Love or hate them, utilities are on the right side of California's NEM debate
- Jan 26, 2022 11:29 pm GMT
For all the regulatory-drama junkies out there disappointed that there won’t be a decision on net-energy metering (NEM) from the California Public Utility Commission at its Jan. 27 meeting, I’m sorry — but I’m probably more sorry that this is your chosen predilection in the first place. (Go get a Netflix subscription already!)
Instead, the best I can offer is my admittedly-distant perspective from literally across the continent here in PJM-land. That said, all organized markets touched by FERC’s wide-ranging Order 2222 on distributed-energy resources are having their own fights over integration of states’ NEM retail-rate compensation into federally-regulated wholesale markets — here's PJM's. (BTW, keep that retail vs. wholesale concept in mind… it’s pretty key to understanding part of this standoff.)
First, a few caveats:
- I don't love seeing utilities maximize profits by leveraging their political influence (ever heard the joke about lobbying being their actual core competency?) to create endless line items on customer bills anymore than you do.
- Nor do I easily suffer self-aggrandizing, self-righteously sanctimonious self-described "tribes" of "noble" "clean-energy" "warriors" and their crusades to reshuffle industry dominance in their favor, no matter how much they swear they’re only doing it for the benefit of we, the people, out of the kindness of their hearts, keen sense of patriotic duty and maybe just a little financial gain.
- I'm also a homeowner and residential customer, so — while I don’t have my own rooftop solar (yet) — I don't begrudge anyone who crunched the numbers to ensure their solar system would be a net-positive and are now frustrated and disillusioned that the game is being changed as they go along.
That said, the proposal as I understand it provides a 15-year runway from when the project went online to when these revisions would be implemented, so if it just interconnected last year, you’ve got 14 more years of the current tariff. Any deal that wasn’t designed to be a winner in that amount of time seems like fertile ground for a consumer complaint.
And, while — again — I am by no means supportive of utilities trying to line their pockets, some of the main thrusts of objection to the revisions seem disingenuous. Here’s why:
- Claiming that more long-distance transmission lines, which form the infrastructure ratebase that transmission owners (often utilities) use to set customer rates and make profit, aren’t necessary is demonstrably false. FERC is currently compiling feedback on why we need more in anticipation of rule changes to further incentivize transmission build-out to prepare for "the grid of the future": "The electric generation fleet is shifting from resources located close to population centers toward resources, including renewables, that may often be located far from load centers."
- Claiming that distributed resources like rooftop solar symbolize some sort of wire-cutting campaign for independence from the tyranny of the grid — as famous basketballer and beloved loon Bill Walton (“the major utilities and fossil-fuel industries … want everything [and] are not happy with the big shift of energy production in our great state towards locally owned roof-top residential and commercial solar.") and no less than The Governator ("Rooftop solar also … gives people a sense of self-sufficiency and independence from the grid. Is it any surprise that the big utilities want to take that away?") have implied — is preposterous. Unless they are actually disconnecting from the grid, owners of rooftop solar are still reliant on the distribution and transmission lines that the utilities pay to upkeep (maybe not always well, but that’s another issue…). And if they are concerned about how much NEM revenue they’re getting to supply power to the grid, they’re obviously not disconnecting from it.
- Claiming that a one-for-one NEM bill credit is fair is actually, well, unfair. This goes back to the retail vs. wholesale question I flagged before. As a state with consumer choice for energy suppliers, Californians can shop for the best rate. That retail rate from your power supplier is bundled, as NRDC explains in these illuminating (pun not initially intended) blog posts supporting revisions, to account for “the costs of wholesale electricity, longer term electricity contracts, costs to maintain and build out the electric grid, and other policy-driven expenses such as the costs to fight climate change and the costs of reducing the threat of wildfires.” Only one piece of all that is the wholesale cost, so if you get a 1:1 credit, you’re essentially opting out of paying your fair share of the rest of those costs. But the costs are still being incurred and you’re still benefiting from improved climate and wildfire protection and a more-robust grid. So who’s paying for them? Anyone who’s not getting the 1:1 NEM credit.
It also doesn't take into account the infrastructure costs and work necessary to turn the grid from a one-way street where power supplies radiate to end-use customers from a centralized generator into a two-way thoroughfare where both centralized plants and end-use customers' distributed-generation resources send electricity up and down the line. From the perspective of utility lineworkers, having to worry about power flows from both directions is a major new safety hazard, and the usual procedure of just turning them off when work needs to be done is now likely to elicit an angry phone call when the rooftop-solar owner sees power generation is down.
So the proposal instead suggests compensation be the avoided costs, or essentially paying you the money the utility saved by using your power. Seems fair enough, no? Whatever the actual value of the generation is, that’s what you get — nothing more; nothing less.
- And this is the basis for dismissing the claim that the cost shift from the haves who can afford solar-generation systems to the have-nots who continue to pay all the grid costs was fabricated by the industry to squeeze more pennies out of consumers. In fact, it’s easy to see how when a fixed cost (like maintaining the electric grid) that was socialized to all customers is now only paid by some of them, those who remain have to pay more to cover those who left. It’s like going out to dinner with friends and then hiding in the bathroom when the bill arrives. Not cool.
When we asked FERC Chairman Rich Glick about this in his second visit to the GT Power Hour podcast, he punted to state regulators to consider as part of their jobs setting retail rates. So FERC certainly believes the CPUC is well within its purview to give the shift some consideration, and the proposal’s inclusion of a $8/KWh “grid participation charge” that works out to something like $55/month for residential participants who aren’t disadvantaged (as well as a $600M equity fund for bringing these programs to low-income Californians) seems like at least a first step in the discussion.
Likely lost in all of this is that the wealthiest folks, who have already reaped benefits, seem to be trying to squeeze out more benefits by manipulating lower classes to fight over who gets to marginally improve their situation at the expense of the other's, which feels like what's going on now.
It makes you wonder what's behind the vicious and reflexive reaction to comments like this from former state-Assemblywoman Lorena Gonzalez-Fletcher, who had the temerity to suggest "You can be an environmentalist and still disagree with this cost shift."
One thing that both sides do seem to agree on that's also likely true is that the end result here will set a national precedent that will impact policy debates in other states with burgeoning solar industries like North Carolina and New Jersey. Maybe as a little consideration for economic realities and the limits of physics get added to the ongoing environmental fervor, comments like Gonzalez-Fletcher's will receive slightly more understanding in response — and slightly less hate.
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