Projects with Power Purchase Agreements or Payback Periods Extending More Than 20 Years Would Not Be Protected

The California Public Utilities Commission (CPUC) recently proposed establishing a 20-year transition period for existing net-energy metering (NEM) customers such as schools, cities, special districts and other customers (including residential) with renewable energy projects. Under the proposal issued Thursday and stemming from Assembly Bill 327 (AB 327), utilities would be able to significantly change the credit provided to a NEM customer after the 20-year period, upsetting that customer’s expected energy cost savings. This proposal, if finalized as is, will impact all solar projects that generate excess energy into the grid under their utility’s NEM program. Parties have 20 days to submit comments on the proposal. 

The proposed 20-year transition period would be calculated from the date of interconnection. In addition and relevant to public agencies, the proposed decision would permit existing customers to modify or expand their systems by the greater of 10 percent of capacity or 1 kW without affecting their grandfathering rights. 

While the CPUC’s proposal would offer NEM customers some protection, the 20-year transition period fails to protect customers who have power purchase agreements (PPAs) with terms of more than 20 years. Additionally, customers who projected the energy cost savings of their solar projects, for example, for the 25-year warranty period of their solar panels should re-analyze the energy cost savings to be provided under only a 20-year transition period to determine how much energy cost savings will be lost under a 20-year transition period.

For this reason, Best Best & Krieger will continue to advocate on behalf of our clients, the members of the Net Energy Metering Public Agency Coalition (NEM-PAC), that public projects should receive a 30-year transition period to protect public investment in renewable energy, including requesting that public projects be entitled to a special carve-out. In fact, treating public projects differently is consistent with the position of the parties in the proceeding. The utilities expressly excluded all public projects from their calculation of the break-even point in the CPUC’s proceeding, and the  proposed decision recognizes that public projects are subject to a different set of rules given their tax-exempt status. 

We strongly encourage agencies with 25-year or 30-year PPAs or that have payback periods of over 20 years to use a template letter created by attorneys at Best Best & Krieger LLP to send to the governor and the CPUC public advisor’s office as well as your local legislator before the March 12th deadline.

To receive the template for the letter, become a member of the NEM-PAC or for any additional information regarding this proceeding, please contact one of the attorney authors of this alert.