On February 18, 2021, Assembly Member Lorena Gonzalez introduced AB 1139 to amend Public Utilities Code Section 739.1, repeal Sections 2827 and 2827.7, and repeal and add Section 2827. These amendments, repeals, and additions address reforms to the CARE program that set specific discount rate ranges as well as a NEM reform that seeks to: 1) eliminate any cost-shift between NEM and non-NEM customers; and 2) change the compensation received for energy exported to the grid under a new NEM tariff to the hourly wholesale market rate applicable at the time of the export and the location of the customer self-generator. The bill would also expand access to renewable energy for CARE customers in several ways. The following discusses both the changes to CARE and NEM based on the bills April 8, 2021 amendments. Additional amendments are expected if this bill moves through committee and each chamber. If signed into law, this bill would impact the in process CPUC R.20-08-020: Successor Tariff to Net Energy Metering proceeding.

CARE Reforms:

Amendment to Public Utilities Code Section 739.1 would change the California Public Utilities Commission (CPUC) authority to set CARE[1] discount rates from the existing average effective CARE discount of not less than 30% or more than 35% to not less than 40% or more than 45% of the revenues that would have been produced for the same billed usage by non-CARE customers. This significantly increases the CARE discount rate by 10-15% for electrical corporations of 100,000 or more customer accounts in California (such as SDG&E, SCE, and PG&E).  The most recent amendment to the bill adds language that would require 25% of CARE program costs be paid for exclusively by residential customers. This changes existing law that does prohibits the cost of CARE from being borne solely by any single class of customer.

The CPUC is currently evaluating future cost, rates, and equity issues per Public Utilities Code Section 913.1 publishing a Report in February 2021 as part of an En Banc Meeting on Cost and Rate Trends that occurred on February 24, 2021. The CPUC will continue to evaluate how rates are impacting customers and make recommendations to address rate increases and how to equitably assign costs across classes of customers, including the NEM reform discussed below with regards to costs shifts from NEM customers to non-NEM customers (see p. 28-29 of the Report).

NEM Reform:

This bill would next repeal Public Utilities Code Section 2827 and 2827.7 that require NEM tariffs for all electrical corporations, local publicly owned electric utilities, and electrical cooperatives, as defined, on a first-come-first-served basis up to 5% of the aggregate customer peak demand for that utility as well as the requirement that all large electrical corporations, as defined, must develop a successor NEM tariff under CPUC regulation time with no limit on the number of new eligible NEM customers.

These reforms appear to fully enact AB 327 (2013) reforms to NEM that the author lays out in AB 1139’s Section 2. legislative findings and declarations. The findings and declaration state that the AB 327  has not been executed by the CPUC nor have rate been kept just and reasonable under Public Utilities Code § 451: “[c]ertain provisions of that act required the commission to revise the net energy metering program so that nonparticipating customers do not subsidize rooftop solar energy system customers. The commission has not done so, resulting in a continuation of this unsustainable and unjust cost shift.” The bill seeks to remedy this to ensure just and reasonable rates and increase solar access to low income customers through targeted subsidies.

These repeals change the existing regulatory regime for NEM in the state and will impact the current CPUC rulemaking to further refine NEM (CPUC R.20-08-020: Successor Tariff to Net Energy Metering) that is set to produce a decision by Q3 or Q4 of this year to address the future of NEM (compensation of exported energy to the grid, cost shift, etc.) and how to ensure that costs are fairly captured between NEM and non-NEM customers.  The bill proposes to replace current language with a new Public Utilities Code Section 2827 that would change NEM eligibility, subsidized distributed generation and Green Tariff Shared Renewable Program participation for low-income CARE customers and Public buildings, limits NEM for certain Direct Access Customers, and set interconnection requirements.  The following discusses these issues:

A. NEM Eligibility: 

Under the language of this bill, NEM eligibility would no longer be limited by electric utility type for investor owned electric utilities regulated by the CPUC.  The proposed language creates a definition of customer self-generator – limited to one-megawatt systems and current NEM customer – as well as a definition for gross electricity usage that includes both imported and onsite renewable electrical generation facility production. These definitions are essential to determine what costs are borne by NEM and non-NEM customers:

“Customer self-generator” means a residential, commercial, industrial, or agricultural customer of an electrical corporation, who uses a renewable electrical generation facility, or a combination of those facilities, that is located behind the customer’s meter, and is interconnected and operates in parallel with the electrical grid, and whose capacity is sized to primarily offset part or all of the customer’s own electrical requirements, but which shall not exceed one megawatt unless, as of December 31, 2021, it was eligible for, and receiving service pursuant to, a net energy metering tariff approved by the commission pursuant to this section or Section 2727.1.

“Gross electricity usage” means that total usage of a customer self-generator that is served by either imports from the grid or production from an onsite renewable electrical generation facility.

Notably, with the repeal of Public Utilities Code Section 2827, the bill would remove the mandate on local publicly owned electric utilities and electrical cooperatives to create and manage a NEM program and tariff, as defined, by eliminating the definition of an electric utility. This language appears to place NEM related statutory requirements only on CPUC regulated investor owned utilities and their ratepayers.

The language would require the CPUC to mandate that all IOUs submit an advice letter with a new NEM Tariff by July 1, 2022 for all customer self-generators that will replace all prior contracts and standards. The new NEM Tariff would require:

• Customer self-generator credits for any electricity exported be at a rate equal to the hourly wholesale market rate applicable at the time of the export and the location of the customer self-generator; and

• Customer self-generator pay for electricity imported at a rate equal to the otherwise applicable tariff for customers in the same class of service who are not customer self-generators; and

• Notwithstanding the limitations of subdivision (f) of Section 739.9, the customer self-generator be charged a monthly grid access charge equal to the costs attributable to the customer’s gross electricity usage billed at the otherwise applicable rates for all elements of retail service except for generation, minus the amount the customer paid for nongeneration elements of retail service paid as part of the rate for imported electricity.

The proposed language does provide a carve out for community choice aggregators (CCA) that allows the CCA to determine whether to provide credits or charges in different amounts (see proposed California Public Utilities Code § 2827 (b)(3) as drafted in the April 8, 2021 amended bill language).

The proposed language removes existing protections for existing NEM customers who interconnected under the original (NEM 1.0) or the successor NEM tariff (NEM 2.0 and interconnection agreements).  The following provides the language that will change current grandfathering under the last CPUC NEM decision (D.16-01-044) in 2016. Any customer self-generator that previously began service under a net energy metering contract or tariff prior to January 1, 2022, may continue to take service under that contract or tariff as follows:

Original Date of Interconnection	Sunset of Existing Tariff/Interconnection Agreement on:
Prior to January 1, 2014	Then may continue to take service under that contract or tariff until July 1, 2022.
After January 1, 2014 but prior to January 1, 2017	Then may continue to take service under that contract or tariff until July 1, 2023.
After January 1, 2017 but prior to January 1, 2022	Then may continue to take service under that contract or tariff until July 1, 2024.

B. Distributed generation and Green Tariff Shared Renewable Program participation for low-income CARE customers and Public buildings:

The following proposed language seeks to subsidize access to renewable energy supply for low-income customers in three ways. The cost for these programs would be collected from IOU ratepayers in the form of a new “nonbypassable charge on distribution.” All of these funds will be divided between IOUs based on the number of residential customers of each electrical corporation:

Residential CARE Customers in Multi-family Self-Generation:  The bill would require a $300,00,000 million annual collection to discount initial purchase cost of renewable distributed generation for residential customer self-generators who both participate in the California Alternative Rates for Energy program implemented pursuant to Section 739.1 and live in multi-family housing or in underserved communities, as defined in Section 1601. The discount to the initial purchase cost as proposed is designed to maximize the number of participating customers. Notably, the bill calls for the renewable electrical generation facilities serving these customer self-generators to be newly constructed, behind the customer meter, and located on or near their housing.

SB 43 Green Tarif Shared Renewables Program For CARE Customers: The bill would require a $300,00,000 million annual allocation to eliminate rate premium and provide 10% discount for CARE customers to participate in 100% solar option under SB 43 Green Tarif Shared Renewables program. The bill calls for the premium elimination and 10-percent discount to be in addition to the discount provided in Section 739.1. The bill would require all renewable electric generating facilities supplying electricity pursuant to this subparagraph to be newly constructed to supply electricity for this program and meet the product content category requirements of paragraph (1) of subdivision (b) of Section 399.16 in addition to the requirement of subdivision (e) of Section 2833. The facility size and program size limits in subdivisions (b) and (d) of Section 2833 would not apply to participation in the Green Tariff Shared Renewables Program under this proposed language. Funds would be allocated pursuant to these applicable requirements and notwithstanding subdivision (q) of Section 2833.

Discount on Purchase of Renewable Electrical Generational Facilities for Public Buildings: The bill would require a $500,000,000 annual allocation for facilities serving public buildings to discount the initial purchase cost for the renewable electrical generation facility. The bill would discount  the initial purchase cost to maximize the number of facilities served. The bill allows the CPUC to utilize additional revenue sources in addition to the amount provided in this subparagraph. The renewable electrical generation facilities serving these customer self-generators would be required to be newly constructed, behind the customer meter, and located on or near the public building. For purposes of this requirement, a public building is any building owned by the state or a political subdivision of the state, as defined in subdivision (a) of Section 8698 of the Government Code.

Marketing and Education: The bill would require that up to 5% of these funds for marketing and customer education.

Notably, projects funded by these ratepayer collections would be subject to pubic work project requirements and restrictions under the Labor code.

C. Limit NEM for certain Direct Access Customers:

The proposed language would allow IOUs to exclude new customer self-generator from using the new NEM tariff who are both direct access customers and the direct access provider does not provide distribution services.  Existing customer-self generators who are either existing direct access customers or who would be allowed on the new NEM tariff by the respective IOU, would be subject to IOUs recovering from the customer’s electric service provider the incremental costs of metering and billing service related to the standard contract or tariff as authorized by the bill’s language in an amount set by the CPUC. 

This is an important distinction as the legislature takes up whether to expand Direct Access based on the CPUC’s August 28, 2020 Report Providing Recommendations on the Schedule to Reopen Direct Access per SB 237 (2018), which recommended, among other things, that direct access be expanded by 10% of eligible non-residential load each year if certain conditions are met.  Expansion could dramatically increase the number of customers affected by this language in addition to providing more retail competition between IOUs, CCA, and direct access providers for commercial customers and complicating how direct access customers self-supply their own electricity.

D. Interconnection Time Period Requirements:

The proposed language would codify the following 30-day time period for processing interconnection requests:

• Every electrical corporation shall ensure that requests for establishment of a customer self-generator interconnection are processed in a time period not exceeding that for similarly situated customers requesting new electric service, but not to exceed 30 working days from the date it receives a completed application form for customer self-generator service, including a signed interconnection agreement from a customer self-generator and the electric inspection clearance from the governmental authority having jurisdiction.

• Every electrical corporation shall ensure that requests for an interconnection agreement from a customer self-generator are processed in a time period not to exceed 30 working days from the date it receives a completed application form from the customer self-generator for an interconnection agreement.

• If an electrical corporation is unable to process a request within the allowed time, it shall notify the customer self-generator and the commission of the reason for its inability to process the request and the expected completion date.

This standardizes the processing time for interconnection with feedback to the CPUC. It is unclear what type of action the CPUC would take for violation of this proposed language.

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[1] CARE is a program of assistance to low-income electric and gas customers with annual household incomes that are no greater than 200% of the federal poverty guideline levels.