San Diego Gas & Electric Making San Diego Solar Power More Expensive

In a potentially damaging move for San Diego solar customers, San Diego Gas & Electric (SDG&E) has recently asked permission to bill its customers for the use of its electric grid. The goal is to effectively unbundle grid use from the cost of electricity through a “network use charge” that would be based on the ebb and flow of electricity for those SDG&E customers that generate excess power during the day (thus pushing electricity on to the grid) and then draw from the grid at night or on a cloudy day.

While this would have virtually no impact on SDG&E’s regular customers, the proposed change would hit San Diego solar customers directly, which it was essentially designed to do. According to SDG&E’s request to the California Public Utilities Commission, SDG&E claims that the issue is one of fairness. First, there is the increased cost of managing the San Diego network as energy is being pushed onto the grid by homes with solar systems, which is something the grid was not necessarily designed to do. Furthermore, as more customers go solar and lower their utility bill, traditional customers end up subsidizing a much larger portion of SDG&E’s infrastructure and public programs for low-income families and energy efficiency.

Unfortunately, the proposed network charge changes the economics of investing in solar. For those customers who purchase their solar systems, they are now looking at much longer pay off periods than they intended. Not only does this impact current customers, but it also impacts potential customers who may be interested in purchasing a solar system but may forgo such a purchase due to the extra charge.

In addition, it removes net metering as a financial incentive to purchase solar. With net metering, homeowners with solar installed are able to “bank” the excess electricity their solar system generates and receive credit up to 100% of their electric use bill at the full retail electricity price that they can use later. Again, making it cheaper to afford solar provided that you generate more electricity that you consume. A network charge would provide a substantial dis-incentive to run a solar system enough to bank any credits.

What’s additionally unnerving is how the network charge would impact third party solar ownership models such as leasing and financing. Instead of owning the solar system, consumers can lease or finance the system at a monthly fee that when combined with their new lower utility bill would still be less than their electric bill without solar. In fact, more and more Californians are investing in solar through these third party ownership models. Adding a new network charge could potentially disrupt the entire model or require consumers to come up with larger up front payments than they otherwise would be required without the charge.

SDG&E’s proposal is not being met warmly, as you can imagine. As one SDG&E customer who owns a solar system said, “They’re changing the rules and charging an excessive rate to undercut people who have made environmentally sound commitments.” Others believe that the measure is a way for SDG&E to alter its revenue model to account for the fact that traditional electric utilities are no longer people’s primary source for electricity. In effect, it is not about fairness to their traditional consumers but about preserving their revenue stream and keeping customers bound to their grid.

Disturbingly, Southern California Edison and Pacific Gas and Electric have taken note of what SDG&E has done and may enact their own charge. How all of this may ultimately impact the largest solar market in the U.S. is unclear but the trend is not good for California solar advocates.

The California Public Utilities Commission is expected to begin initial hearings on this matter in December and SDG&E hoping for approval by the middle of 2012 in which case the billing structure and network charge could hit consumers between 2013 an 2015.