A case heads to the California Supreme Court, while another anti-consumer bill passes the House.
Over the last few years, regulatory battles in California related to rooftop solar have turned into a prolonged war. The state’s residential solar installations crashed following a 2023 transition away from favorable net energy metering rates, and the decision is still being litigated.
In the spring of 2023, the state transitioned to the controversial NEM 3.0 billing structure which cut rates paid to rooftop solar customers for exporting electricity to the grid by about 75%.
Shortly after NEM 3.0 went into effect, three environmental groups, including Center for Biological Diversity, The Protect our Communities Foundation, and the Environmental Working Group filed a lawsuit against the California Public Utilities Commission (CPUC) for the ratemaking decision.
The petition said the rulemaking violates the state’s climate laws and improperly evaluates the benefits of small-scale, distributed solar on rooftops, while ignoring the billions of dollars utilities spend on transmission infrastructure that drives increased rates.
The petitioners said the justification for NEM 3.0 contained numerous legal errors and false assumptions, and that the Court must reverse the decision, grant review, and remand the issue with instructions to comply with the legislatures requirements to fully and properly evaluate NEM’s costs and benefits.
The case now heads to the California Supreme Court, with a decision expected over the next month.
Proponents of NEM 3.0, namely constituents of the state’s three investor-owned utilities, argue that rooftop solar causes an $8 billion cost-shift to non-solar customers. An independent analysis refuted this claim, finding that rooftop solar provided a $1.5 billion cost savings to the grid in 2024.
“If lawmakers are serious about controlling energy costs, they should address the real problem: runaway utility spending,” Brad Heavner, executive director of the California Solar & Storage Association, said in a statement. “Instead, they seem more interested in protecting utility profits and blaming solar users.”
According to the California Public Utilities Commission, the state’s three largest electric utilities PG&E, SCE and SDGE have raised customer rates by 110%, 90% and 82%, respectively, over the last decade. Despite relatively flat electricity usage, transmission and distribution spending by utilities has increased 300%.
What’s more, state regulators are not done waging war against rooftop solar. This week the California Assembly approved AB 942, which would retroactively break existing net metering contracts upon a home sale, moving customers off the more favorable NEM 1.0 and NEM 2.0 rates.
An average rooftop solar customer would see their home’s electricity bills increase by about $63 per month after selling or transferring their home, presenting a potential sticking point in a real estate transaction.
The bill was filed by Assemblymember Lisa Calderon. Calderon had a 25-year tenure in a government affairs and political compliance role with one of the state’s investor-owned utilities, Southern California Edison.
AB 942 is opposed by the California Association of Realtors, the California Building Industry Association, and Los Angeles Business Council as well as a coalition of over 100 environmental, climate, clean energy and consumer groups.
“Messing with home values and the transferability of property has long been considered a dangerous ‘third rail’ for California politicians, and this interference is no different,” said Heavner.
The controversial bill next heads to the California State Senate for vote and would take effect on January 1, 2026, if enacted.
California’s rooftop solar regulatory battles are occurring amid a backdrop of a broader industry decline. Post-pandemic interest rates have remained persistently higher for longer, making it more difficult to offer favorable loan terms for solar installations.
The “One Big, Beautiful Bill” heading through Congress poses a threat as well. As currently drafted, the bill cuts the 30% tax credit offered via Section 48E of the Inflation Reduction Act for projects placed in service after 2028 and cuts the 25D 30% residential solar tax credit offered directly to homeowners for projects not placed in service by 2025. The bill next heads to the Senate, which represents the final chance for Congress to step in and avoid a potential loss of over 300,000 jobs nationally.
