Item D-11 Agenda Report — Beverly Hills City Council, February 8, 2022

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AGENDA REPORT
Meeting Date: February 8, 2022
Item Number:

To: Honorable Mayor and City Council
From: Cynthia Owens, Policy and Management Analyst
Subject: APPROVAL OF THE BEVERLY HILLS CITY COUNCIL LEGISLATIVE / LOBBY COMMITTEE RECOMMENDATIONS TO SUPPORT THE

PROPOSAL AT THE CALIFORNIA PUBLIC UTILITIES COMMISSION
REGARDING CHANGES TO THE STATE’S NET ENERGY

METERING PROGRAM
Attachment: 1. Summary of Proposal at CPUC from State Lobbyist

2. Summary of Proposal from CPUC Website

RECOMMENDATION
The Beverly Hills City Council Liaison Legislative/Lobby Committee (Vice Mayor Wunderlich and Councilmember Mirisch) recommends the City Council support the proposal at the California Public Utilities Commission (CPUC) regarding changes to the state’s net energy metering program (“NEM 3.0 program”).

INTRODUCTION
This item requests the City Council approve a position of support on the proposal at the CPUC regarding changes to the state’s NEM 3.0 program, which is not addressed in the City’s adopted Legislative Platform.

DISCUSSION
Each year, the City establishes a Legislative Platform (“Platform”) which embodies key legislative themes and priorities for the upcoming year. The Platform provides direction for our legislative advocates and City staff as they work to secure clear and strategic initiatives locally as well as in Sacramento, California and Washington, D.C. In February 2021, the City Council adopted the current Legislative Platform.

The objective of the Platform is to outline the City’s position on legislative matters and serve as the foundation for the City to support or oppose various local, state and federal legislation. The Platform seeks to not only secure critical resources for our City, but also D-11
Meeting Date: February 8, 2022

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outlines policy statements that allow City staff and the City’s legislative lobbyists to more effectively respond to and influence legislation at the local, state and federal level.

On January 8, 2022, the Beverly Hills City Council Liaison Legislative/Lobby Committee (“Committee) met to discuss the City’s Legislative Platform and the proposal at the CPUC regarding changes to the state’s NEM 3.0 program. The Committee provided some recommended changes on the City’s Legislative Platform, which will be brought before City Council on February 15, 2022 for further review and direction.

The Committee recommended supporting the proposal at the CPUC regarding changes to the state’s NEM 3.0 program as it aims to modernize the state’s decarbonization incentive efforts.

The proposal determines that NEM must be modernized to incentivize customers to install storage paired with rooftop solar to help California meet its net peak shortfall and ensure grid reliability. The proposal adopts more accurate price signals which will promote greater adoption of customer-sited storage. This will help California decrease its dependency on fossil fuels during the early evening hours, when the sun is down and energy demand is high.

The includes a bill credit for Net Billing customers to ensure customers can pay for a solar plus storage energy system in 10 years or less through electric bill savings. The bill credit is designed to phase out while helping the solar and storage market continue to grow.

The proposal also creates an Equity Fund with up to $600 million to improve low-income customer access to distributed clean energy programs with strong consumer protections.

Should the City Council concur with the recommendation of the Committee, then staff will prepare a letter for the Mayor to sign on behalf of the City.

FISCAL IMPACT
There is no anticipated fiscal impact to the City.

Gabriella Yap,
Deputy City Manager
Approved By
Attachment 1
January 03, 2022
To: Cindy Owens, City of Beverly Hills
From: Andrew K. Antwih, Partner, Shaw Yoder Antwih Schmelzer & Lange Priscilla Quiroz, Legislative Advocate, Shaw Yoder Antwih Schmelzer & Lange Re: Proposal at the CA Public Utilities Commission (CPUC) Regarding Changes to the State’s Net Energy Metering Program (NEM 3.0)
Summary
The California Public Utilities Commission (CPUC) released a Proposed Decision on December 13, 2021 to make drastic changes to the state’s Net Energy Metering (NEM) program.

Background
In 1995, the state enacted SB 656 (Alquist) which established net energy metering in California, an electricity tariff-based billing mechanism created to “encourage private investment in renewable energy resources, stimulate in-state economic growth, enhance the continued diversification of California’s energy resource mix, and reduce utility interconnection and administrative costs.”
SB 656 directed every electric utility in California to develop a standard contract or tariff to allow eligible customer-generators (customers who own and operate a solar electrical generating facility to offset part or all its own electrical requirements) to receive a financial credit on their electric bills for any surplus energy fed back to the utility’s grid. In the first net energy metering tariff, referred to as NEM 1.0, utility customers who installed solar on their roofs received a full retail rate bill credit for power generated by their onsite systems that was fed back into the grid when generation exceeded onsite energy demand. The credits offset a customer’s monthly electricity bills and could be used on subsequent bills for up to one year.

Subsequent legislation in 2013, AB 327 (Perea) required the CPUC to adopt a successor to the existing net energy metering tariff (NEM 2.0) with several mandated components.

In 2021, the Legislature considered AB 1139 (Gonzalez), a measure that sought to direct the CPUC to adopt a new net-energy metering standard contract or tariff (NEM 3.0), by August 1, 2022. The bill also sought to require an electrical investor-owned utility (IOU) to offer the replacement tariff to an eligible customer-generator by December 31, 2023. If the CPUC fails to act, the CPUC is required to adopt a new tariff under terms prescribed by this bill. This measure failed on the Assembly Floor. The bill needed forty-one votes to pass. The 2 final vote was 27-27 with, twenty-five voting members either absent or recorded as not voting.

Arguments in Support of AB 1139 (Gonzalez)
The California State Association of Electrical Workers and the Coalition of California Utility Employee are the sponsors of this bill with the intent of ending the "NEM unjust cost shift" and begin to reform the "Reverse Robin Hood nature of our solar programs that take from the poor and gives to the wealthy…giving all ratepayers a rate cut on their electric rates." They report that "NEM Customers are not paying their share of system costs, so the 91% of non-NEM customers are paying all the costs for the 9% who are in NEM...This wind fall profit [the difference between the wholesale and retail rate] amounts to $3 Billion in 2021 and will grow to $4.5 Billion in 4 short years. Again, the 91% paying this windfall to the 9%."
Arguments in Opposition to AB 1139 (Gonzalez)
Several opponents recognize the need for a replacement NEM tariff but object to the terms of the "backstop" or replacement tariff that would be triggered by this bill if the CPUC fails to act. Environmental groups opine that the terms "undervalue established benefits of distributed generation, removing a consideration in developing a future NEM structure intended to ensure deployment continues at levels necessary to California's climate goals." The bill was amended in policy committee so there is little correspondence on the current version. However, the general sentiment has been that the Legislature should not act and allow the CPUC to continue its work on a replacement tariff. "Depending on the outcome of those proceedings, there may be a need for the state legislature to weigh in on the future of net energy metering policy but undertaking such an effort while a proceeding is open and active would be inappropriate."
Alternate Proposals Filed With the CPUC
According to the CPUC, several groups have individually or jointly filed proposals or submitted recommendations for a successor to the current net energy metering tariff.

Please see link here for a summary of the current Proposed Decision that is pending with the CPUC Governing Board, and a summary of each proposal listed below:
https://docs.cpuc.ca.gov/SearchRes.aspx?docformat=ALL&docid=430903088 AARP Recommendation
CALSSA Proposal
CCSA Proposal
Californians for Renewable Energy Proposal
CESA Proposal
CalWEA Proposal
Clean Coalition Proposal
Foundation Windpower Proposal
GRID Alternatives/Vote Solar/Sierra Club Proposal
Ivy Energy Multifamily VNEM Proposal
3 Joint Utilities Proposal
NRDC Proposal
PCF Recommendations
Public Advocates Office Proposal
Sierra Club Proposal
SBUA Proposal
SEIA/Vote Solar Proposal
TURN Proposal
The CPUC has identified the following guiding principles to evaluate this proposed decision:
 What guiding principles (including those related to Assembly Bill 327 (2013, Perea), equity, environmental goals, and social justice) should the Commission adopt to assist in the development and evaluation of a successor to the current net energy metering tariff?
 What information from the Net Energy Metering 2.0 Lookback Study should inform the successor and how should the Commission apply those findings in its consideration?
 What method should the Commission use to analyze the program elements identified in Issue 4 and the resulting proposals, while ensuring the proposals comply with the guiding principles?
 What program elements or specific features should the Commission include in a successor to the current net energy metering tariff?
 Which of the analyzed proposals should the Commission adopt as a successor to the current net energy metering tariff and why? What should the timeline be for implementation?
 Other issues that may arise related to current net energy metering tariffs and subtariffs, which include but are not limited to the virtual net energy metering subtariff, net energy metering aggregation subtariff, the Renewable Energy SelfGeneration Bill Credit Transfer program, and the net energy metering fuel cell tariff.  What additional or enhanced consumer protections for customers taking service under net energy metering and/or the successor to the current net energy metering tariff should be adopted by the Commission?
Next Steps
The CPUC is currently scheduled to vote on this Proposed Decision on January 27, 2022.

Attachment 2
2/2/22, 9:37 AM CPUC Proposal Aims To Modernize State’s Decarbonization Incentive Efforts https://www.cpuc.ca.gov/news-and-updates/all-news/cpuc-proposal-aims-to-modernize-state-decarbonization-incentive-efforts 1/3     Contact Us Translate Settings
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Home › News and Updates › All News and Updates › CPUC Proposal Aims To Modernize State’s Decarbonization Incentive Efforts CPUC Proposal Aims To Modernize State’s Decarbonization Incentive Efforts
December 13, 2021 - The California Public Utilities Commission (CPUC), in ongoing actions to evolve decarbonization incentive efforts to meet the state’s groundbreaking clean energy goals, today issued a proposal that would revise current Net Energy Metering (NEM) rules and create a Net Billing Tariff that balances the needs of the electric grid, the environment, and consumers.

The proposal will be on the CPUC’s January 27, 2022 Voting Meeting agenda.

The proposal issued today, formally called a Proposed Decision, determines that NEM must be modernized to incentivize customers to install storage paired with rooftop solar to help California meet its net peak shortfall and ensure grid reliability. The Proposed Decision adopts more accurate price signals that will promote greater adoption of customer-sited storage, which will help California decrease its dependency on fossil fuels during the early evening hours, when the sun is down and energy demand is high. The proposal also includes a bill credit for Net Billing customers to ensure customers can pay for a solar plus storage energy system in 10 years or less through electric bill savings. The bill credit is designed to phase out while helping the solar and storage market continue to grow.

The proposal also creates an Equity Fund with up to $600 million to improve low-income customer access to distributed clean energy programs with strong consumer protections.

Today’s proposal for a new Net Billing Tariff:

Evolves the tariff to improve grid reliability and accelerate climate goals by incenting the adoption of solar paired storage systems through more accurate price signals that will provide more value to the electric grid.

Establishes an Equity Fund with up to $600 million to help scale up low-income access to distributed clean energy. There would be a stakeholder process to determine the allocation of funds, which could go toward upfront incentives for distributed storage, community solar in low-income and disadvantaged communities, or other low-income clean energy programs with strong consumer protections.

Provides additional measures to incentivize distributed solar plus storage for lowincome and tribal households, including an exemption from the Grid Participation Charge.

Allows Net Billing customers to “oversize” their systems by up to 150 percent of the customer’s historical load to allow for future vehicle and appliance electrification.

Requires Net Billing customers to take service on rates with high differentials between peak and off-peak prices, which will incent energy conservation or the use of stored solar energy during the net peak window of 6 p.m. to 9 p.m. when California needs to displace electric grid fossil fuel usage.

Adopts a monthly residential Grid Participation Charge of $8 per kilowatt (kW) of installed solar to capture residential adopters’ fair share of costs to maintain the grid and fund public purpose programs.

Creates a four-year glide path for the industry through a monthly Market Transition Credit of up to $5.25 per kW for residential solar plus storage and solar-only systems.

Customers will lock this amount in for 10 years. During the four-year glide path, the credit

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2/2/22, 9:37 AM Modernizing California’s Net Energy Metering Program to Meet Our Clean Energy Goals https://www.cpuc.ca.gov/industries-and-topics/electrical-energy/demand-side-management/net-energy-metering/nem-revisit/net-billing-tariff-fact-sheet 2/5 distributed storage, but the current NEM program lacks the price signals necessary to incent storage adoption, thus less than 10 percent of existing NEM customers have paired storage with their solar systems.

All ratepayers pay as much as 10 times more for exported NEM energy than for other sources of renewable energy.[3] Californians today spend more than $3 billion a year to support NEM programs.

An independent third-party evaluation of NEM 2.0 found that its costs substantially exceed its benefits as residential NEM 2.0 participants only pay 9 to 18 percent of what it costs their utilities to serve them, even considering the value of the energy produced by their NEM systems.

Under NEM 2.0, the typical solar customer pays for the solar energy system through energy bill savings in 3-5.5 years depending on utility[4], and then receives substantial bill savings for the remainder of the current 20-year tariff.

Ratepayers without NEM systems, who are disproportionately low-income, pay significantly higher electricity rates due to NEM. The Public Advocates Office at the CPUC estimates that low-income households without NEM systems pay $67 to $128 more per year, depending on the utility, due to the costs of the NEM 1.0 and NEM 2.0 programs.[5] The Public Advocates Office at the CPUC estimates that non-low-income households without NEM systems pay $100 to $234 more per year, depending on utility. Without NEM reform, these amounts will increase substantially by 2030.

While the Proposed Decision does not recommend this, as a reference point for current NEM costs, this amount would be sufficient to achieve 90-96 percent decarbonized electricity for all Californians by 2045 if it were redirected toward a portfolio with a greater emphasis on large-scale clean energy projects.

Overview of the Proposed Net Billing Tariff
The proposed new Net Billing Tariff has four key components:

1. Pays Net Billing customers for the electricity they export to the grid based on its value, determined by the avoided cost to the utility of buying clean energy elsewhere.

2. Charges Net Billing customers for the electricity they receive from the grid based on high differential time-of-use tariffs, creating more benefit for customers who install storage and incentivizing them to store solar energy and shift exports later in the day.

3. Creates a Grid Participation Charge based on the size of the solar system to ensure that Net Billing customers are paying the same fixed costs of the electric grid as non-Net Billing customers.

4. Provides a Market Transition Credit so that customers can pay back the cost of a new solar plus storage energy system in less than 10 years, ensuring that the solar industry in California continues to grow and rooftop solar remains economic. The credit will phase out for new customers over four years.

How the Net Billing Tariff Incentivizes Storage Adoption to Support Net Peak Reliability Needs
Creates a Net Billing Tariff that sends more accurate price signals based on avoided costs that will incent storage and provide value to the grid when it is most needed during net peak.

Requires Net Billing customers to take service on rates with high differentials between peak and off-peak prices. Higher on-peak prices incent storage usage, while lower offpeak prices make using electric vehicles and appliances more affordable.

Transitions residential NEM 1.0 and NEM 2.0 customers (except low-income customers) to the new Net Billing Tariff after 15 years of being interconnected to the electric grid, which will incent storage adoption and reduce costs paid by other ratepayers by billions of dollars.

Provides storage rebates to NEM 2.0 customers if they switch to the Net Billing Tariff over a four-year period through the Storage Evolution Fund, so they can help California •
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2/2/22, 9:37 AM Modernizing California’s Net Energy Metering Program to Meet Our Clean Energy Goals https://www.cpuc.ca.gov/industries-and-topics/electrical-energy/demand-side-management/net-energy-metering/nem-revisit/net-billing-tariff-fact-sheet 3/5 displace fossil fuel use at peak hours and become more resilient to natural disasters and wildfires.

Allows solar systems to be sized to cover 150 percent of a customer’s historical load in order to enable future electrification.

How the New Net Billing Tariff Promotes Equity
Establishes an Equity Fund with up to $600 million to support clean energy and storage programs for low-income Californians, with allocation details to be determined following stakeholder feedback.

The fund could enhance and expand existing low-income storage and community solar programs that have strong consumer protections (e.g., Disadvantaged CommunitiesGreen Tariff and Self-Generation Incentive Program Equity) or support new low-income programs that improve access to clean energy.

Exempts low-income customers, customers living in a disadvantaged community, and tribal households from paying the Grid Participation Charge.

How the New Net Billing Tariff Supports the Sustainable Growth of Customer-Sited Renewable Energy
Supports installation of new customer-sited renewable energy by providing substantial annual bill savings and a 10-year payback period for solar plus storage energy systems.

Establishes a monthly residential Grid Participation Charge of $8/kilowatt (kW), so that future solar and storage adopters pay fairly for access to the electric grid (see table below).An average customer who does not have NEM solar or storage pays roughly $100 per month for their access to the grid.

Provides a glide path for the industry through a monthly Market Transition Credit of up to $5.25/kW for residential customers for both storage plus solar adopters and solar-only adopters (see table below).During the four-year glide path, the credit will step down 25 percent a year for prospective customers.

Provides stability and predictable bill savings by locking in the Market Transition Credit amount and tariff structure for each customer for 10 years and export compensation amount for a customer’s first 5 years.
2023 Effective Monthly Fixed Charges per Kilowatt (kW)
(Grid Participation Charge minus Market Transition Credit) Customer Segment PG&E SDG&E SCE
Residential $6.38/kW $8.00/kW $4.41/kW
Low-Income -$4.36/kW $0.00 /kW -$5.25/kW
2023 Effective Monthly Fixed Charges for 5 kW Solar System Customer Segment PG&E SDG&E SCE
Residential $31.90 $40.00 $22.05
Low-Income -$21.80 $0.00 -$26.25
Remaining Steps in this Proceeding
Parties may file comments on the Proposed Decision within 20 days, and replies to comments are due 5 days thereafter, following Rule 14.3 of the Rules of Practice and Procedure.[6]
The Proposed Decision may be heard, at the earliest, at the CPUC’s January 27, 2022 Voting Meeting. To confirm when it will be heard, see the agenda and hold list, which is •
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2/2/22, 9:37 AM Modernizing California’s Net Energy Metering Program to Meet Our Clean Energy Goals https://www.cpuc.ca.gov/industries-and-topics/electrical-energy/demand-side-management/net-energy-metering/nem-revisit/net-billing-tariff-fact-sheet 4/5 posted on the CPUC website.[7]
If adopted, the Proposed Decision would implement a sunset on the NEM 2.0 tariff four months after issuance of the final decision.

If the Proposed Decision is adopted, the next phase of the NEM proceeding will include workshops to consider community project tariffs, which will be coordinated with other related proceedings.

The next phase would also include a workshop by April 30, 2022 to solicit stakeholder feedback on the allocation of the Equity Fund, and a Ruling to seek stakeholder input on the five-year evaluation of the Net Billing Tariff, with a focus on affordability and equity metrics.
[1] For California solar installation data, see the CPUC’s California Solar Initiative webpage and California Distributed Generation Statistics.
[2] For an introduction to “net peak,” see
www.caiso.com/documents/gross-and-net-load-peak-fact-sheet.pdf. [3] www.cpuc.ca.gov/nem2evaluation
[4] Cost Effectiveness of NEM Successor Rate Proposals under Rulemaking 20-08-020, at https://willdan.app.box.com/s/3jpscul3lbtof5erje7f4bkqkk96uahp [5] R2008020 Public Advocates Office Prepared Testimony on NEM [6]
www.cpuc.ca.gov/-/media/cpuc-website/divisions/administrative-law-judgedivision/documents/rules-of-practice-and-procedure-may-2021.pdf [7] www.cpuc.ca.gov/events-and-meetings
View the Fact Sheet as a PDF.

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Beverly Hills City CouncilFebruary 8, 2022

Beverly Hills City Council
February 8, 2022