature reaffirmed that, "[d]ue to the intermittent nature of solar and the costs of installation, rooftop systems would not pencil out for most customers without the exemption from transmission and distribution costs provided by full retail NEM. The program is known to be a subsidy but one thought worth its value by the Legislature as part of its effort to stimulate the solar industry and bring down the costs of solar. The capacity of full retail NEM is designed to coincide with the capacity goals of the CSI and therefore has a form of sunset."³

SDG&E is trying to accomplish through the CPUC what the utilities were unsuccessful in arguing before the State Legislature during the consideration of SB 489. The State Legislature passed, and the Governor signed, SB 489 into law this year to expand the use of NEM to all forms of renewable energy to allow more utility customers to convert to renewable energy and offset their electric bill.4

Figure 1: SDG&E Analysis of School District impact from proposed Phase 2 GRC tariff proposal. This analysis shows that annual electricity charges for the District would increase by an average of 87% at school sites with solar PV installed (first three NEM accounts), versus 8% for sites without solar PV.

References

¹ Valley Center Municipal Water District and the Sweetwater Authority have shelved their plans for their solar projects as their projects no longer pencil under SDG&E's new rate structure. Source: Best, Best and Krieger, December 5, 2011, Memorandum to San Diego Coalition Members, "RE: SDG&E Application 11-10-002, Phase 2 General Rate Case Proposed Network Use Charge for Solar Projects"

²Assembly Committee on Appropriations Analysis of SB 489, August 17, 2011, available at http://www.leginfo.ca.gov/pub/11-12/bill/sen/sb_0451 0500/sb_489_cfa_20110816_164638_asm_comm.html

³Senate Floor Analysis of SB 489, May 31, 2011, available at http://www.leginfo.ca.gov/pub/11-12/bill/sen/ sb_0451-0500/sb_489_cfa_20110531_185838_sen_floor.html

⁴Assembly Floor Analysis of SB 489, August 24, 2011 available at http://www.leginfo.ca.gov/pub/11-12/bill/sen/ sb_0451-0500/sb_489_cfa_20110824_171412_asm_floor.html