Solar panel reimbursements to remain low under California appeals court ruling

A California appeals court this week sided with state utility regulators in a case seen as crucial to the spread of solar panels on the rooftops of California homes.

Three appeals court judges ruled that the California Public Utilities Commission was justified in reducing the rate utilities pay customers for excess energy the customers’ solar panels generate.

Environmental advocates who brought the case say the decision will exacerbate California’s energy affordability crisis. Regulators believe it vindicates a decision they took “to ensure that rooftop solar programs remain fair, sustainable and aligned with California’s clean energy goals,” CPUC spokesperson Terrie Prosper said Tuesday.

The case centered on the state’s “net energy metering” program, which governs how much solar customers are paid for excess power from their panels. Earlier versions of the program guaranteed customers the retail rate, which is how much utilities charge other customers when they resell the energy.

But a 2022 commission decision reduced this payment by about 75%. The commission’s decision backed utilities’ position, which was that those who have rooftop panels don’t pay their fair share of costs such as maintaining the grid, shifting the expenses disproportionately to non-solar customers. The decision resulted in a significant drop in new customers signing up for rooftop solar.

Advocacy groups sued over the decision, including the Center for Biological Diversity, The Protect our Communities Foundation, and the Environmental Working Group. They argued that commissioners didn’t properly take into consideration the benefits to disadvantaged communities and customers of having local energy generation.

The case reached an appeals court, which applied, in a decision siding with commissioners, a legal standard granting them significant deference. The Supreme Court of California then unanimously ruled last August that the lower court should not have applied this standard and must delve more deeply into the substance of the arguments.

Roger Lin, senior attorney at the Center for Biological Diversity, said this week’s decision is “disappointing” and the groups are “evaluating all of our options.” They can appeal again to the state supreme court.

“The whole reason the utilities created the ‘cost shift’ narrative was to preserve their profits,” Lin said. Under state law, utilities can earn a rate of return on everything they build, which amounts to hundreds of millions of dollars from ratepayers every year. They can’t earn that return on customers’ rooftop solar.

The decision comes amid renewed attention on California’s energy affordability crisis. Golden State residents pay the second highest rates in the country for energy after Hawaii, according to the U.S. Energy Information Administration.

Ratepayers routinely admonish state utility regulators for their high bills at public meetings. And Gov. Gavin Newsom recently announced an upcoming replacement of the head of the utilities commission as part of a move to focus on bill affordability.

This article was originally published on CalMatters and was republished under the Creative Commons Attribution-NonCommercial-NoDerivatives license.