May 27, 2021

The Utility Sun Tax: AB1139 and Net Energy Metering 3.0

By Bob Marra

A bill in the California Assembly (AB1139) would radically reduce the value of solar generated electricity for utility solar customers, threatening the financial viability of installed solar and the future viability of the rooftop solar market in California.

If California Assembly Bill 1139 (AB 1139) is passed, it will be equivalent to Californians being taxed for using the sun. The bill is backed by investor-owned utility companies (IOUs), including Southern California Edison (SCE), Pacific Gas & Electric (PG&E), and San Diego Gas & Electric (SDG&E). At the heart of the matter is a push for a drastic change in the current policy, known as net energy metering (NEM) that has allowed rooftop solar to continue to grow sustainably and become increasingly accessible to low- and-moderate income consumers.

The bill has been authored and advanced by Assemblymember Lorena Gonzalez (D-San Diego) and Wendy Carillo (D-Los Angeles) and co-authored by Bill Quirk (D-Hayward). It is sponsored by the International Brotherhood of Electrical Workers (IBEW), the union representing electric utility workers.

AB 1139 would be particularly damaging to existing solar customers with third-party-financed systems (such as power purchase agreements and leases), or virtual net metering, who would likely lose money by continuing to operate their solar systems. This significantly increases the risk of customers defaulting on these contracts.

If passed, the bill would also add high mandatory monthly fees applied only to solar users, force rooftop solar companies to pay their employees at highly inflated prescribed hourly rates known as prevailing wage and eliminate 20-year grandfathering of the credits under current and prior NEM rates that were relied on for investing in solar.

According to the California Solar + Storage Association (CalSSA), “The bill would retroactively harm those who have already gone solar, including low-income and working-class solar users who are nearing 50% of the annual market, by slapping $50-86 monthly solar fees and lowering the financial value of the rooftop solar energy exported to the grid by more than 80%.”

“The bottom line is that AB1139 would make going solar much more expensive for every ratepayer, including non-residential energy consumers like schools, businesses, government agencies and farms,” said Vincent Battaglia, Founder/CEO of Renova Energy based in Palm Desert. “Low-income customers receiving reduced California Alternate Rates for Energy and those living in multi-family affordable housing would also be greatly impacted with higher electricity rates. Going solar would become so much more expensive that it would likely be out of reach for most home and business owners.”

The Cost Shift Explanation

Utility companies are in direct competition with solar. As solar prices continue to fall, utility costs for coal, grid maintenance, and failing infrastructure continue to rise. The bill backed by the IOU companies can only be self-serving, but a narrative is being pushed to hide this tactic: poor, disenfranchised ratepayers cannot afford solar.

Actually, they can. For example, according to Battaglia, approximately 65% of Renova’s customer base Palm Desert-based Renova Energy, approximately 65% of their customer base of about 7,000 have opted for zero money down leases and loans. These payments are fixed and often cut a ratepayer’s monthly bill in half, sometimes more. In other words, there is no barrier of entry to get solar and the savings can start immediately.

According to the current AB1139 language, the alleged poor, disenfranchised ratepayers are being forced to incur a “cost shift” from utility companies as a result of the massive savings from the “wealthy” solar customers.

Except, according to data collected by the Berkeley Lab, 47% of U.S. solar ratepayers earn less than $100,000 in annual household income. Thirty three percent of those ratepayers fall into the lower middle-class category, while 14% earn less than $50,000 per year, dropping down to the poverty line. The wealthiest customers (annual household income of over $250,000) only account for 10% of all solar customers across the nation. You can check the income distribution of solar customers here.

People don’t just want solar; they want lower rates. Their utility company can’t give that to them.

Utilities Have Proved They’re Bad at Managing Costs

Utility companies have run into some staggering costs in the last several years. Wildfires caused by outdated transmission lines in SCE territory cost the utility around $4.6 billion, which does not include additional fines and penalties. You can read more about their legal woes here. Of course, this also doesn’t include their rising costs of grid maintenance. Remember the rolling blackouts that plagued California during the summer of 2020? Customers with solar, and especially those with solar and battery storage, were actually able to relieve strain on the utility grid by shifting to battery reserves during peak demand periods.

‍Public purpose programs, like San Diego Gas & Electric’s Power Your Drive program, were mismanaged and forced overspending to the tune of $25 million, which was then cost-shifted to ratepayers. These are the cost shifts that truly increase rates and should be addressed, not rooftop solar, which is shown to provide a net benefit to the grid. The Los Angeles Times reported on a Vibrant Clean Energy study that stated rooftop solar could save all ratepayers upwards of $473 billion dollars, and not installing rooftop solar could cause ratepayers to pay $385 billion more.

When power is produced at its point of consumption, it increases grid reliability and reduces strain on distribution components. It also allows utilities to avoid paying for production and distribution infrastructure costs. NEM quantifies this value and compensates the consumer accordingly. Without a viable net metering rate, utilities receive all the benefits of distributed solar while families, business and government agencies bear the investment costs.

“Yes, solar customers have lower electric bills as a result of their investment, but it’s because they compensate for aging infrastructure from the utility companies, and it does not cost the utilities a cent to maintain an independent, clean energy power plant,” said Battaglia. “The cost shift AB1139 and NEM 3.0 are accounting for is based on utilities losing money from customers who have the choice to go solar.”

Let’s reframe it this way: Name one time your utility bill has come down on its own. The answer is never. Also, if the utility companies destroy the solar industry and add their proposed costs to solar customers, will they bring their prices down since there’s no longer a “cost shift” from solar customers?

The reality is that this bill helps no one but profit-driven investor-owned monopoly utilities, including Pacific Gas & Electric, Southern California Edison and San Diego Gas & Electric. Because these companies can’t compete with solar energy prices, their answer is to hold their otherwise monopolistic control on ratepayers by implementing policy that will block solar for individual homeowners and business owners. In the end, solar will become too expensive for most ratepayers if they get their way. Ironically, if AB1139 and NEM 3.0 are voted into effect, only the rich will be able to afford solar. If AB1139 passes, there is only one option remaining: higher and higher electricity bills from your current utility.

Results of Imperial Irrigation District’s Policy Illustrate What Would Happen Under AB1139

The Imperial Irrigation District (IID) is a real-life case study about the death of the solar industry. In July 2016, the IID Board passed their own version of NEM 3.0 and AB1139, known as Net Billing. You can watch the meeting where the new policy was passed here.

Several solar customers and local solar companies pleaded with the board not to institute this policy, as it would devastate ratepayers’ opportunity to go solar and put the local solar companies serving the IID territory out of business. The IID Board mocked this argument and implemented Net Billing regardless. Every single solar company on the video is now out of business. The customers you can see in the video have either incurred larger bills or defaulted on their leases and had the panels removed.

Picking Winners and Losers – An Extreme Version

It’s no secret that in Sacramento legislators are feeling extreme pressure from the IBEW union to support AB1139.

‍The utilities are contractually guaranteed a profit, often around 10%, on any infrastructure they build, and local rooftop solar reduces the need for that infrastructure. The investor-owned utilities would prefer to see large-scale solar farms as the only means of reaching California’s state mandated climate goals, because it would require large amounts of new transmission and distribution infrastructure to be built with IBEW workers to bring the clean energy into our communities from far away, and the utilities get Renewable Portfolio Standard credits for these systems.

Electricity produced by both large-scale solar farms and geothermal plants is very expensive based primarily on getting power from remote locations into the grid. The IOUs have been complaining for years about the mandate to purchase or create much more energy from these renewable sources, but now they seemingly want to focus on these means when rooftop solar is available and has been a great solution.

Talk of offshore wind turbines as a viable next option is a pipe dream at this point. Lease sales are planned as early as 2022 for two locations — federal waters off the coast of Central California and another area on the North Coast — that officials estimate could contain enough turbines to power 1.6 million homes over the next decade. But there’s a catch: Although Governor Newsom has said the wind farms could help California reach its clean energy goals, the power may not even stay within the state. It would be sent to the highest bidder, whether that’s Nevada, California or elsewhere. And, experts say it could take at least a decade for them to start generating a significant amount of energy because numerous state agencies have to sign off on the offshore wind farms and the projects will likely face lawsuits from environmentalists as well as property owners concerned about turbines blocking ocean views.

Why Should You Care?

If you care about having control over your utility bills, preserving good jobs for Californians, and preserving our planet, then you should care about this bill.

And then there is the matter of good paying, skilled jobs. Sixty full-time jobs are supported by every megawatt (MW) of local solar energy built, and California made over 1,200 megawatts of local solar in 2019. Thousands of small businesses and more than 70,000 jobs are at risk if AB 1139 is allowed to stall out the solar market.

From wildfires to heatwaves, California is witnessing the most extreme weather events in its history.  The state’s aging electrical grid can’t keep up. Rooftop solar and batteries can help.

California’s rooftop solar systems produce nearly 13 billion kilowatt hours (kWh) of clean energy each year, avoiding 5 million metric tons of CO2 annually. The California Energy Commission estimates California will need three times as much rooftop solar as it does today to meet its very ambitious clean energy goals.

How Can You Help?

Call your California legislators and tell them to vote No on AB 1139 and send this petition to Governor Newsom.


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