New California bill would undo some 20 -year rooftop solar contracts

California lawmakers are considering a bill that would renege on decades of commitments to customers who’ve installed solar panels on their homes — all to shrink only a tiny fraction of the utility costs that are driving electricity rates through the roof.

The bill in question is AB 942, introduced by Assemblymember Lisa Calderon, a Democrat who previously worked for decades at utility Southern California Edison. And unlike the cuts to rooftop solar incentives that California regulators have imposed over the past few years, which apply only to solar systems installed after the new policies have been put in place, AB 942 would undermine the value of solar on the nearly 2 million homes that installed panels years ago.

The original version of the bill would have unilaterally cut from 20 years to 10 years the net-metering contracts those households have with utilities Pacific Gas & Electric, Southern California Edison, and San Diego Gas & Electric. That would have forced an increasing number of households grandfathered into the state’s legacy net-metering program onto the far less lucrative net billing tariff, which applies to solar systems installed after April 2023. That tariff pays roughly 75% less for solar power sent back to the grid than the net-metering program.

The blowback has been fierce. Nearly 100 California environmental justice and community organizations warned in a letter to lawmakers that passing AB 942 would ​“gut consumer confidence and trust in government, right when we need more Californians to make the choice to invest in clean energy technologies.”

Last week, the state Assembly Utilities and Energy Committee stripped that universal contract-clawback provision from AB 942. The amended version of the bill passed by the committee now requires only homes that are sold or transferred to move from legacy net metering to the less lucrative net billing tariff.

That’s still a problem for rooftop solar backers. ​“A lot of homeowners are selling solar as a positive feature, which makes perfect sense. It’s a valuable asset,” said Brad Heavner, executive director of the California Solar and Storage Association, a solar industry trade group. Cutting the value of that system at the time of sale ​“reduces value for the seller,” he said.

Households with leased solar systems, which make monthly payments based on 20-year contract terms, are in an even worse position, Heavner said.

“If the buyer doesn’t get the same value, they’ll be underwater on the lease,” he said. ​“That would either force you to lower the price, or more likely, force you to buy out the lease. If you suddenly have to buy out the lease, you’ve suddenly lost a lot of money.”

California policy that changes contracts already in place is almost certain to draw legal challenges. In Nevada, a move by state regulators in late 2015 to retroactively reduce compensation and contract terms for existing net-metered systems was successfully challenged in court. Regulators eventually reinstated the original terms in 2016 and 2017 — although not without severe disruption to the state’s rooftop solar market in the meantime.

An April memo from law firm Davis Wright Tremaine, to solar companies Prologis, Sunrun, and Transform Energy and advocacy groups Solar Rights Alliance and Environmental Working Group, noted that ​“this 20-year guarantee attaches to the solar system, not the customer that owns it,” based on the ​“reasonable and contractual expectation that the rights associated with the system that they have purchased will be assigned to a buyer upon sale.”

Ahmad Faruqui, an energy economist and utility-rate expert who has vocally opposed California’s policy shifts against rooftop solar, agreed that the retroactive clawback of existing net-metering contracts would see legal challenges.

“It would be like, I bought a car with a 10-year warranty, and now all of a sudden it’s five years with no rhyme or reason,” he said. ​“Let’s say an air conditioner has a 15-year warranty, and they suddenly said it’s 7.5 years. There would be a class-action lawsuit.”