By Steven Soldani
On February 18, 2025, the California Public Utilities Commission (CPUC) conducted a comprehensive analysis and released a report in response to Governor Newsom’s Executive Order N-5-24. The Executive Order, issued in October 2024, addresses California’s commitment to achieving carbon neutrality by 2045 and a 100% clean electricity grid by the same year. The order acknowledges the progress made in clean energy but raises concerns about rising electricity costs outpacing inflation, partly due to programs like the legacy Net Energy Metering (NEM) system. The NEM system subsidizes rooftop solar photovoltaic installations. Governor Newsom directed state agencies, including the CPUC, to evaluate ratepayer-funded programs and recommend modifications to ensure electric service remains affordable, reliable, and safe during the clean energy transition.
The CPUC’s report highlights that the financial structures supporting clean energy initiatives have led to unintended consequences despite California being a leader in adopting these programs, particularly concerning the distribution of costs among ratepayers. One significant finding is the “cost shift” resulting from the legacy NEM programs. These programs allowed homeowners with rooftop solar panels to receive substantial credits for excess energy fed back into the grid, effectively reducing their utility bills. However, this arrangement led to non-solar customers bearing a disproportionate share of grid maintenance and infrastructure costs. The CPUC estimated that by the end of 2024, the cost shift would amount to approximately $8.5 billion, with non-solar customers paying up to $400 more per year to subsidize these expenses.
The CPUC proposed several measures to create a more equitable cost distribution. To move more quickly to a system that offers lower compensation rates for excess energy, the CPUC would shorten the 20-year legacy period granted to NEM customers. It would also implement a monthly fee for solar owners to ensure fairness in electric grid upkeep. To avoid future unfairness between customer rates, the compensation rates for excess solar generation would be tied to the rates at the time of system installation.
These proposals sparked a range of reactions. Organizations supporting solar energy argue that CPUC’s measures could discourage future solar adoption and penalize early adopters who invested based on previous incentives. They contend that reducing incentives undermines California’s clean energy goals and could lead to job losses in the solar industry.
Utility providers and some policymakers assert that the existing NEM structure places an unfair financial burden on non-solar customers. They believe revising compensation rates and introducing grid charges are necessary to distribute costs more equitably and maintain grid reliability.
Public participation is crucial in shaping the future of California’s energy policies. Residents can engage in decision-making by commenting at CPUC’s public meetings, submitting written comments to the CPUC, or contacting state legislators.