Update on Assembly Bill 327
Update on Assembly Bill 327: Proposed Decision on Net-Metering Transition Period
(February 26, 2014)
A. Summary of Proposed CPUC Decision:
On February 20, 2014, the California Public Utilities Commission (CPUC) issued a proposed decision to establish a transition period for existing net energy metering (NEM) customers and those who go solar before the existing NEM tariff expires. The proposed transition period is 20 years from the date of interconnection of a solar system.
This means that a utility customer can continue to receive full retail credit for electricity generated for 20 years from the date of interconnection of its solar facility, as long as interconnection (defined as receipt of permission to operate (PTO)) occurs prior to the earlier of:
- July 1, 2017, or
- the date that the large investor-owned electric utilities reach their NEM program limits of 5% of each utility’s aggregate customer peak demand.
- The proposed decision clarifies that non-material replacement of system components that increase the production of an existing solar system by 1 kW or less will not trigger a shift to the new NEM tariff, but any increase in production in excess of 1 kW would (at least for the additional production).
- If an existing solar system is sold to a new owner during the 20-year transition period, it would remain on the existing NEM tariff (i.e., it would not be shifted to the new tariff).
- California’s three large investor-owned utilities, PG&E, SCE and SDG&E (“IOUs”), will be required to post their progress towards reaching the NEM Cap transition trigger level on a monthly basis so that the public will be alerted if it looks like the existing NEM tariff will be ending prior to July 1, 2017.
The proposed CPUC decision is still subject to change until approved by a vote of the entire CPUC. A vote on the proposed decision is expected at the CPUC meeting on March 27, 2014.
B. Background on AB 327:
In September 2013 Cenergy Power issued an alert on Assembly Bill 327 (“AB 327”). AB 327 was subsequently signed into law on October 7, 2013. AB 327 provides a roadmap for how the NEM program will change for the IOUs.
The current NEM program provides IOU customers that go solar with a billing credit for full retail value of the electricity their solar systems generate. AB 327 makes some material changes to the NEM program:
1. It makes net energy metering into a permanent program with no expiration date;
2. It clarifies how the current NEM program limit for each utility (i.e., 5% of such utility’s aggregate customer peak demand) is calculated, and in any event, sets a floor of 2,409MW for PG&E, 2,240MW for SCE and 607MW for SDG&E (the “NEM Cap”);
3. Once the NEM Cap is met, the IOUs would be relieved of the current retail credit requirement and instead would offer new NEM customers a new standard contract (“Standard Contract”) that will undoubtedly be at a lower value than the current full retail credit; and
4. It grandfathers existing NEM customers through a transition period before they too will be subject to the lower value Standard Contract.
C. Critical NEM Transition Dates.
The timeline Cenergy Power provided in its last AB 327 update is now revised:
With the expectation that the NEM transition period will be at least 20 years long, both 2014 and 2015 should be good years to go solar. 2016 will bring some uncertainty if the NEM Cap is reached ahead of the July 1, 2017 deadline. In addition, we expect there to be a backlog of projects attempting to interconnect in 2016, which may outstrip the IOUs’ capacity to provide interconnection services. Advanced planning to get projects on-line ahead of time in 2014-2015 will ensure completion and interconnection before the deadlines are reached.
Also note that, at the federal level, the 30% investment tax credit for solar is scheduled to decrease to 10% by December 31, 2016. As a result, going solar between now andDecember 31, 2016 is critical in order to lock-in both the existing higher NEM program rates and the existing 30% Federal tax credit.