The Governor previously directed the CPUC to find ways to reduce electricity costs statewide. “We’re taking action to address rising electricity costs and save consumers money on their bills. California is proving that we can address affordability concerns as we continue our world-leading efforts to combat the climate crisis,” Newsom stated prior to the request. In response, the CPUC’s findings  detail a proposed  controversial measure that could penalize homeowners who have invested in solar power.

The 35-page report from the CPUC suggests reducing compensation for legacy solar customers—those who installed solar systems before the new proposal. The report claims these customers are not paying their fair share of the fixed costs associated with the distribution and transmission of power, leading regular energy users to subsidize these costs by as much as $400 extra per year.

The CPUC’s response to Executive Order N-5-24 acknowledges California’s success in clean energy initiatives but warns that rising electricity rates could undermine the state’s climate goals. While the transition to renewable energy has been driven by utility ratepayers, the CPUC argues that inequitable rate structures have created an imbalance in how costs are distributed. One of the most controversial findings in the report is that legacy Net Energy Metering (NEM) programs have led to a cost shift, with non-solar customers paying significantly more to maintain the grid while solar users, who still rely on the grid for power at night or during cloudy periods, contribute less.

To address this issue, the CPUC is proposing measures that could significantly impact homeowners with solar panels. One recommendation suggests shortening the 20-year legacy period granted to NEM 1.0 and 2.0 customers, accelerating their transition to the new Net Billing Tariff (NBT), which compensates solar users at a lower rate for excess energy they send back to the grid.

Another proposal includes a new Grid Benefits Charge, which would introduce a monthly fee for solar users to cover their share of infrastructure costs. “The costs of maintaining and modernizing the electric grid must be equitably shared among all users, including those who generate their own power through rooftop solar,” reads the report by the CPUC.

Additionally, the CPUC suggests tying compensation rates for excess solar generation to the rates in effect at the time the system was installed, preventing solar customers from benefiting from future electricity rate increases. “As electricity rates continue to rise, legacy NEM customers receiving compensation based on retail rates will impose increasing cost burdens on non-participating customers,” the report states.

These changes could dramatically alter the financial landscape for homeowners who installed solar under the assumption that they would continue receiving full retail rates for 20 years. Many of these customers made significant financial investments in solar technology based on these promised returns, and a sudden shift in policy could mean lower-than-expected savings or even new fees. The CPUC report argues that these adjustments are necessary to ensure fairness in electricity rates and to prevent non-solar customers from bearing a disproportionate burden of grid maintenance costs.

Beyond the impact on individual solar users, the CPUC also proposes broader electricity rate restructuring, including reallocating California’s Climate Credit, a rebate that currently provides bill relief to all residential customers. Under the new plan, the credit would primarily benefit low-income households and non-solar users, effectively removing this benefit for many solar customers. Additionally, the report discusses the need for continued wildfire mitigation investments, another significant driver of increasing electricity rates. It suggests that solar customers should contribute more equitably to these costs, which are currently distributed unevenly across ratepayers. “Wildfire mitigation and infrastructure resilience costs must be incorporated into rate structures in a way that does not disproportionately burden lower-income customers,” reads the report by the CPUC.

The proposed changes have sparked immediate pushback from solar advocacy groups and homeowners who see them as a direct attack on California’s renewable energy progress. Many argue that discouraging solar adoption contradicts the state’s clean energy goals and could slow efforts to reduce reliance on fossil fuels. Critics contend that instead of penalizing solar users, the state should focus on alternative funding sources for grid maintenance, such as utilizing federal funding opportunities or restructuring existing subsidies.

With electricity rates already soaring due to wildfire mitigation costs and infrastructure upgrades, the debate over these proposed changes is likely to intensify. If implemented, these measures could significantly alter the financial viability of residential solar power in California, affecting tens of thousands of homeowners who installed systems under the promise of long-term savings. The CPUC’s recommendations will likely be scrutinized as they are reviewed in the coming months as policymakers, utility companies, and consumers weigh the potential impact on affordability, equity, and the state’s commitment to a clean energy future.  

Those wishing to read the entire CPUC report that was released can do so HERE.