California Utilities Commission Backs Off from the Solar Tax Proposal

By: Sharjeel Sohaib


Feb 15, 2022


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Key Points

  • California Public Utilities Commission (CPUC) has backed off from implementing its NEM 3.0 proposal, according to which existing solar energy owners/consumers in California would have to pay a grid access charge, an $8/kW solar capacity charge per month.
  • CPUC’s decision came after solar consumers, solar power advocacy groups, and solar power companies mounted a blitz of public campaigning and protests against the proposal

We Covered this in our Weekly Wire Roundup

The Fight Over The Future Of Rooftop Solar In… | Canary Media
PC: Canary Media

Riverside, CA — California is known for giving perks to its residents with rooftop solar panels installed on their homes.

You may call it the best state for solar in the U.S. as the Golden State keeps adding solar capacity at a stellar pace making it five times ahead of Texas and North Carolina (Capacity of solar megawatts installed CA: 29.2K MW; TX: .6.7K; NC: 6.4K). It’s home to 40% of the nation’s residential solar energy capacity.

The California Public Utilities Commission (CPUC) was about to pass a NEM 3.0 that would have tipped that balance in favor of other states. According to the Net Energy Metering (NEM 3.0) proposal, all solar customers in California were to pay the grid access charge, an $8/kW solar capacity charge per month, meaning $56 a month additional expense for a 7kW system owner.

According to analysts cited by PV Magazine, cumulatively, it would have caused a 57-71% overall reduction in solar savings across the state.

The good news is that CPUC has backed off from the NEM 3.0 Proposal indefinitely.

The 10 States With The Most Solar Megawatts Installed

Long Story Short

When CPUC floated this proposal to go ahead and levy an $8/kW solar capacity charge per month, this did not sit well with consumers and solar power companies.

Tesla and residential solar power company Sunrun took the lead and encouraged consumers to fight the proposal to make rooftop solar more expensive.

Consumers were encouraged to voice their concerns in the CPUC public meeting. Public advocacy took off in the form of organizations like the California Solar and Storage Association (CALSSA) and websites and forums like SAVE CALIFORNIA SOLAR and SolarReviews. The latter even interviewed 4,000 active solar shoppers in the state and showed the reduced savings under NEM 3.0. There were protests in front of the CPUC office and in Los Angeles.

Sanity prevailed when everyone banded against NEM 3.0, hence the announcement that antagonist NEM 3.0 is out indefinitely.


Per Reuters reporting, the shelving of NEM 3.0 is a quick win for solar power companies.

A notice to parties involved in the rulemaking by the California Public Utilities Commission (CPUC) said the commissioner assigned to the proceeding “has requested additional time to analyze the record and consider revisions to the proposed decision based on party comments.”


What’s the Motivation Behind CPUC’s Proposal?

At the heart of CPUC’s proposal is an argument that says the current NEM 2.0 policy provides a multi-billion-dollar subsidy for wealthy homeowners at the expense of other utility ratepayers.

By adopting NEM 3.0, the CPUC argued, it would kill two birds with one shot, meaning that it would (1) eliminate the disparity of subsidies between current solar-customers versus non-solar customers and (2) it will encourage existing solar customers to install storage systems as well rather than just selling solar energy back to utilities.

CPUC argued that non-solar energy consumers of the state pay an unfair and higher cost of energy and their rising utility bills reflect that. CPUC needs to fix that in that it wants to level the playing field for current and would-be solar energy consumers by taking some incentives away from current customers and packaging them for would-be consumers (who happen to be non-solar at this time). It also argued that non-solar consumers are disproportionately low-income households, so it makes sense to make the structure of subsidies work in their favor.

Secondly, a tiny percentage of solar homeowners have storage batteries, and their subsidies and incentives encourage them to sell back energy to utilities. CPUC wants to encourage battery storage system installation, and a charge of $8/month on joining the grid to sell electricity will encourage homeowners to install battery storage.

CPUC’s detailed reasoning may be assessed here.

We reported on the proceedings of this public campaign that caused a shift in CPUC’s stance. We wrote that “California’s Solar Energy Consumers Resist CA Public Utilities Commission’s Decision. It was the only time CPUC would have backed off, given the active campaign run by solar companies and consumers.

Nonetheless, it might be a quick win as CPUC weighs how to move forward. A CPUC notice reads that the “commissioner assigned to the proceeding has requested additional time to analyze the record and consider revisions to the proposed decision based on party comments,” Reuters.

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