California's Net Metering Reform: Necessary, Accurate, Fair

Net metering, which charges customers for energy consumed less the amount their solar panels produce, is a critical tool for advancing distributed solar. As the market takes off, as it has in California, this important policy must be kept up to date. Currently in California, it overpays solar customers and shifts fixed grid and societal charges that solar customers should pay onto other customers. This inordinate rate increase is unique to California and a sign of NEMs success, but it cuts against affordability and makes electrification of cars and buildings – critical to meet our decarbonization goals – a harder proposition.

The CPUC’s Proposed Decision, if adopted, would institute significant reforms to the Commission’s net metering (NEM) rate for residential customers with rooftop solar. This proposed decision is the culmination of a year-long proceeding at the CPUC.

The proposed decision modernizes California’s NEM policy to meet the state’s evolving electric grid and clean energy needs in a cost-effective and equitable manner. It accomplishes this by:

  • Adopting more accurate price signals which encourage customers to pair rooftop solar with storage. Paired systems will help California ensure grid reliability and displace polluting fossil fuel generation that ramps up after sundown.
  • Targeting a payback period of ten years for new storage and solar customers through electric bill savings.
  • Providing cash incentives to customers on existing NEM rates to install storage if they voluntarily move to this new more accurate net billing tariff.
  • Creating a novel equity fund with up to $600 million to improve low-income customer access to distributed clean energy programs with strong consumer protections.

Additional details of this new Net Billing Tariff are summarized here by the CPUC.

The Proposed Decision conducts a thorough evaluation of all competing proposals and expert testimony to reach a balance between further incentivizing rooftop solar and residential storage to meet our clean energy goals, promoting equitable rooftop solar and storage adoption, and making sure that these subsidies don’t unduly burden Californians that don’t have or cannot get rooftop solar.

The CPUC will vote on this proposed decision on January 27th, 2022 at the earliest.

About the Authors

Mohit Chhabra

Senior Scientist, Climate & Clean Energy Program

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