Report For CPUC Says NEM Will Cost $1B Per Year By 2020; CALSEIA Slams ‘Flawed’ Study


A majority of the customers who have installed solar power in the service areas of California's public utilities have subscribed to net energy metering (NEM), and the policy is expected to cost more than $1 billion a year by 2020, says a draft report commissioned by the California Public Utilities Commission (CPUC). In the report's cost-benefit analysis, NEM policies create a cost shift from NEM customers to other customers as utilities adjust their rates to compensate for the shortfall.

The report, which was prepared by Energy and Environmental Economics Inc., analyzes the costs and benefits of NEM according to actual installed capacity at the end of 2012, which was about 1.3 GW; projected capacity with full participation in the California Solar Initiative (CSI), totaling 2.9 GW; and the capacity needed to reach the 5% net metering cap, forecast to be 5.57 GW in 2020.

The costs associated with all NEM generation are forecast to be about $1.1 billion per year in 2020. By comparison, the total cost in 2012 was $254 million per year. Generation costs with full CSI participation are forecast to be $436 million.

The report says residential NEM customers would have paid utility bills that are 154% higher than the utility's cost of providing service if they had not installed an NEM-eligible distributed generation system. This high cost is due to the fact that most residential NEM customers are in the higher rate tiers, the report says.

According to the report, California's three largest investor-owned utilities had approximately 150,000 customers enrolled in NEM at the end of 2012, totaling 1.3 GW of installed capacity. These systems generated about 2,400 GWh of electricity during that year. The report says 99% of NEM customers have solar photovoltaic systems, representing 96% of capacity.

The California Solar Energy Industries Association (CALSEIA) was quick to denounce the study as"flawed," and"out of date."

‘The draft study is flawed because it includes cost estimates of solar electricity generated and consumed on-site by a solar home, school or business,’ says CALSEIA Executive Director Bernadette Del Chiaro, in a statement. ‘All solar electricity generated and consumed on-site has the same zero impact on other ratepayers as energy efficiency. If a homeowner installed a more energy efficient refrigerator or windows, are they causing harm to their fellow ratepayers who didn't make such investments? Of course not. In fact, it has been a long-standing policy principal in California that reducing electricity demand, whether through conservation, energy efficiency, or through self-generation, provides net economic and social benefits for the state.

‘The E3 draft study is also already out of date given the impending changes to residential rate structures and fees called for by AB 327 (Perea), which passed the state legislature two weeks ago and is sitting on the governor's desk awaiting his expected signature.’

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