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Rooftop Solar Energy Tug of War – Resolution, Part 2

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John Benson's picture
Senior Consultant, Microgrid Labs

PROFESSIONAL EXPERIENCE: Microgrid Labs, Inc. Advisor: 2014 to Present Developed product plans, conceptual and preliminary designs for projects, performed industry surveys and developed...

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  • Dec 22, 2021

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On December 13 the California Public Utilities Commission (CPUC) released the Proposed Decision for the Net Energy Metering Tariff (a.k.a. NEM 2.0) that will be used in the future for rooftop solar in our state. This decision is over 200 pages long, because of the complexity of net energy metering tariffs and the many stake-holders involved. This summary of this decision is also very long for the same reasons, thus it will require two posts, one yesterday, (12/21) and one today. Today’s post will cover the main decision process.

If you have ventured into the Part 2 post without first reading part 1, it is strongly suggested that you start with Part 1. Part 1 was posted on 12/21/21, and part 2 a day later.

Bob Meinetz's picture
Bob Meinetz on Dec 22, 2021

The California Public Utilities Commission is clueless:

"...we agree that highly differentiated time-of-use rates will vastly improve the pricing signal to customers. These rates will incentivize them to divert energy usage to lower-priced hours when the solar system is producing and/or when charging storage, rather than using this energy at expensive times when the grid’s energy supply is constrained. As a result, rates are closer to the cost of service. This maximizes the value of the generation to all customers and to the electrical system and ensures equity among all customers."

No, the value of electricity to customers is directly proportional to its availability. Time-of-use pricing, especially "highly-differentiated" TOU, accomplishes nothing more than shift the burden of availability to electricity customers. It forces lower-income customers to either use electricity when it's least convenient, or pay a larger percentage of their hard-earned income so they don't have turn their air conditioning off when the sun goes down - even if it's still 96°F in their apartment.
CPUC commissioners and their appointer, Gavin Newsom, are privileged, entitled idiots. They should take a drive out to Paradise and talk to some of the families living in trailers, whose homes were burnt to the ground by PG&E's carelessness. Ask them if they mind paying electricity rates among the highest in the continental U.S. to fight climate change. They might be surprised to discover an entire class of Californians for whom caring about climate change is a luxury.

FIRE - POWER - MONEY: "With California’s wildfires growing deadlier and bigger than ever, ABC10 examines the connection between wildfires, PG&E and its influence on California politics."

John Benson's picture
John Benson on Dec 23, 2021

Hi Bob, thanks for the comments.

Having been highly involved in rate design before (see the paper linked below), I can tell you that all rates (including TOU) attempt to be revenue neutral. If the peak demand periods have a higher rate than the average, the other periods are lower. By shifting their demand during the peak demand period to off-peak the average customer class for a given rate should reduce their overall bill.

I'm on a TOU rate structure myself, and have a lower bill than I did on the standard residential tariff.


Bob Meinetz's picture
Bob Meinetz on Dec 24, 2021

"I'm on a TOU rate structure myself, and have a lower bill than I did on the standard residential tariff."

For that to be the case:
1) The current average of all TOU rates would have to be lower than your previous non-TOU residential rate, and/or
2) Shifting your use of electricity to less-convenient times of the day isn't a significant burden for you.
Re: #1, I don't know anyone in California with lower average electricity rates than they had a year ago. Re: #2, by specifying an "average customer class"  we assume higher rates / inconvenience bear no additional burden on low-income customers - that the ratio of burden/cost is linear, that the poor can absorb rate increases as easily as you or I. I think you would agree that's not the case.

Kevin Gregerson's picture
Kevin Gregerson on Dec 23, 2021

I'm really not sure why they keep messing with TOU and rates there.   Even more so I have no idea why they keep trying to tack on a monthly fee to solar systems.   It makes far more sense to simply cut the net metering rate by half a penny to a penny per khwr for all customers solar, wind, water or otherwise.   They would get the same effect and it would set a level playing field for solar in general without costing anyone very much money except maybe those who have a really large solar system like 50 plus KW.  But, even then, it achieves the goal of primarily affecting those larger customers without penalizing those on fixed incomes etc. and it doesn't add pain to those who might have a solar system that's basically down due to a failure of component that's going to take 3 months to replace. 

Bob Meinetz's picture
Bob Meinetz on Dec 24, 2021

" doesn't add pain to those who might have a solar system that's basically down due to a failure of component that's going to take 3 months to replace."

When a customer's solar system goes down it doesn't reduce a utility's operating expenses. Maintaining transmission lines, paying customer service employees, etc., are essentially fixed costs of the system.

Conversely, buying a quality solar array and maintaining it are the responsibility of its owner.

Nathan Wilson's picture
Nathan Wilson on Dec 28, 2021

"I'm really not sure why they keep messing with TOU and rates there."

Great question!  It all comes down to what's on the producing side of the grid and how peaky the demand is.


Utility bills are simplest and most customer-friendly when the same rate is charged all the time. If the (net) demand is very peaky, it really is the size of the peaks that determine how much generation and distribution equipment must be bought and maintained. It is very economical for utilities to offer discount pricing for off-peak usage; furthermore, policies often dispatch cleaner generators first, and add the dirtier ones only during demand peaks.  So it's pretty advantageous to offer those off-peak discounts (or on-peak rate surcharges).


In a conventional grid, based on fossil fuel, hydro, and/or nuclear, making time-of-use billing work is pretty straight forward: give users a discount at night.  That's easy to understand, and will work for users such as BEV owners and some industrial users.  Everyone else is free to ignore the policy.


But with the grid moving in the direction advocated by California's renewables enthusiasts, there is no simple answer to the TOU problem.  The off-peak times will vary more with the weather, and with residential rooftop solar growing, the grid net-demand will have more peakiness, which means there will be even more economic incentive to shape consumer usage.  


California and other locations that aspire to high renewables usage can expect a continual escalation in TOU policies, and can expect those policies to become increasingly coercive in addition.


John Benson's picture
John Benson on Dec 30, 2021

OK Guys, sorry for the delay in responding to this, but I've had a bit of an issue - COVID-19 - I've had a breakthrough infection in spite of being fully vaccinated in boosted. The Omicron Variant good at this.


As I said in the intro, "This is a very important and complex subject, has many stakeholders, and will set the tone for other states that will need to go through a similar process."  I believe that (1) ALJ did an excellent job of bringing together all of the massive amount of information related to this subject, and actually developing a complex and fair tariff, and I'm uniquely qualified to understand this since I went through a similar process shortly after Y2K (go through the link below, section 3).

Also, I tried my best to make an obscure and complex subject understandable but know that not everyone will understand it for their own reasons. So be it.




Bob Meinetz's picture
Bob Meinetz on Dec 31, 2021

Sorry to hear about your breakthrough infection, John - hope you're on the mend.

CPUC has changed since Y2K. Current commissioners  (with one exception) are activists, attorneys, or former utility lobbyists with little understanding of energy, who largely serve as foot soldiers for advancing the Governor's agenda. Those who refuse are fired (ask Alice Stebbins).

Since 2005, the core conflict in California electricity pricing is the result of attempting to combine cost-of-service regulation and free-market competition. Because utilities aren't permitted to profit on sales of electricity, they're being paid, essentially, to "build stuff" (the Averch-Johnson effect).

Alas, electricity remains a commodity, under any other name. All that California's return-on-equity pricing does is to encourage exploitation of consumers - why since 2011, CA prices have increased 7 times faster than the national average.

John Benson's picture
Thank John for the Post!
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