The California Public Utilities Commission (CPUC) set a Friday deadline for interested parties to submit comments on establishing a transition period under the newly signed Assembly Bill 327 (AB 327). For existing net-energy metering (NEM) customers such as schools, cities, special districts and other customers with renewable energy projects, the scope and terms of this transition period will affect their NEM contracts with the utilities and may affect the economic viability of their NEM systems.
AB 327 is a controversial law that makes significant changes to existing NEM law that will affect NEM’s customers’ contracts with the utilities. NEM is a program that allows renewable energy customers to essentially run their electricity meters backwards, using the grid as a kind of battery and “netting” out the energy produced by their systems to the grid against the energy they consume from the grid. AB 327 directs the CPUC to change the tariff for those existing NEM customers at a future date, which is extremely problematic for public entities that have made renewable energy investments.
AB 327 does require the CPUC to determine the transition or grandfathering period for some NEM customers and requires that the state agency consider a “reasonable expected payback period based on the year the customer initially took service under the NEM contract.” Qualified NEM customers are those who take service under the NEM tariff prior to the earlier of July 1, 2017 or the attainment of each utility’s NEM cap. What the CPUC should consider to be “reasonable,” given the vastly differing payback periods for renewable energy projects between customers, is unclear and not specified in AB 327. These components of the transition period will be established by the CPUC after receiving stakeholder input.
On November 27, the day before Thanksgiving, the CPUC issued a ruling establishing extremely short deadlines for public comments regarding the transition period. Initial comments are due by December 6th, and reply comments are due by December 16th. While some stakeholders have requested a short extension of these deadlines, it is currently unclear if it will be granted.
For parties wishing to affect the development of the transition period, submitting comments is vital. The CPUC has requested comments regarding all components of the transition period, including (1) the length qualified NEM customers will be guaranteed their current tariffs, (2) whether the “reasonable expected payback period” should be based on the ten-year statutory warranty period, (3) when the “reasonable expected payback period” should commence for customers, (4) what the “reasonable expected payback period” is and whether it should be different for each customer class and (5) how additional solar panels or other modifications to existing facilities should be treated.
In order to ensure that public agencies have a seat at the table before the CPUC, Best Best & Krieger LLP has formed a NEM Public Agency Coalition or “NEM PAC,” which public agencies may join as clients for a flat, fixed fee. The NEM PAC will gather and submit data from its clients regarding investments, such as expected payback periods, to ensure that the CPUC receives and considers such information in formulating its proposed grandfathering period. Parties wishing to submit initial or reply comments may do so by joining the NEM PAC.
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