A battle is brewing between the solar industry and utilities over "net metering," a popular policy that allows homeowners, school districts and businesses to offset the cost of their electric use with the rooftop solar power they generate and export to the grid.

Though wonky in name, net metering is a straightforward concept that has been in place in California for 15 years. Utilities give solar customers a credit on their monthly bill during sunny months when they generate more solar power than they use, and those credits can offset higher consumption of utility-generated electricity during the less sunny months of the year.

Contra Costa County's Mount Diablo Unified School District is adding solar panels to 51 schools and facilities across the district in an effort to drastically curtail a $3.5 million annual electric bill.

"I look at net metering as a bank account," said Superintendent Steven Lawrence. "In June, July and August our schools are closed, but our solar systems are producing a lot of electricity. We stock up on credits in the summer to offset our costs during the school year. Net metering is an important aspect of our financial model. Without net metering, solar doesn't make a lot of financial sense for school districts."

But net metering poses several challenges for utilities, particularly in states like California, where the rooftop solar industry is experiencing rapid growth. Utilities argue that under current rate structures customers using net metering do not pay their fair share of the overall costs of being tied to the transmission and distribution grid. And since solar customers tend to be more affluent homeowners, utilities argue that lower-income nonsolar ratepayers are subsidizing solar customers in a way that needs to be revised.

"Net energy metering is not under attack," said David Rubin, director of service analysis for PG&E, which has 63,000 net metering customers throughout its vast Northern California territory. "We're motivated to find a way to compensate solar customers that export power to the grid at a price that is fair for all of our other customers that are paying for these exports."

San Diego Gas & Electric, which has 16,000 net metering customers, recently requested a controversial "network use charge" that would have added, on average, a $22 monthly fee to the bills of solar customers. The solar industry fought back against the proposal, denouncing it as a "solar tax." State regulators with the California Public Utilities Commission ultimately rejected the proposal, saying it would have unfairly discriminated against solar customers.

But the fight over net metering is far from over.

"Defending net metering is our No. 1 priority in California," said Rosalind Jackson of the nonprofit Vote Solar Initiative, based in San Francisco. "We're in defense mode."

San Diego Gas & Electric says that net metering was designed to promote solar when the market was still in its infancy. Now that solar has moved beyond early adopters and into the mainstream, the true costs and benefits of net metering for all ratepayers need to be discussed, it maintains. The utility is sponsoring a bill that would require state regulators to study the cost and benefits of net metering.

"We want to make sure that rooftop solar stays sustainable," said J.C. Thomas, manager of regulatory affairs for the utility. "This is an important public policy issue, and the public deserves an honest discussion."

Net metering is a hot topic at solar industry conferences, as well as in Sacramento. The Assembly's Select Committee on California's Clean Energy Economy held a hearing on the topic this week that featured testimony from consumer advocates, the solar industry and school districts.

One looming issue is the net metering "cap." State law requires California's major utilities to make net metering available to customers on a first-come, first-served basis, but the program is capped at 5 percent of a utility's peak demand. The cap has been slowly raised over time, and many in the solar industry would like to see the cap raised further, or abolished.

Eliminating a cap is "a major policy priority for our company and several others," said Sanjay Ranchod, director of government affairs for SolarCity. "The 5 percent cap is an artificial restriction on the growth of the residential and commercial solar industry."

Contact Dana Hull at 408-920-2706. Follow her at Twitter.com/danahull.

WHAT IS NET METERING?
Net metering measures the difference between the electricity you buy from your utility and the electricity your solar system generates and feeds back to the electric grid over a 12-month period. Your meter keeps track of this "net" difference as your system generates electricity or uses electricity from the transmission grid.
Source: California Energy Commission