In response to a California Public Utilities Commission (CPUC) Decision on net metering, three California investor-owned utilities have proposed a new structure to compensate rooftop solar customers for the power they generate. The proposal, which would be a departure from the CPUC’s proposed approach, is the latest in a series of similar proposals in other states designed to address the rapid growth of rooftop solar.  The issue of how to compensate net metering customers has become a thorny issue for many state Commissions, with recent PUC proceedings in Arizona, Colorado, and  Nevada drawing significant stakeholder attention to the growth of rooftop solar.

The California utilities’ propose a buy-all, sell-all type approach to compensating new distributed generation customers, where customers would purchase all of the electricity they use from the grid at a fixed rate, and likewise sell their excess energy back to the grid at a fixed rate. This is in contrast to “net” metering where customers pay only for their net consumption from the grid after energy generated by their rooftop systems is accounted for. This proposal, like those from utilities in other states, aims to address concerns about the lower contributions that net-metering customers make to fixed investments such as utility distribution infrastructure.

The utilities supporting the proposal also argue that this structure would make the subsidy currently provided through net metering more transparent—it would be reflected directly in the rate the utilities pay for customers’ power exports to the grid—rather than buried in the netting structure that is used now. The IOU proposal also stands in contrast to the CPUC’s proposed solution, which is to institute a two to three cent “non-bypassable” fee on the electricity that solar customers take from the grid.

As we have seen in other states, solar advocates are likely to push back against this proposal at the CPUC as the discussion over net metering continues. As one of the largest consumers of electricity in the country, California’s decision on net metering will likely be used as an example as other states continue to grapple with this decision.