A new report commissioned by the California solar industry contends that higher utility rates are not being caused by rooftop solar customers buying fewer electrons from investor-owned utilities or from construction costs of wildfire mitigation, including hardening lines.
The real reason for rising rates, says the report, is the utilities’ need to create profits for their shareholders: The more the utilities spend, the higher the profits.
In fact, the report says, customer-owned solar systems have kept rates from rising even higher because the systems are producing power at the local level, helping to supply enough juice to handle peak loads such as the notoriously hot summers in the Valley when air conditioning demand skyrockets.
The real reason for rising rates, says the report, is the utilities’ need to create profits for their shareholders: The more the utilities spend, the higher the profits.
And, the report says, state regulators and policymakers appear to be protecting the interests of the investor-owned utilities instead of Californian ratepayers whose tax dollars support regulatory agencies and the state government.
The report, “Rooftop Solar Reduces Costs for All Ratepayers” was authored by Brad Heavner, policy director of the California Solar + Storage Association, Bernadette Del Chiaro, CALSSA’s executive director, and Richard McCann of M.Cubed Consulting.
“Utilities are attacking clean energy as a way to deflect attention from their self-serving overspending,” Heavner said in a news release. “This has nothing to do with the transition to clean energy and everything to do with companies owned by Wall Street running roughshod over California consumers.”
Scapegoating Solar Customers
Utilities and state regulators have tried to paint owners of private, so-called “rooftop” systems as privileged and wealthy, but more than half of the 2 million systems installed thus far in California are in low- to middle-income neighborhoods, according to the report.
After NEM 3.0 was imposed in April 2023, sales of new systems plummeted in California, causing many solar businesses to close, the report says.
The power those systems produce has helped California keep pace with its growing electricity needs as the state moves toward decarbonization, the report says.
One of the report’s key points is this: Energy that is produced at the neighborhood level does not have to travel far to serve nearby customers. Keeping energy production local lowers transmission costs, which should lower the rates customers pay.
But the state’s decision to alter net-metering rules, such as prohibiting schools, apartments, and other large customers from directly benefiting from the energy produced at their sites, has discouraged customers from installing new systems.
After NEM 3.0 was imposed in April 2023, sales of new systems plummeted in California, causing many solar businesses to close, the report says.
The solar association’s report contends that the increase in rates charged to customers has corresponded to the utilities’ spending, which the report says is unchecked by regulators such as the California Public Utilities Commission.
Report: ‘Cost Shift’ Calculations Are Flawed
The report also is critical of findings in an analysis by the CPUC’s Public Advocates Office that rooftop solar’s “cost shift” has climbed to $8.5 billion a year as of August 2024.
“The single biggest error the PAO makes is to include self-consumption (electricity produced and used on-site) as a cost to the utilities. Roughly half of the electricity generated by rooftop solar panels is directly consumed by the customer in real time. The other half is exported to the grid and consumed immediately by a neighbor, using only the small wires connected to the transformer.
The solar association’s report … comes just a week after Pacific Gas & Electric reported a $2.48 billion profit for 2024 — its highest annual earnings on record.
“The electricity that customers produce from their own solar panels and use in real time without ever touching a single utility wire should be treated the same as energy efficiency, not as ‘lost revenue’ or a cost to the utilities … utilities do not own a customer’s electricity usage. Their monopoly status does not extend behind the meter to cover the electricity a customer doesn’t buy. Anyone would be hard-pressed to identify a single business, monopoly or otherwise, that gets guaranteed revenue from customers not buying their product,” the association’s report says.
Customers with rooftop systems are paying the utilities companies on average $101 monthly, the report says, so those customers are paying more than their share of connecting to the grid, the report says,
But until state regulators get serious about regulating instead of enabling the utilities, runaway spending will continue because it’s how the utilities increase profit margins, the report says.
PGE Reports Record Profits
The solar association’s report, which was released Tuesday, comes just a week after Pacific Gas & Electric reported a $2.48 billion profit for 2024 — its highest annual earnings on record, and a 10% increase over 2023 profits.
According to statewide consumer advocate organizations, PGE’s record-breaking profits follow six rate hikes in 2024, causing rates to balloon by 20% in just one year. And the company’s bottom line is bolstered by a guaranteed 7.27% rate of return.
For-profit utility rates in California now exceed public utility rates by 67%, according to the advocacy organizations.
Investor-owned utilities such as PGE, Southern California Edison, and San Diego Gas & Electricity have the biggest customer bases. Some Californians, such as those who live in Sacramento, are served by municipal utility districts and pay much lower rates.
“The rate of return issue is the 800-pound gorilla in the room and it’s high time the PUC dealt with it rather than pumping up investor profits at ratepayers’ expense,” said Jamie Court, President of Consumer Watchdog. “If the PUC doesn’t address the outrageous profits for PG&E coming from outrageously high utility bills, then the legislature must do it. Ratepayers at California’s investor-owned utilities deserve more affordable electricity.”
The solar association’s report includes a similar call for heightened oversight by regulators and lawmakers.
“What did they spend those billions of ratepayer dollars on in the face of flat demand should be the subject of an extensive investigation by regulators. Instead, some California regulators today are blaming solar rooftop, repeated the utility’s cost shift myth, while turning a blind eye to the glaring problem of runaway spending. Consumer solar did not cause rate increases. Utility spending did.”