The California Public Utilities Commission (CPUC) is proposing to update the net metering policy, commonly referred to as NEM 3.0. You can see what we have done to support modelling these changes here. We have summarized the proposed changes for you below:
1. Change from Net Energy Metering to a Net Billing Policy
- Historically the export compensation of solar in California, and in many other states in the US is based off a Net Energy Metering (NEM) Policy. Both NEM1.0 and NEM2.0 were under this compensation mechanism.
- Under NEM, a system owner is generating more electricity than they are consuming would sell the excess electricity back to the utility grid and get credited at equal to, or slightly less than the full-retail rate. This credit can then be applied to offset electricity consumption within the current billing cycle (i.e. monthly), or in future billing cycles before expiring annually at some specified month (known as the true-up period).
- With NEM3.0, the system owner is now compensated based off a "Net Billing" arrangement which works very differently to Net Energy Metering (NEM).
- Under Net Billing, energy exports are metered and credited at a predetermined sell rate which is generally much less than the retail rate that the system owner buys at. The netting also occurs in real-time (i.e. instantaneously) with periods when there is net export (generation > consumption) and net consumption (consumption > generation) being measured separately. This means that a smart meter, or two separate unidirectional meters is required.
2. What is the Value of Selling Energy back to the Grid under Net Billing?
- Under Net Billing, there is a 50-80% reduction on the credits customers receive for selling excess energy back to the utility when compared to NEM2.0.
- The value of selling energy back to the grid is calculated using the Avoided Cost Calculator (ACC) which you can find the link to download it on this webpage. This model provides a set of different hourly prices per month, and per weekday vs weekend for a total of 576 different export rates for each year (12 months x 24 hours = 288 different export rates for weekday and another 288 export rates for weekend).
- The Avoided Cost Calculator (ACC) also provides forecasted export rates up to 30 years in advance, and will be updated every 2 years.
- Customers that install solar within the first 5 years of Net Billing (i.e from April 2023 until April 2028) can have their export compensation locked in for 9 years based off the latest forecasted export rates from the Avoided Cost Calculator (ACC). This means that the export rates will be fixed on the 9 year ACC forecast at the time the customer gets solar, and will not change even as newer ACC export rates have been provided.
- After the 9 year locked-in, the export rates will be set every 2 years based off the latest ACC values and can rise or fall.
- The lock-in export rates can be lost if the property is sold, or if the customer chooses to leave the lock-in early.
- For the first 5 years of Net Billing, residential customers from PG&E and SCE will also receive an additional adder to their export rate that is fixed for 9 years. This adder value will decrease by 20% annually for new customers until it reaches zero. We will expand upon this in the section below.
3. ACC Calculator Plus Adder (For PG&E & SCE customers)
- An additional adder amount to the export rate is provided to residential customers that gets solar within the first 5-years of Net Billing (i.e. up until April 2028). This adder essentially increases the export rate received by the customer when selling excess solar back to the grid.
- The adder amount is fixed for 9 years at the adder value in the year the customer received it.
- These adders are only provided to PG&E and SCE residential customers, with low-income customers receiving a higher adder amount.
- Low-income customers are customers that are currently on California Alternate Rates for Energy (CARE) and Family Electric Rate Assistance (FERA) programs.
- Non-residential and SDG&E customers will not receive the ACC Plus adders.
- The adder amounts shown in the table below will decrease by 20% year on year until April 2028 when no more adders are provided to new solar customers.
4. Billing Rules on Net Billing
4.1. Monthly Billing and Annual True-up
- Residential customers must pay all incurred charges every month (i.e. same as current commercial customers), however the annual true-up continues to apply.
- This is unlike NEM2.0 where residential customers pays the amount they owed, or receives compensation for any credits at the Net Surplus Compensation Rate on the bills annually (i.e. once per year) on the true-up date.
4.2. Non-bypassable Charges (Same as before)
- Non-bypassable charges are charges per kWh of "imported" electricity from the grid that must be paid by a customer.
- Non-bypassable charges will continue to apply to Net Billing.
5. No more Grid Participation Charge from Earlier Net Billing Proposals
- The previous Net Billing proposal required new solar customers to pay a "Grid Participation Charge" which is a monthly charge based on the installed kWp of the system. The amounted to around $40-$60/month extra that a solar customer will have to pay. This charge has now been scraped in the most recent Net Billing proposal. Great news for the solar industry!
- This also means there is no more Market Transition Credit as well that came with the Grid Participation Charge.
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