NEM 2.0 Final Decision A Big Win For California Solar

by Tom Williard, Principal - Sage Renewables

Updated January 29, 2016:

This week, Commissioner Picker's office published the Net Energy Metering Successor Tariff (NEM 2.0) final decision language, and on Thursday, CPUC commissioners voted 3-2 to enact it. There were no substantive changes from the proposed decision (see December 16 article below), except that proposals for disadvantaged communities were removed from this decision and will be taken up in the next phase of the proceeding. 

Here are the main features of NEM 2.0:

  • All energy is net metered. Exported energy is full retail value minus NBCs.
  • Once on NEM 2.0 a customer is grandfathered on that tariff for 20 years.
  • Systems up to 1.0 MW AC in size will have nominal interconnection fees.
  • Systems greater than 1.0 MW AC are eligible for NEM 2.0 but will have to pay all Rule 21 interconnection fees.
  • NEM 2.0 will be revisited by the commission in 2019 with information from ongoing studies.

Perhaps the biggest change from the Proposed Decision (PD) is a clarification the Non-bypassable Charges applicable to NEM 2.0 are:

  • Public Purpose Program Charge
  • Nuclear Decommissioning Charge
  • Competition Transition Charge
  • Department of Water Resources bond charges

This modification of the PD is expected to be adopted by the commission tomorrow. If it is, it will help ensure that the PV industry in CA continues to grow.


December 16, 2015 Article:

The California Public Utilities Commission (CPUC) today released a Proposed Decision (PD) for the Net Energy Metering (NEM) successor tariff, known as NEM 2.0. By releasing the PD on December 15, 2015, a final decision can be taken at the CPUC Commissioner’s meeting on January 14, 2016. 

In general, this decision largely leaves the existing NEM 1.0 regulations intact. NEM 2.0 customers will now need to pay a “reasonable” interconnection fee, and will be require to pay all non-bypassable charges for energy they consume. Residential NEM 2.0 customers will be required to use TOU rates, and Virtual Net Metering (VNM) and NEM Aggregation (NEMA) will continue to be supported.

What The Proposed Decision Means for California Solar

If the PD stands as issued, future solar PV projects in the state of California will continue to be eligible for NEM. The value of energy produced by your future PV system will be similar to the current NEM rules and your system will be grandfathered on NEM 2.0 for 20 years from the date of operation.

Note that this is a Proposed Decision. The decision is not final until adopted by the CPUC. The utility companies did not get what they asked for with this decision and will be lobbying the CPUC heavily in the coming 30 days. We would not be surprised to see some changes brought forward to the Commission meeting on January 14, but we do not expect those changes to be significant departures from what has been proposed. If this PD proves to be overly controversial, it’s possible that the Commission could hold the decision beyond the January 14th meeting. 

The main details of the PD:

  1. NEM 2.0 largely leaves in place the existing NEM 1.0 structure. There are no new NEM-specific demand charges, capacity or grid access fees, or monthly netting of energy.
  2. NEM 2.0 customers will have their accounts grandfathered on this successor tariff for 20 years from the date of first commercial operation.
  3. NEM 2.0 accounts will need to pay all non-bypassable charges, they cannot be offset by energy produced on site. Non-bypassable charges are typically:
    1. Low-income assistance charges
    2. Energy efficiency program charges
    3. Bond repayment charges
  4. NEM 2.0 customers will be required to prove the following in their NEM applications:
    1. Major solar PV system components must be CEC approved
    2. A 10-year warranty on all equipment and the installation of that equipment
  5. NEM 2.0 customers with onsite generation systems of less than 1.0 MW will now be required to pay “a reasonable fee” for interconnection, based on the utility company’s actual costs for these interconnections. However, as with the current NEM 1.0 regulations, these customers will not be required to study fees and distribution upgrade costs.
  6. There is no maximum generator size for NEM 2.0 accounts. However, accounts larger than 1.0MW will be required to pay for full Rule 21 interconnection and facilities upgrade costs.
  7. The NEM 2.0 tariff will be reviewed by the Commission in 2019 for small commercial and residential customers.
  8. For residential customers, NEM 2.0 introduces the following:
    1. Residential customers will be required to use TOU rates.
    2. Fixed charges may be introduced in 2019. 
  9. VNM will be expanded for disadvantaged communities.

If the PD is finalized as written, this will be a significant victory for the renewables industry in California. Sage will continue to update this information as this CPUC proceeding unfolds.