CPUC Begins Work on Successor NEM Tariff

BB&K is Forming a Coalition to Represent the Public Agency Perspective on Renewable Energy Investments to the CPUC

The California Public Utilities Commission recently held a workshop with interested stakeholders regarding the successor Net Energy Metering tariff for customers of Pacific Gas & Electric, Southern California Edison and San Diego Gas & Electric. The workshop was the first step in establishing the so-called successor NEM tariff, or “NEM 2.0.” This tariff will apply to all NEM customers who interconnect after July 1, 2017, or when their utility reaches the statutory cap — whichever occurs first. This tariff will also apply to existing NEM customers after the expiration of the 20-year grandfathering period, which was established in the last CPUC proceeding. Participation in this new proceeding is important to ensure current and future renewable energy projects are financially viable. To ensure that public agencies have a seat at the table before the CPUC, Best Best & Krieger is forming a new coalition. Public agency clients may join the NEM Public Agency Coalition or “NEM PAC 2.0” for a flat, fixed fee.

NEM is a program that allows renewable energy customers to essentially run their electricity meters backwards, using the grid as a kind of battery and “netting” out the energy produced by their systems to the grid against the energy they consume from the grid. This program is the main economic incentive of roof-top solar and other smaller renewable projects.

Last year, the Legislature adopted Assembly Bill 327, which dramatically altered NEM in California. Specifically, the Legislature directed the CPUC to establish a revised NEM program for new customers. In addition, it directed the CPUC to establish a grandfathering period for existing customers. At the expiration of this period, existing customers will be subject to the new NEM program. AB 327 imposed tight deadlines on the CPUC for both of these actions.

The CPUC was required to establish the grandfathering period by March 31. It met this deadline and created a 20-year grandfathering period for existing customers from the interconnection of their systems. “Existing” means any current NEM customers or new customers that install before the earlier of July 1, 2017, or whenever each utility reaches its existing cap on NEM production. BB&K represented a coalition in this earlier proceeding and successfully advocated for a 20-year grandfathering period, safeguarding many renewable energy investments.

The current proceeding is the second step mandated by AB 327. The NEM 2.0 proceeding will establish the successor tariff for new customers and existing customers after the expiration of their grandfathering period. AB 327 requires the CPUC to complete this process by Dec. 31, 2015. In addition, the CPUC must take into account a number of factors when doing so, including (1) ensuring that renewable energy projects continue to grow “sustainably” and (2) permitting projects greater than one megawatt (that were previously not eligible for NEM).

The CPUC’s recent workshop was the first step in the process of establishing the new successor tariff. While the exact details of the process are still being determined, the CPUC has indicated that it will look at all available options for structuring the NEM program, including eliminating the current bill credit, providing payment to customers for excess net energy and providing locational or other incentives to certain customers in areas of need. In addition, the CPUC will be creating a NEM “public tool.” This tool is expected to (1) permit interested parties to calculate payback periods and rates of return on projects and (2) provide the CPUC with cost and other relevant data to evaluate different NEM proposals. The CPUC will begin this process in the next few months.

Once the public tool is available, the CPUC is expected to solicit comments from interested parties regarding how the NEM successor tariff should be structured. It is imperative that renewable energy customers with current renewable projects not protected by the grandfathering period, or those interested in investing in renewable projects in the future, participate in this proceeding. The NEM 2.0 proceeding will determine if — and how — economically beneficial renewable projects will be in the future.