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California’s Gov. Newsom says changes need to be made’ to the state’s polarizing net-metering proposal

But he says he won’t intervene in the heated debate that’s pitted solar and environmental groups against utility customer watchdogs.

California Governor Gavin Newsom (D) (Brontë Wittpenn/The San Francisco Chronicle via Getty Images)
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California Governor Gavin Newsom (D) said Monday that he believes changes need to be made” to the state’s controversial proposal to slash financial incentives and add fees for new home rooftop solar systems — but he added that he doesn’t intend to interfere in the process. 

We have work to do,” Newsom told reporters asking about the net-metering proposal at a presentation of his state budget plan. Do I think that changes need to be made? Yes, I do.”

Yet Newsom also said that he won’t intervene with new California Public Utilities Commission President Alice Reynolds, whom he appointed late last year, or with other CPUC commissioners as they decide whether to approve the plan, amend it or propose an alternative. The CPUC could vote on the matter as early as January 27

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Newsom said he has tasked Reynolds, a former senior energy adviser for both his administration and that of former Governor Jerry Brown (D), to use her best judgment in all deliberations” at the CPUC. Beyond that, nothing more. I don’t require litmus tests. […] I appoint people on the basis of their character and values.” 

The comments, Newsom’s first on the topic since the net-metering proposal was unveiled last month, have raised the hopes of the rooftop solar industry and some environmental groups that he will push the CPUC to prevent the enactment of a new regime they fear could crush the state’s distributed solar industry. 

For new owners of rooftop solar systems, the proposal would reduce payments they receive for power fed into the grid to roughly a quarter of what current solar owners earn. It would also impose fixed monthly fees on new solar-equipped customers that would be the highest such charges in the nation. 

We urge the governor to use his bully pulpit to push regulators to start from scratch and take no action to curb rooftop solar until they fully examine the real reason why working-class families and communities are paying so much for power and how they can be put at the forefront of the rooftop solar and storage revolution,” Ken Cook, president of the nonprofit Environmental Working Group, said in a Tuesday statement.

Rooftop solar markets under threat 

Cook’s comments highlight the core challenge the CPUC faces in its net-metering decision: how to balance the sustainable growth of its nation-leading rooftop solar industry with the need to fairly divide costs between customers who have rooftop solar and those who don’t.

The CPUC’s proposal has triggered an outcry from the rooftop solar industry, a number of environmental groups and a coalition of hundreds of cities, environmental justice organizations and community groups. They contend that it would destroy the economic case for customers to install solar. That, in turn, would set back the state’s clean energy progress, weaken the case for customers to switch to electric vehicles and electric heating systems, and undermine efforts to supply battery-backed solar systems to communities facing the threat of wildfires and blackouts, these stakeholders contend.

Under the current proposal, lower-income customers would be exempt from the monthly fees and eligible to receive incentives for solar systems paired with batteries. Still, the end result could wind up harming lower-income communities, according to the Sierra Club, the advocacy group Vote Solar, and Grid Alternatives, an organization that supports solar installations and job training in low-income communities. In a joint filing submitted to the CPUC this month, the three groups argue that the commission’s current proposal could cause major solar market contractions that will make it difficult for companies to provide customer-sited clean energy to low-income customers.”

That view was backed up by a survey released earlier this month by SolarReviews, a solar-installer review platform. Of more than 4,000 respondents considering the purchase of a solar system, 95 percent said they would no longer be interested in installing solar if two key components of the CPUC’s proposal were put in place: lower compensation for solar power fed into the grid and new monthly fees being imposed upon owners of solar systems. Even without the monthly fees, the reduced compensation alone would deter 68 percent of potential buyers. 

It is incomprehensible to think that people will spend $15,000 to $20,000 of their own hard-earned money to buy something that will now not only have a much longer payback period but will also expose them to a new monthly tax,” Andrew Sendy, SolarReviews president and co-founder, wrote in a Monday blog post.

Concerns over unfair cost shifts run deep 

But the argument that net-metering changes will decimate the rooftop solar industry is being countered by an equally adamant argument that net-metering as it exists today forces higher electricity rates onto people who can’t afford to go solar. 

The state’s three big investor-owned utilities contend that existing net-metering rules allow solar-equipped customers to avoid paying their fair share of fixed utility costs such as building and maintaining the power grid and paying for the construction and maintenance of power plants and solar and battery farms. To make up for those unpaid fixed costs, utilities will be forced to raise rates for customers at large, they say. 

That view is also supported by some utility customer watchdog groups and the Natural Resources Defense Council. They warn that this net-metering cost shift” disproportionately harms lower-income and disadvantaged communities that can’t afford solar. In fact, some of those groups are asking the CPUC to reduce even further the payments for rooftop solar power fed into the grid in an attempt to rectify the cost shift.

The CPUC’s Public Advocates Office, the agency’s internal customer watchdog group, argued in a filing this month that the proposed reforms do not go far enough” to restore the balance between solar and non-solar customers. For example, the CPUC proposes shifting solar customers whose systems have been in place for 15 years onto the new, less-lucrative system, but the Public Advocates Office calls for shortening that time period to eight years.

The proposal to accelerate the switch of existing customers to the new rates is already facing pushback from groups that say it will undermine the economics of existing solar installations, which were promised a 20-year legacy period” in the CPUC’s last round of net-metering reforms back in 2016

But for those who say that net-metering allows wealthier solar system owners to shift the costs of maintaining and building the state’s electricity infrastructure to others, arguments based on protecting homeowners’ solar investments or the continued growth of the rooftop solar industry fall flat. 

Severin Borenstein, director of the Energy Institute at UC Berkeley’s Haas School of Business, has been an outspoken critic of existing net-metering policy on equity grounds. In a Monday blog post, he argues that current net-metering policies are not only costing non-solar households boatloads of money” but also failing to drive distributed-energy investments that could help the state meet its aggressive carbon-reduction goals. 

The goal should be equitably saving the planet, not growing one industry,” Borenstein writes. Arguments centered on maintaining a healthy market for rooftop solar installers should take a back seat to broader equity and environmental concerns, he contends: 

[I]nstead of a debate about the appropriate role of residential solar in addressing greenhouse gas emissions in California and beyond, the reactions have largely been about how much subsidy rooftop solar companies in California need in order to stay in business. If that sounds to you like climate policy is taking a back seat to political horse-trading, you aren’t alone.

A tough decision for the CPUC

The disputes between these two camps have only grown more intense in the year since the CPUC started working on reforms to its net-metering policies. Each coalition has accused the other of misusing data on the costs and benefits of rooftop solar and of misrepresenting potential impacts on the state’s low-income and disadvantaged residents. 

The CPUC could now take action to amend the existing proposal before it comes up for a vote, or it could issue an alternative decision to consider alongside the existing proposed decision. 

The CPUC is also in the midst of replacing two of its five commissioners. Reynolds, the newly appointed CPUC president, is replacing former President Marybel Batjer, who in November announced her departure from the commission to lead a state Department of Motor Vehicles task force. Meanwhile, Martha Guzman Aceves, the CPUC commissioner who managed the net-metering proceeding over the past year, is departing to become administrator of the U.S. Environmental Protection Agency’s Region 9. She is being replaced by John Reynolds (no relation to Alice Reynolds), an attorney and former chief of staff, adviser and public utilities counsel at the CPUC

As the new head of the CPUC, President Reynolds will be the key decider on changes to rooftop solar policy,” said Susannah Churchill, Vote Solar’s Western senior director. It’s up to her to craft a more balanced approach than the disastrous December 13 proposal.”

The CPUC now faces a tough choice — and it will almost certainly be lambasted no matter what course it takes. 

Jeff St. John is director of news and special projects at Canary Media.