SolarCity Corp.’s SCTY shares declined 3.7% on Dec 15 after the California Public Utilities Commission (“CPUC”) proposed to extend the state's solar net metering program beyond 2017. Nonetheless, a few modifications have been made to the program such as the establishment of an interconnection fee and non-bypassable charges.
Per the proposal, California will end its current net metering program and new solar customers will fall under the new rules either when their utilities hits a cap on rooftop solar (5% of total generation) or by Jul 2017, whichever criteria is fulfilled first. The decision for a new solar tariff came in 2013 under Assembly Bill (A.B.) 327, which necessitated CPUC to provide a new tariff before Dec 31, 2015. The commission expects three major California utilities to hit that cap by next year.
CPUC’s new net metering rules will be applied to California’s three regulated utilities customers, including Southern California Edison and San Diego Gas and Electric, between 2016 and 2017.
However, the proposal includes a one-time interconnection fee to pay for the inspections and other related expenses of connecting a new solar array into the grid. CPUC estimates that interconnection fees will range between $75 and $150.
New solar customers are also expected to bear more costs for the programs. These will be non-bypassable fees that would help low-income customers and simultaneously enhance energy efficiency. CPUC expects the fee (2–3 cents per kWh) to lift the average solar customer’s fee from roughly $5 per month to $10.
Another change proposed by CPUC involves shifting solar net metering participants to time-of-use (TOU) rates. The change, if implemented, will increase the amount paid for electricity from the grid during periods of high demand. Per the proposal, net metering customers who intend to sign up in 2018 or later must adopt the TOU rates immediately. However, customers who sign up before 2018 will be allowed to wait until 2019 before going on to TOU rates.
The final decision has not been reached yet and is subject to a full vote of the CPUC commissioners. The regulatory body is scheduled to vote on the proposed decision on Jan 28, 2016.
SolarCity, a leading U.S. focused residential solar service provider, appreciated CPUC’s decision to continue the state’s net metering policy. However, the company expressed concerns over the TOU rates proposed for new solar customers. “While these rates can send helpful signals about when to use electricity, we urge the CPUC to closely examine the impacts of mandating time-of-use rates,” said SolarCity CEO Lyndon Rive.
TOU charges customers different rates for electricity consumed at different times of the day and discourages more consumption during peak grid demand. Many commercial customers already have those rates, and CPUC is shifting all residential customers to these by 2019.
Hence, solar customers will have to go for it a bit earlier, in 2018 to be precise. Though these companies will be charged more for consuming electricity at peak demand times, they will be compensated more for exporting electricity to the grid at those times. However, Solar City’s CEO cautioned that TOU rates would reduce the incentive to go solar.
SolarCity currently has a Zacks Rank #3 (Hold). JA Solar Holdings Co., Ltd. JASO, ReneSola Ltd SOL and JinkoSolar Holding Co., Ltd. JKS are some better-ranked stocks in the solar industry. Each of these stocks sports a Zacks Rank #1 (Strong Buy).
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