NEM-3

What Changes are Coming and How You Can Save NOW!

The California Public Utilities Commission (CPUC) is making some changes to the solar industry, here is what you need to know about their Proposed Decision (PD).

What is NEM

Net Energy Metering (NEM) is a program that credits solar customer’s electric bill for surplus energy they send back to the grid.  As a solar customer, you can use these credits to offset the cost of energy you use from the grid.

When

NEM-2 enrollment will end 120 days after the decision is final – Dec 15 vote = April 14 start of NEM-3.  The qualifier is the submittal of completed application.  There is no deadline to complete construction.

After the 120-day period, customers can be billed according to NEM-2 on an interim basis until the utilities NEM-3 billing capabilities are built. NEM-2 customers can add a battery after NEM-3 starts and not lose NEM -2 status.

Key Takeaways
NEM will be replaced with Net Billing, this will require customer to switch to specific Time of Use (TOU) billing plans with high peak electricity prices, reduce compensation for excess energy sent to the grid and measure energy exports in real-time, as opposed to the current practice of reconciling exports and imports on an hourly basis. Net Billing was designed so the average homeowner would be able to recoup their investment in a solar installation after 9 years.

Utility Company Rate Name Lowest Off-Peak Rate Highest On-Peak Rate
PG&E E-Elec $.258/kWh $.529/kWh
SCE TOU-D-Prime $.214/kWh $.539/kWh
SDG&E EV-TOU-5 $.102/kWh $.653/kWh

Reductions to Energy Credits
Currently CA residents save an average of between 22 and 36 cents for every kWh of electricity generated by their solar panels.  With the new decision excess generation would go down to just 4.7 to 5.8 cents, on average.  The credit for this energy would be called “Retail Export Compensation Rate” These rates would be based on the state’s Avoided Cost Calculator (ACC), a complex tool used to determine the value that each kWh of energy produced by distributed solar adds to the grid.  The export compensation rates follow similar schedule to retail energy prices under a time-of-use rate.  This low credit for energy sent to the grid when the sun is shining is intended to push solar owners to add batteries.

Temporary Incentives
The CPUC admits the switch to Net Billing would make it difficult for new solar owners to see adequate bill savings in 2023, so they have added a small incentive.  They call the bonus “ACC Plus” and it would apply equally to every kWh of electricity exported by a solar install.  The incentive is designed to allow new solar owners to hit a 9-year payback period (only available to Home Owners (HO) that made the solar purchase, does not carry over to new HO.

Customer Segment PG&E SCE SDG&E
Residential Non-CARE $.018 $.0400 $0
Residential CARE $.087 $.093 $0

Increase In Monthly Fixed Charges
The new TOU rates that will go into effect year one will result in increased monthly fixed charges.

Utility Company Current Value of NEM-2 Credits ($/kWh) Average value of proposed credits including Non-CARE ACC Plus ($/kWh) Proposed monthly fixed charge increase*
PG&E $.277 $.068 $15
SCE $.224 $.087 $12.18
SDG&E $.340 $.049 $16

*associated with eligible TOU rates listed in PD, subject to change.

System Oversizing – capped at 150% to allow for future EV’s.

Areas Effected – PG&E, SCE & SDG&E territories

How to Prepare?

Install Solar Panels now, reap the benefits of NEM-2 for 20 years.  This is unchanged from the proposal that talked about lowering the grandfathered rate to 15 years.  There are no new rate requirements on NEM-1 & NEM-2, unchanged for 20 years, so take advantage of the rates NEM-2 has to offer now.

Add Storage – Putting excess energy back into the grid becomes less attractive because of lower credits and higher electricity rates.  Instead, use the energy to power your home when solar cannot produce with a backup storage system.